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SUBWAY NICKELS
A SURVEY
OF
NEW YORK CITY'S
TRANSIT PROBLEM


SUBMITTED TO
HON. JOHN F. HYLAN
MAYOR OF THE CITY OF NEW YORK
AND
BOARD OF ESTIMATE AND APPORTIONMENT
OF THE CITY OF NEW YORK


1I.i. j


By
HARRY A. GORDON
Special Corporai!5n Counsel


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II
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JANUARY 29, 1925


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"  HAVE vigorously opposed the Transit
Commission's efforts to put into effect
transit plans, similar to those foisted upon
the people under the dual contracts, that will
tie the City of New York for generations to
the traction corporations now operating the
City-owned subways.
"Over ten years have passed; the money
has been invested; the business has been more
prosperous than was ever contemplated; the
subways are more packed than was ever
expected; more nickels are coming in than
could possibly have been calculated, but the
net result is that the City has not received one
cent interest.
"The City regards that as a poor business
investment for the people and I regard those
with whom the City has that investment as
not good partners; and my point of view is
that if the City is to continue in the same line
of business, it certainly does not want to
continue with the same partners, where it can
expect the same results-in other words, more
money and no return.
"My position in this matter is, that as the
business representative of the City of New
York, it would be folly to put more money
in an enterprise with partners who have
promised a return which they have never
made."
Hon. JOHN F. HYLAN,
Mayor.








CONTENTS
CHAPTER
I. INTRODUCTION........................    1
II. THE BACKGROUND..................... 11
III. THE CITY'S PLIGHT..................... 33
IV. THE LEGACY.........................    57
V. THE vFRUITS OF GREED.................. 78
VI. THE HARVEST........................    98
VII. FINANCIAL REHABILITATION............ 103
VIII. OTHER PEOPLES' MONrEY............... 111
IX. AN ESSAY ON FINANCIAL JUGGLERY...... 130
X. DAWNING LIGHT..................... 153
XI. SUMMARY AND CONCLUSIONS............ 160




CHAPTER I


INTRODUCTION
Hon. JOHN F. HYLAN,
Mayor of the City of New York,
and
THE BOARD OF ESTIMATE AND APPORTIONMENT
OF THE CITY OF NEW YORK.
Honorable Sirs:
As Special Counsel retained to present the charges
for the removal of the Transit Commissioners, I hereby
submit this report:
THE TRANSIT PROBLEM
The importance of the Transit problem to the public
and to the Government of the City of New York which
has invested $300,000,000 in the unfortunate partnership with the traction corporations operating in the
City of New York, and the recent investigation by the
Moreland Commissioner, is the reason for this extended
presentation and analysis of the situation. The magnitude of the problem and the vital interests of the city
require, that once and for all, a complete and exhaustive
statement of the situation shall be presented.
The city's strait reduced to its final and ultimate
terms is two-fold:  First, the miserably inadequate serNoTE.-Italics are the writer's. All references, except where otherwise
indicated, are to names of witnesses and to pages of stenographer's
minutes of the hearings before the Hon. John V. McAvoy, Commissioner
under the Moreland Act, held Dec. 15, 1924-Jan. 8, 1925.
1




vice rendered by the two traction companies, which between themselves and with the connivance of those who
are still the Transit Commissioners of the State of New
York, have seized the traction monopoly *of the city.
The I. R. T. holds in the hollow of its hand the traveling
public of Manhattan and the Bronx, and the B.-Al. T.,
a holding company organized to evade direct responsibility for its conduct, is in substantial control of the
transit situation in the Boroughs of Brooklyn and
Queens; and, Second, the unprecedented growth of the
city necessitates the building of new and more subways
and transportation facilities such as buses, which the
development of the automobile has made possible, desirable and necessary.i
THE CITY S DILEMMA
One would suppose that the Government of the State
of New York would not treat the City of New York as
a satrapy or as a subjugated province, and would at
least afford to the citizens of our City an opportunity
to create organs of administration and government to
control the destinies of the City, as they affect this all
important problem of transportation. Unfortunately
the contrary is the fact. The City of New York never
had, and has not now, the right or authority to say a
word as to the adequacy of the service rendered by the
traction corporations. The City of New York never had
any power to initiate new routes or new subways.
Unbelievable as it may seem the City of New York
with its $300,000,000 investment is chained, to a partnership with the traction companies through the betrayal
of the City's interests, by the outrageous Dual Contracts
of 1913. The climax of the iniquity was reached when,
under the Transit Act of 1921, enacted during the ad2




ministration of Governor Miller, the "leading spirit" in
this indefensible betrayal of the City was clothed with
the great authority of the Empire State, to continue in
the capacity of an alleged "regulator of service" to be
rendered by these corporations and as an "initiator of
new subways."  The Transit Commissioners aim at but
one purpose-forever to compel the City to remain in
bondage to these traction corporations, as their partner
-to pay all the losses and share in no profits.
When the Transit Commission was created, the office
of the Transit Construction Commissioner held by
John H. Delaney, was abolished. The Transit Commission succeeded to the regulatory powers of the then only
Public Service Commissioner Barrett, First District,
and also to the construction powers exercised by the then
Transit Construction Commissioner Delaney.
It should be clearly borne in mind, particularly because of attempts of the Transit Commissioners, to confuse the issue and shift the blame, that the sole power to
initiate construction and provide for new subways from
the time the Transit Commission came into office in
April, 1921 until July 1, 1924, when the present Board
of Transportation was appointed, was vested exclusively
in this State Transit, Commission. Throughout the
seven years of the present administration repeated but
unsuccessful efforts were made to secure from the legislature such power for the City. The City has a right to
make suggestions for new subways to the Transit
Commission. The Mayor presented a comprehensive
program for rapid transit construction, as early as
September 6, 1922, which the Transit Commission has
ignored.
The excuse for the creation of the Transit Commission is written in the law which created it. The


3




Legislature took cognizance of an "emergency" which
existed in the transit situation in the City of New York.
Ostensibly the Transit Commission was created to give
relief to the public from the emergency. Nothing has
been done to give that relief, either by requiring the
traction companies to give, on the existing lines, the
kind of service that the contracts with the city and the
law require, or by the construction of new subways.
Its principal concern has been the financial rehabilitation of the traction companies.
The members of the Transit Commission are all
glib-tongued garrulous orators. One would hardly expect that from Commissioner O'Ryan, a General with
previous military training. No one will deny that all
that was said by these gentlemen could be very succinctly stated in at most seventy-five pages of testimony.
Mr. Leroy T. Harkness apparently is the business
manager of the Commission. He had charge of its
records and accounts, and supervision over the reports
and accounts of the railroad companies, and of the
determinations of cost made by the Chief Engineer. He
was the employment agent of the Transit Commission
and a lecturer and writer on increased fares for traction
companies.
Commissioner O'Ryan is outstandingly the author
of the famous "Readjustment Plan" of the Transit
Commission, for the so-called unification of our transit
lines, the financial rehabilitation of forty traction companies, and purchase for the city of a thousand
franchises and obsolete surface car lines. He superintended the reorganization of the Interborough and New
York Railways Company, and it is to him that we
should be thankful for destroying his colleagues' alibi
based on the lack of shop and yard facilities, as we
shall see.
4




Commissioner McAneny, the Chairman of the Commission is apparently its master mind. He is the expert
who gave the kind of service that we got on our rapid
transit lines. To him was left the difficult task of explaining the unexplainable, and well did he carry this
burden. Too bad this silver-tongued gentleman, who
can talk endlessly, and with his perfect command of
words, conceal any thought and confuse any issue, did
not live in the ancient days of the Greeks. How well he
might have functioned as the Dean of the School for
Mental Gymnastics, described by Aristophanes in "The
Clouds." How plausible are his proofs that wrong is
right!
I am wondering whether Governor Miller in appointing these gentlemen had in mind that (all that was
required to relieve the emergency in our transit situation
was lip service. Judging from the record, their activities since their appointment, have been only in that
direction, and in the preparation of words and figures
in attempted justification for their inaction.
THE LIMIT OF ENDURANCE REACHED
CHARGES AGAINST THE TRANSIT COMMISSION
All the protestations of Mayor Hylan against the
intolerable conditions on our transit lines and against
the outrageous treatment of the City by the Legislature,
all the appeals of the city administration to the State
Legislature for relief from this impossible situation,
have been unheeded. When the hope for relief from
a hostile legislature was seen to be in vain, the Board
of Estimate and Apportionment decided to appeal to
the Governor of the State of New York for the only
relief which lay within his power. Accordingly, on May


5




7th, 1923, a resolution was adopted by the Board of
Estimate and Apportionment as follows:
"Whereas, The Transit Commission * * * has
failed to afford proper relief to the citizens of New
York in the way of proper and adequate transportation facilities and has accomplished nothing of
substantial or constructive nature, although it had
held office for a period of almost two years, at an
unwarranted cost to the taxpayers and at the expense of health, comfort and convenience of the
traveling public, and
"Whereas, In the opinion of this Board, the interest of the city would be best served l)y the termination of the Commission, be it
"Resolved, By the Board of Estimate and Apportionment that the Corporation Counsel be requested to advise the Board whether the members
of the present Transit Commission can be removed
from office, and if so, what steps should be taken to
bring about such removal."
I was retained to finally formulate the charges for
the removal of the Transit Commissioners and to collect
and present the evidence in support thereof. On October 14, 1924, the proposed charges were read before the
Board of Estimate and Apportionment and on October
24, 1924, a resolution was adopted, voting the charges
and their submission to the Governor. Much has been
said, although entirely immaterial to the inquiry, as to
differences between the original draft as read, and the
charges finally adopted. I am responsible for those
changes. A comparison will disclose that the modifications were in the main, in verbiage only; that not a single allegation of fact was withdrawn, that the changes


6




were made to conform them to the form of charges,
rather than of an indictment. A copy of the charges
is attached, marked Exhibit "A."
Section 4 of the Public Service Commission law provides that the Governor may remove the Transit Commissioners upon charges, after a trial upon ten days'
notice. The charges lie on the Governor's table. On
November 29, 1924, his Excellency, the Governor, appointed the Honorable John V. McAvoy, one of the
Justices of the Supreme Court, New York County, a
Commissioner, under Section 8 of the Executive Law,
called the Moreland Act, to make an investigation into
the affairs and management of the Transit Commission.
HEARING BEFORE COM.MISSIONER MC AVOY
At the outset of the hearings before Commissioner
McAvoy, the City of New York was represented by
Hon. George P. Nicholson, Corporation Counsel,
Mr. Edgar J. Kohler, Assistant Corporation Counsel,
Mr. Max D. Steuer and myself, as Special Counsel,
and Mr. Louis Lande, Special Assistant Counsel. From
the beginning, the representatives of the City stated
their position, that because the investigation was the
result of charges, filed by the Board of Estimate against
the Transit Commissioners, that the Board of Estimate
be allowed to make proof of the charges, and that the
City's counsel be permitted to examine its witnesses
and cross-examine the Transit Commissioners and their
witnesses.  The Moreland Commissioner ruled that
counsel for the City would not be permitted to call,
examine or cross-examine witnesses. Upon the grounds
stated by Mr. Steuer, that no useful purpose could be
served by him, in sitting and listening, and that he had
not been retained for that purpose, and upon the addi7




tional ground which I assigned, and in which Mr.
Nicholson concurred, that "right of cross-examination
of witnesses was an inherent right under our AngloSaxon Jurisprudence in connection with any proceeding
where there is a hearing on any controversy"-the
City's representatives withdrew their appearance on
the second day of the hearings, and did not further
participate, save that when Mayor Hylan testified I
was present and suggested to Mr. Henry L. Sherman,
the counsel designated by Commissioner McAvoy,
certain inquiries (p. 251-253).
Hearings before Commissioner McAvoy commenced
on December 15, 1924, and were held on fifteen days.
Twenty-seven hundred and twenty-three pages of testimony were taken, three hundred and twenty exhibits
were received.
The witnesses were the three Transit Commissioners,
Mr. Philip Mathews, the Chief Executive Officer of the
Transit Commission; Mr. Willam C. Menden, the
President of the B.-M. T.; Mr. Frank Hedley, the
President of the I. R. T.; Mr. James S. Doyle, Mr.
Hedley's assistant; Mr. George Keegan, another of
Mr, Hedley's assistants;; Mr. S. Herbert Wolfe, an
accountant engaged by Commissioner McAvoy; Mr.
Robert Ridgway, the Chief Engineer of the Board of
Transportation, formerly Chief Engineer of the Transit
Commission; the Mayor, the Comptroller, Margaret
Quirk, Mary Collins Rooney, C. L. Hutzelman, John
S. Coppola, complaining citizens. Although Mr.
Henry L. Sherman, Counsel to the Commissioner,
stated: "I stand ready at any time to receive from the
Counsel of the Board of Estimate and Apportionment,
or from anyone else, evidence which may be deemed
pertinent to this inquiry so that it may be presented to


8




you for consideration, so that all the questions relating
thereto may be propounded to any witness who may be
called, that relates not only to the general scope of the
investigation but also to the charges preferred by the
Board of Estimate and Apportionment, which up to this
time, as your Honor is aware, has been before us"
(1p. 254). Apparently the policy of the investigation
was subsequently changed.
This is evident from the fact that at the close of
Mayor Hylan's testimony, I suggested that an inquiry be conducted into an alleged expenditure of
nearly six million five hundred thousand dollars, as
an incident of the reorganization of the B.-M. T., and
on January 7, 1925 I also caused to be delivered to Mr.
Sherman, a communication, a copy of which I am annexing, Exhibit "B," in which I suggested further subjects
for examination. Reference to the receipt of this com,munication will be found on page 507 of the record. My
suggestions have been ignored, and the evidence which
I have sought will not be found in the record.
An examination of the stenographer's minutes will
disclose that at least 90 per cent. of the testimony elicited, consists of a statement, restatement and endless
repetition of a mass, of what is now ancient history in
the transit situation, and practically all of which is
contained in public records. The archives of the Transit
Commission and its predecessors, were raked and their
contents dumped into the record. Lengthy communications were prepared, after notice of the charges, between
the Transit Commission and the traction companies
containing nothing probative, and only self-serving
declarations, and their united arraignment of the City
Administration, and attempts to cast the blame for our
present intolerable transit situation upon the Mayor


9




and were freely admitted in evidence. This is not intended as a criticism of Commissioner McAvoy. There
was no one to object to the admission of this irrelevant
evidence. His counsel stated that he was anxous that
the Transit Commissioners have the fullest opportunity
to present their views and the Transit Commissioners
took that full opportunity. It became a self-exculpating proceeding for the Transit Commissioners. Notwithstanding this unlimited latitude, as I shall indicate,
they convicted themselves, not only of the charges which
the Board of Estimate made against them, but of grossest indifference to the interest of the traveling public
and proved themselves concerned solely as benefactors
of the traction companies.
It would be purposeless further to comment upon the
manner and method of the investigation conducted by
Mr. Sherman. The citizens of the City of New York
who have followed from day to day the developments
of this hearing, have formed their own opinion of this
futile and fruitless investigation; But for good or evil,
the transit problem is still with us, after the presentation of nearly three thousand pages of so-called testimony and truck loads of exhibits.
What is this problem? I shall endeavor to give what
I hope, will be an adequate picture of the plight of the
City, in regard to rapid transit. The following pages
will tell their own story. Undisputed and uncontradieted facts and admissions of the Transit Commissioners themselves will reveal the shocking situation and
will show that the strong language used in these introductory pages are restrained under-statements of an
appalling situation.


10




CHAtPTER II


THE BACKGROUND
HISTORY OF RAPID TRANSIT-DUAL CONTRACTS
INVESTMENT-OPERATIONS-FIVE-CENT FARE
The rapid transit system of the City of New York,
all boroughs except Richmond, which is not yet physically embraced in the system, consists of the four elevated lines in Manhattan and Bronx (Second, Third,
Sixth and Ninth Avenues), owned by the Manhattan
Railway Company and leased to the Interborough
Rapid Transit Company, with extensions and additions
made since 1913; the old elevated lines of the B. R. T.
system in Brooklyn, as these existed in 1913, extensions
and additional tracking added since; and the subway
and elevated lines constructed under what have come
to be known, as Contracts 1, 2, 3 and 4, the first three
with the Interborough Rapid Transit Company and the
last, with the New York Municipal Railway Company,
a subsidiary of the old B. R. T., whose rights have now
passed to the New York Rapid Transit Corporation,
a subsidiary of the B.-M. T.
Contracts Nos. 1 and 2 were made with the railroad
companies by the Board of Rapid Transit Railroad
Commissioners, and Contracts 3 and 4 by the Public
Service Commission of the First District, both acting
for and on behalf of the City of New York.
Contract No. 1 was made on February 21, 1900, and
has been supplemented by agreement dated April 15,
1915. Under it there was constructed the subway from
Van Cortlandt Park to 42nd Street on the west, thence


11




across 42nd Street to Grand Central Station, thence
south along Fourth Avenue to City Hall; also the subway from Bronx Park to 110th Street and Lenox Avenue, thence westerly connecting with the westerly line
at about 96th Street and Broadway. Under this contract the city paid the entire cost of construction anrd
the company the cost of equipment. This subway, together with that which was constructed under Contract
No. 2 was leased to the company for periods respectively
of fifty and thirty-five years, with certain privileges of
renewal to the railroad company, which are no longer
effective, because of the merger of these contracts in
Contract No. 3.
Contract No. 2 was made July 21, 1902, and modified
January 31, 1914. Under it was constructed the subway from City Hall under the East River and into
Brooklyn to Atlantic Avenue.
The investment of the City under Contracts 1 and
2, as determined in 1921, is $62,767,713, and of the
company $43,398,479, a total of $106,166,192.
The subway under Contract No. 1 commenced operation in 1904 and under Contract No. 2, between 1906
and 1908. Between 1908 and 1913 no provision was
made for the construction of any new subways in the
city.
On March 19, 1913, the so-called dual contracts, No.
3 and No. 4, the former with the I. R. T., in Manhattan, and the latter with the subsidiary of the B. R. T.
in Brooklyn, were made. The contracts provide that
they shall be completed and the new subways be in
operation by January 1, 1917. In other words, the new
subways, and the elevated extensions and third tracking
provided for by the so-called related certificates accompanying the dual contracts, and all equipment and facil

12




ities, including repair and inspection shops and storage
yards were required to be fully completed by January
1, 1917.
The "Related Certificates" were in the nature of
supplementary contracts executed simultaneously with
the dual subway contracts, and made provision for the
extension and third tracking of the existing elevated
lines in Manhattan, Bronx and Brooklyn.
The present City administration came into office on
January 1, 1918, and the greater part of the record before Commissioner McAvoy consists of an inquiry into
the non-completion of the subway lines and facilities,
under Contracts 3 and 4, and particularly with respect to
the non-completion of certain additions to repair and inspection shops and storage barns, and not one word
of comment is made upon, or criticism directed at the
parties responsible for the non-fulfillment of these contracts before the present administration, except the testimony of Comptroller Craig, who brought to the attention of the Commissioner, that this delay in the
completion of these contracts served to the great advantage of the railroads and detriment of the public, and
that in 1915 and 1916 when the work should have been
done, the cost of labor was cheaper than before the
outbreak of the World War (p. 1891).
In this connection it should be borne in mind that
on January 1, 1918, we were in the midst of the War,
when steel fabrication was controlled and to all intents
prohibited by the Federal Priorities Board, and that
the three years following the cessation of hostilities, on
November 11, 1918, brought kaleidoscopic changes of
financial depression and inflation which did not lend
themselves to a program of stable and progressive rapid
transit construction.


13




Contract No. 3 provided for an extension of the old
subway, by a continuation north of the easterly leg,
from 42nd Street into the Bronx, adding the Jerome
Ave. and Pelham Bay Park branches, and the continuation south, of the westerly leg, down 7th Avenue and
under the East River in a new tunnel (Clark Street),
the linking with the old line at Atlantic Avenue, thence
proceeding along Flatbush Avenue to Prospect Park
Plaza, and thence by Eastern Parkway as a subway so
far as Buffalo Avenue, and then as an elevated line to
New Lots Avenue, the Brownsville District of Brooklyn, with a branch from Eastern Parkway, from Nostrand to Flatbush Avenues.
It also provided for the so-called Queensboro line running originally from Times Square and later from 8th
Avenue and 42d Street, under 42d Street and through
the Steinway Tunnel. It also provided for the dual
operation by the Interborough and the Brooklyn Company of two elevated lines from the Queensboro Plaza
in Long Island City, one to Astoria and another to
Corona.
As a result of these constructions the Z formation of
subways, under Contracts 1 and 2, was converted into
the H system by the addition of the Lexington Avenue
Line to the north, on the easterly side, and the Seventh
Avenue Line to the south, on the westerly side.
It provided also for the linking up of these sulbways
with the elevated lines owned by the Manhattan Railway Company and leased to the Interborough and for
the extension and additional tracking of those elevated
lines. The cost of construction was paid by the city,
with a contribution by the railroad company, which also
paid the entire cost of equipment, and improvements
to the elevated lines.


14




Under Contract No. 3 the investment of the company
as of June 30, 1923, is $105,970,736, and of the city
$93,362,704, a total of $199,333,440 besides $41,423,759
invested by the I. R. T. in extensions and additional
tracking of the Manhattan "L" Line. Thus the total
investment of the city under Contracts 1, 2 and 3 is
$156,000,000 and of the company $150,000,000, besides
its investment in "L" improvements. Their investments
are roughly the same.
Under Contract No. 3 it is provided that after payment of operating expenses, there shall be first paid to
the city interest and sinking fund charges on its investment of about $63,000,000 under Contracts 1 and 2,
a total slightly in excess of 4 per cent per annum. During the year ending June 30, 1924 the city's return on
this investment was $2,610,999 (p. 2175).
The Company then receives a so-called preferential
of $6,335,000 which was stated to be the average profit
realized by the I. R. T. from operation of the subways
under Contracts 1 and 2 during the years 1910 and 1911.
This Contract No. 3, was negotiated between the
Board of Estimate and Apportionment, acting through
a Committee of which Mr. George MecAneny, now
Chairman of the Transit Commission, was Chairman,
and the Public Service Commission of the First District and the Railroad Company. Leroy T. Harkness
was Assistant Counsel to the Public Service Commission and drafted the contract. In other words, the agreement was, that, out of the first proceeds of operation of
the combined subway system, the city receive slightly
over 4 per cent. on its investment of $63,000,000 under
Contracts 1 and 2 and that the railroad company receive
$6,335,000 on its investment, under those same contracts, of under $46,000,000. The city receives a return


15




of 4 per cent. on its investment, whereas the railroad
company receives a return of about 14 per cent. on its
investment.
This $6,335,000, it is claimed, respresents $3,157,000,
the interest charges of the company, at 6 per cent. on the
bonds of $52,615,000 which it issued to finance its investment under Contracts 1 and 2, and $3,178,000, a profit,
on absolutely no investment. The $52,615,000 bonds
represent at least $6,000,000 over the actual investment
of the railroad company under Contracts I and 2.
Contract No. 4 and related certificates provided for
the extension and additional tracking of certain of the
Brooklyn elevated lines, the reconstruction and adaptation for rapid transit operation, of other specified
elevated lines, and the construction of the following
new city-owned lines-all to be operated as one system:
Broadway-Brooklyn-Fourth Avenue Line-Beginning at Queensboro Bridge Plaza, crossing the East
River to 59th Street and Seventh Avenue, then south on
Broadway, to Whitehall Street, under the East River
via the Montague Street Tunnel, to DeKalb Avenue,
then down Fourth Avenue to 86th Street. This line includes the Centre Street loop, running to the Municipal
Building (constructed prior to 1913) and used for
operation of trains, from Brooklyn over the Williamsburg and Manhattan Bridges; and the Nassau-Broad
Street section, running from the Municipal Building
in Manhattan and connecting with the Montague Street
tunnel. Provision was also made for the joint operation
with the I. R. T. of trains from the Queensboro Bridge
Plaza of the lines, one to Corona and the other to
Astoria, as previously indicated;
Culver Line, an elevated structure which connects
with the Broadway-Fourth Avenue line at the 38th


16




Street cut, Brooklyn, and runs via Gravesend Avenue
to Coney Island;
Fourteenth Street-Eastern Line, which begins at
Sixth Avenue, Manhattan, and runs as a subway
through Fourteenth Street under the East River to
Williamsburg, and then as an elevated structure (so
originally projected) to East New York.
Under this contract the company agreed to furnish
the equipment, and to pay for the extensions, additional
tracking, and the reconstruction of the existing lines,
and to contribute towards the cost of construction of
the city lines as follows: $13,500,000 (which includes
$1,000,000 for easements), plus the cost of making the
physical connection at Canal Street between the Centre
Street loop and the main Broadway-Fourth Avenue
line.
The investment of the city under Contract No. 4,
as testified to, is $149,000,000, and of the company is
$88,000,000. Of this sum only $46,177,000 was invested by the company in subway cost of construction
and equipment and $41,823,000 in extension and improvements of its L lines (p. 2266).
Thus the total actual investments of the New York
and Brooklyn companies in subways under all the contracts are, about $150,000,000 by the New York Company and $46,000,000 by the Brooklyn Company, a
total of less than $200,000,000, and the City's investment is nearly $300,000,000.
Contract No. 4 provides that after payment of
operating expenses and allowances for depreciation,
the first charge on the profits, shall be a preferential of
$3,500,000 claimed to have been the profit of the
B. R. T. from operation of its elevated lines during the
years 1910 and 1911. There is no accurate appraisal


17




of the value of these old elevated lines and equipment.
There is an appraisal by the Transit Commission as
of June 30, 1921 which fixes the same at about
$22,400,000. Undoubtedly $20,000,000 would be a very
fair value. On that basis Contract No. 4 assures to the
B.-M. T., by the guaranteed preferential, at least 171/,
per cent. per annum  on its investment in L lines.
On that basis Contract No. 4 assures to the B.-M. T.,
by the guaranteed preferential, at least 171/4 per cent.
per annum on its investment in L lines.
Contracts Nos. 3 and 4 both provide, that, after payment of interest on the city's investment under Contracts 1 and 2 amounting to about $2,500,000 a year,
and after the payment to the railroad companies of not
only their preferentials of $6,335,000 to the I. R. T., and
$3,500,000 to the B. M. T., there shall next be paid to
the railroad companies, interest and sinking fund
charges upon their investments under Contracts 3 and
4; that then only shall the city receive interest and sinking fund requirements on its investment, and that the
balance shall be shared equally between the companies
and the city. Of course the city only gets interest and
only divides the profits after all deficits from prior
years have been made good to the companies. With
respect to the I. R. T., the deficits bear compound
interest at the rate of five per cent per annum computed
semi-annually.
The city, as indicated, has about $300,000,000 invested
in these subways. Except for the interest on the $63,000,000 invested und(ler Contracts 1 and 2, it has not to
(late received one single cent interest on its remaining
$240,000,000 investment. The annual cost to the city
in 1924 for interest on the bonds which it issued for this
investment was $10,230,000 (p. 2177). This and prior
deficits are included in the budg(et and have been paid
18




by the taxpayers. To date the deficits from operation
under Contract No. 3 (The Interborough) are as follows: due the city $44,702,831 (p. 2267); due the company $10,434,623, a total of $55,137,453 (p. 2293), and
lnder Contract No. 4, due the city for period from
August, 1920 to June 30, 1924, $25,851,790 (p. 2282)
and due the company $15,623,318 (p. 2281) besides
$18,000,000 due the city, for period prior to August,
1920, and included in cost of construction, a total of
$59,478,108 deficits, under Contract No. 4, and a grand
total of $114,600,000 deficits under Contracts 3 and 4.
And these are the contracts which McAneny boasts
that he engineered, and Harkness brags that he drafted.
The only redeeming aspect of the contracts, are that the
city has the satisfaction of knowing that at least on
paper, the city owns the subways and the equipment,
and that on some remote day, the right to operate them
will revert to the city, and that the contract specifically
limits the companies to charge a single fare of five cents
with universal free transfers (p. 2576) and that besides
under given conditions the city may "recapture" these
lines-a word very well chosen.
It is important that the provisions for "recapture"
be clearly understood, because to "recapture" has
definitely become the policy of the city, and has the approval of the citizens of the city as indicated at the polls
in 1921 and of the people of the State as indicated by
recent constitutional amendment legalizing municipal
operation of our rapid transit lines.
Both Contracts Nos. 3 and 4 provide that the city
may recapture the whole or parts of our subway system.
Under Contract No. 3 the system is divided into four
parts or sections and under Contract No. 4 into three
sections. The sections under Contract No. 4 are classified as:
19




1. Broadway-Fourth Avenue Line,
2. Culver Line and
3. Fourteenth Street-Eastern Line.
Under Contract No. 3 the sections are as follows:
1. Steinway Tunnel Line,
2. Seventh Avenue-Lexington Avenue T,ine,
3. White Plains Road Line, and
4. Eastern Parkway Line.
Both contracts provide that the city may recapture
the subways in toto, at any time after ten years after
the commencement of operation of any part of the system, or may recapture any section at any time after ten
years, after the commencement of the operation of any
substantial operable part of that section (McAneny, p.
2583) and the right to recapture may be exercised upon
one year's notice to the railroad company and the payment of the company's investment in the subway proposed to be recaptured, plus a maximum sum of 15 per
cent. on such investment, which recapture price gradually
diminishes until at the expiration of the terms of the
leases of the railroad companies, which is about 49 years,
the roads revert to the city without payment. These
leases will expire in 1964 and 1962 under Contracts Nos.
3 and 4 respectively. Each year the recapture price
with respect to the I. R. T. is reduced by $2,700,000 and
with respect to the B.-M. T. by $1,300,000, a total annual reduction of $4,000,000 (McAneny, p. 2574).
The city's right to recapture in toto, the subway lines
operated by the Brooklyn Company under Contract No.
4 accrued on August 4, 1923 so that the city may at any
time reclaim that subway.
The city's right to recapture the entire subway system
of the Interborough will accrue on June 22, 1925
(p. 2584, 2585).
20




The dates of accrual of the rights of the city to recapture sections only under Contract No. 4 with the
Brooklyn Company are as follows:
Gravesend-Culver Line-March 16, 1929;
Broadway-4th Avenue Line-August 4, 1923;
Fourteenth Street-Eastern Line, which is not yet
completed from  Montrose Avenue-10 years
from date of completion.
Under Contract No. 3 the dates of recapture of sections are as follows:
Steinway-Tunnel Line-June 22, 1925;
Seventh Avenue-Lexington Avenue Line-June
2, 1927;
White Plains Road Line-March 3, 1927;
Eastern Parkway Line-April 15, 1929.
It should be borne in mind that a recapture by the city
of the subways in Manhattan and the Bronx under Contract No. 3, would leave to the railroad company the
"Z" system, which is not recapturable under Contracts
1 and 2, namely the line from Van Cortlandt Park in
the west, Bronx Park in the east, which runs down to
7th Avenue and 42d Street on the west, across 42d
Street and down 4th Avenue to Atlantic Avenue,
Brooklyn, and give the City the Clark Street tunnel,
the 7th Avenue Line below 42d Street, the road in
Brooklyn from the Clark Street tunnel and the Lexington Avenue Line above 42d Street, with branches in
the Bronx. Accordingly, in order that it may have continuous trunk lines in Manhattan, the city is granted
the privilege of exchanging, either the northerly or
southerly leg in the "H" system, so that the city may
on recapture, have either the Lexington Avenue Line
with branches in the Bronx running through the ol0(
21




tunnel under the East River, or the westerly line from
Van Cortlandt Park through the Clark Street tunnel
and out into Brooklyn, upon appropriate adjustments
of prices, on an earning basis.
As already indicated the investment of the B.-M. T.
subsidiary under Contract No. 4 is $46,000,000. Not
all of that represents real cost of construction or equipment. Included in that sum are high interest rates paid
on the money which was borrowed for that construction
and equipment, duplications, damages from delay, mistakes, and the penalties of extravagance. Undoubtedly
under economic and businesslike management that construction and equipment would not have cost in excess of $30,000,000.
Be that as it may, the City must pay that alleged cost
of construction and equipment, together with a bonus
upon recapture. The cost to the City of recapturing
the entire B.-M. T. subway system  is $52,995,000
(McAneny, pp. 2588-2589) and of the I. R. T. subways $123,995,000.
If the downtown legs of the "H" in Manhattan are
traded, so that the City will own the easterly line, there
will be an additional $10,000,000 cost, or if the uptown
legs are exchanged so that the City will own the westerly
line, there will be an additional cost of $24,300,000, and
taking into account additional equipment and improvement, the total cost to the City of recapturing all the subways under Contracts 3 and 4 will not be in excess of
$200,000,000, according to the testimony of McAneny
(p. 2589).
If the $275,000,000 proposed to be exempted from
charge against the City's debt limit, is made available,
the City will not only be able to recapture all of the subways, but will have at least $75,000,000 for use towards
future construction.
22




Taking into account estimates given by the Comptroller before Commissioner McAvoy of amounts available from regular sources and conservative estimated
increased real estate assessments, at least $175,000,000
besides this $75,000,000, a total of $250,000,000 will be
available during 1925 and 1926 for subway construction (p. 2147), should this constitutional amendment be enacted, with corresponding amounts in subsequent years, during the course of the contemplated
future construction of subways. There can be no question of the City's financial ability to carry forward its
present subway construction program. It is true, as
has been urged, that the constitutional amendment cannot be made effective until January 1, 1928, but with
reasonable assurance of its passage, the City can readily
regulate the letting of contracts, in accordance with its
assured prospective borrowing capacity. Besides, the
City can arrange to physically take possession of the recaptured lines contemporaneously with the commencement of operation of the new subways.
During the year ending June 30, 1924 there were carried by the I. R. T. 714,000,000 passengers, and by the
B.-M. T. 600,000,000 passengers, an aggregate of
1,314,000,000 passengers or at the rate of about 4,000,000 a day. The population of the city is 6,000,000, of
whom about 2,000,000 are children under 14. Thus
the rapid transit lines of this city carry a very substantial
part of the entire population, and their operation and
particularly the limitation in the contracts to a five-cent
fare may unquestionably be said, to insure to the benefit
of the great majority of the people of the city, who as
taxpayers pay the city's $10,000,000 deficit from subway
investment. It was forcibly presented before Commissioner MeAvoy that subway operation is a benefit, not
23




only to the riders, but to all who own property or are
engaged in business in territory served by our rapid
transit lines.
The five-cent fare has become a settled municipal
policy of the City. It was urged by the Comptroller
before Commissioner   lIcAvov that it is a sollnd
economic municipal policy that these deficits il the light
of the benefits, which rapid transit confers upon the
whole people of the city, be treated as legitimate expenses of the municipal government and are properly
includible in the City's annual budgets.
It is unnecessary to concur in these views because in
fact the City, in the last analysis is not mulcted by these
deficits, but on the contrary, is financially benefited by
our subways to the extent of many times the amount
of these deficits. In the first place, the railroad companies pay in taxes and assessments nearly $10,000,000
annually (O'Ryan, pp. 2488-2489). Besides, since the
commencement of subway operation, the city's assessnient valuations have increased three billion dollars, of
which at least two billion is due to the construction of
our new subway lines, the income of which to the city
is at least fifty million dollars a year (McAnenl, pp.
2596-2597). The point is that the City can have these
b)enefits but, instead of deficits, have profits from the
municipal operation of its subways.
Much of the testimony before Commissioner McAvoy
was directed to an inquiry as to the cause of these deficits. It was shown that repeated efforts were made
since 1918 by the railroad companies to secure increased
fares. There are carried on the transit lines of the City
about 6,000,000 passengers daily. An increase to an
eight-cent fare would spell an exaction from the traveling public of $180,000 per day or in excess of
24




$65,000,000 per annum and the huge sum of nearly
$3,000,000,000 during the term of the leases. Mayor
Hylan is blamed by the Transit Commissioners for stubbornly opposing and preventing this increase in fares.
It appears that early in the present administration,
on January 10, 1919, the Board of Estimate and Apportionment declared its policy in opposition to any
fare increases (p. 1992) that the Mayor has ever since
carried forward that policy and that there have been
no increases in fares and the companies have been held
to their obligations under Contracts Nos. 3 and 4.
It is claimed that the deficits from operation under
Contracts Nos. 3 and 4 are due to the impossibility to
operate with financial success, our rapid transit lines,
on a five-cent fare. As early as August of 1921 Harkness began agitating for increased fares in New York
and read an article before the Public Utilities section
of the American Bar Association il Cincinnati, in which
he says:
"The question naturally occurs, if most of the
cities in the country have relieved their traction
situation by increases in fare, why hasn't New
York City done so? To those who have examined
the situation superficially, a sufficient answer has
been found in the hostility of the City administration.  The City administration has been vigorously and bitterly opposing an increased fare."
"To carry out such a plan of readjustment, the
Commission is vested with the broadest powers to
vary rates, including the power to vary rates fixed
in municipal consents and contracts; to revise existing contracts and to make new ones, and to value
and acquire railroad properties for and in the name
25




of the City. Provision is made for submitting plans
and contracts to the local Board of Estimate and
Apportionment, but if that Board finally refuses
to approve, the ultimate power to carry the plan
into effect is vested in the Commission" (Craig,
p. 2112).
Notwithstanding that, on September 9, 1921, the
Transit Commission made public its plan of readjustmient, to which reference will be made later, under
which a fare of at least eight and possibly ten cents
would have been inevitable, the almost incredible situation is presented that at the conclusion of the hearings
before Commissioner MIcAvoy, both Harkness and
McAneny, and I understand also O'Ryan, in public
statement made January 14, 1925, have finally unequivocally endorsed the Mayor's stand for a five-cent fare
on existing lines as justifiable, on the basis of present
operation.
The question naturally presents itself, why, under
these circumstances, and in view of the fact that even
the Transit Commissioners have finally committed
themselves to the five-cent fare, there should have been
this aggregate deficit of over $100,000,000 from operation of our subways. The answer is simple when consi(leration is given to the waste, extravagances, huge
sums paid in swollen dividends on watered capitalization, receivership expenses, Wall Street syndicates and
various committees, counsel and committees of stockholders and bondholders and fees of receivers and
lawyers on reorganization.
The I. R. T. collected during the year ended 1924
over $38,000,000. The fact is that the I. R. T. during
every single year without exception, commencing 1912,
made a substantial profit from operation of its subway
26




lines under Contracts 1, 2 and 3, after payment of all
interest, maintenance and operating expenses, etc., the
profits for the last three years being respectively as
follows:
1924...................... $3,359,259.73
1923.....................  2,002,854.04
1922.......................  2,012,587.56
I am annexing hereto Exhibit "C" showing the results
of operation of the Interborough Rapid Transit Company from 1912-1915 to 1924.
So too with respect to the B.-M. T. and its predecessor, the B. R. T., that company earned a profit
from the operation of its subways under Contract No.
4 for every year, except 1920-1921 of the Receivership
of the B.-M. T., when there was an extraordinary
cost of operation due to strikes. Exhibit "I)" hereto
annexed, shows that during each year commencing 1915
and ending 1924, excepting 1920-1921, the Brooklyn
Company earned such profit. The profits in 1924,
1923 and 1922 are respectively as follows:
1924.......................  $2,492,982.43
1923......................  038,939.65
1922.......................  1,106,623.12
The interest deductions include the interest on all of
the obligations of the Brooklyn Company, including
its watered bonds on the old elevated lines.
It is to be borne in mind that these are the company's
figures, that none of the items of expenses have been
disturbed, including the extravagant, wasteful and
unbusinesslike expenditures which would not be under
municipal operation. They include what brokers and
money-lenders exacted on loans also charges which
27




belong to other and less profitable properties of the
companies and not operated as part of Contracts 1, 2,
3 and 4.
I direct attention to the fact that in these schedules
no account has been taken and no interest charged on
the city's investment of over $240,000,000, under contracts 3 and 4. In other words, whilst the roads have
earned a profit for the companies, the result has been
a loss to the city of about $10,000,000 a year.
There can be no question but that under municipal
operation the income from our subways, will not only
provide for all operating and maintenance expenses,
depreciation and interest on investment, but furnish
substantial sums for the construction of future subways.
Annexed hereto, marked Exhibit E, is an analysis
which supposes complete municipal operation of the
Brooklyn Rapid Transit lines, assuming the payment of
interest on investment, at the rate which the City is
required to pay, but not in any way questioning any of
the expenses of operation of the railroad company, for
the year ending June 30, 1924, except taxes. It will be
noted that without disturbing or questioning any of these
expenditures, and by merely calculating interest at the
rate of 4 per cent. per annum upon the investment of
both city and company, and much of this investment
does not represent real cost of construction or equipment, and taking the B.-M. T.'s old elevated lines at
the Transit Commission's valuation of $28,534,060,
there would be sufficient from income to pay all of
these charges besides a small sum of about $7,000, and
that, on the basis of the net revenue reported by the
B.-M. T. for the first three months of the current fiscal
year, that there will be earned from its rapid transit
lines, after the payment of interest at 4 per cent. per
28




annum on the company's as well as the city's investment, a total of $240,000,000, a net profit of $1,390,000.
Annexed hereto, marked Exhibit F, is an analysis
and schedules showing that if the city, instead of the
1. R. T. had operated the subway lines under Contract
No. 3, and the city only paid 4 per cent. interest, which
it does, without in anyway disturbing any of the expense
items reported by the company, there would have been
earned from the operation of the I. R. T. subway lines
during the year ending June 30, 1924, a sum sufficient
to p)ay interest on the combined investment of both the
city and the company, and besides a net profit of
$4,340,000.
If the computation of interest is made upon the basis
of the investment of the city and company, properly
depreciated as it should be, namely upon $250,000,000;
after the payment of all operating and maintenance
expenses and interest, there would have been a profit
of $5,950,000 during the same year.
Exhibit G, hereto annexed, shows in connection with
Contract No. 4, the Brooklyn system, that for the year
ending June 30, 1924, assuming complete municipal
operation, and payment of interest at the rate of 4 per
cent. per annum, and adjusting the operating expenses
and taxes of the New York Rapid Transit Corporation
(subsidiary of the B.-M. T.) that after paying interest
on both the company's and city's investment and all
expenses of operation, there would have remained a net
profit of $2,537,375. for additional depreciation, sinking fund requirements and improved service.
Much testimony was given as to the cost of construction of future subways. It was claimed that because
of increased costs of labor and material, that the cost
of new construction will be 125 per cent. higher than


29




was the cost of construction under the dual contracts.
The cost of construction will undoubtedly be higher
than it was under the dual contracts, but it is very
doubtful whether the advances will be as great as it is
claimed.
Exhibit H, hereto annexed, is a copy of a valuation
report made by the present Transit Commission of
properties of the Brooklyn Rapid Transit system as of
June 30, 1921, showing both the original cost and 1921
reproduction cost. It will be noted that the New York
Consolidated Railroad Company, the lessee under contract No. 4 of the New York Municipal Railway Corporation, then had invested under Contract No. 4 about
$75,000,000. Its total investment to date is $88,000,000
so that in 1921 about 85 per cent. of its investment
under Contract No. 4 had been made, and you will
note that the 1921 price basis for this investment was
only $106,000,000. In other words, the 1921 value was
about 42 per cent. in excess of the original cost. I
understand the costs in 1921 were fully as high, if not
higher, than they are today.
It is to be borne in mind that much of the construction under Contracts 3 and 4 took place after prices
of labor and material had advanced above the levels
obtaining in 1913, when the dual contracts were made.
Undoubtedly, with respect to that portion of the construction, under the dual contracts which occurred after
January 1, 1918 the cost was fully as high as it is today.
Very probably the cost of future construction will not
be in excess of 75 per cent. above the average costs of
construction under the dual contracts.
However, it is to be borne in mind that for this increased cost there will not merely be a duplication in
construction of the present subways. We will have


80




modern construction and equipment. The stations will
be built to accommodate local as well as express ten,
car trains. Adequate provision for ventilation, eme~gency exits and sanitary conditions will be provided,
resulting not only in increased capacity, but in invitation to those who, because of present conditions, resort
to other means of transit, so that whilst the cost of
construction will be higher the modern structure will
have a greater earning power.
For the purpose of further study of the problem, I
have caused to be prepared and am annexing hereto
Exhibit I, in which municipal operation by the I. R. T.
is assumed for the fiscal year 1924. The cost of construction and equipment is assumed to be 125 per cent.
in excess of what it actually was, namely, $565,000,000
instead of $250,000,000 as depreciated. Adjustments
are made upon the basis of estimated increased gross
income and corresponding expenses of operation and
maintenance, from which it appears that were it even
assumed that the cost of construction of our existing
lines were 125 per cent. higher than they actually were,
there would be a net profit from operation of $6,353,000,
after the payment of 4 per cent. interest on the entire
city and company investment and all expenses.
Further, it should not be overlooked that the deficits
from subway operation on both lines, an aggregate of
$110,000,000, are attributable to other causes besides
extravagance, mismanagement and receivership.
The Manhattan Elevated Lines operated under lease
from the Manhattan Railway Company at a rental
equal to interest on $45,000,000 outstanding bonds, and
7 per cent. interest on $60,000,000 outstanding stock
of the Manhattan Company, has been operated at a


81




huge loss, and the earnings from the subways have been
diverted to make good this loss (p. 2600).
Lastly, there is the astounding fact that the B. R. T.
paid out prior to 1918, in dividends $36,000,000 on its
common stcok of $74,500,000, which in June of 1923
sold at a dollar a share, an aggregate of about $775,000
and that the I. R. T. paid out prior to 1919, $65,000,000
in dividends on $35,000,000 common stock, which in
June of 1923 was sold at $9.50 a share, an aggregate
of $3,325,000.
This sapping of the financial vitality of these companies prevented necessary capital improvements and
resulted in what Commissioner McAneny euphemistically calls "deferred maintenance"-a technical term for
gross disrepair.


32




CHAPTER III


THE CITY'S PLIGHT
TRAFFIC CONGESTION-CURTAILED    SERVICE-INSUFFICIENT CARS-DILAPIDATED ELEVATED STRUCTUREDANGEROUS DEFECTS-WOODEN CARS-ACCIDENTS
When the Legislature in 1921 spoke of an emergency
in our traffic situation, it had in mind the intolerable
transit conditions which the public in the City of New
York were suffering-specifically the herding, jamming and crowding, long waits between trains, bedlam,
particularly at congested points at the beginning and
end of rush hour periods, strap-hanging during nonrush hours, insufficiency of conductors in trains, and
guards on platforms and stations, the filth on the
windows and elsewhere in the trains, the unsanitary conditions and "out-of-order" signs in comfort rooms, and
the dangers from defects in the roadbed and structure
of the elevated lines due to long neglect.
Of course, the Legislature contemplated, that ultimate relief might come by the construction of new subways, but that immediate relief could come only by a
correction of these conditions on our existing lines.
That, constituted the primary duty of the Transit Commission. The obligation of the transit companies to
remove these conditions and to give decent service was
clear, fixed both by contract and statute. Section 26
of the Public Service Commnission law defines that obligation in the plainest terms, namely:
"Every corporation, person or common carrier
performing a service designated in the preceding
33




section, shall furnish, with respect thereto, such service and facilities as shall be safe and adequate and
in all respects just and reasonable."
So, too, it is provided in Contract No. 4 with the
Brooklyn Company, and a similar provision is contained
in Contract No. 3 with the New York Company.
"The principal object of the city in making this
contract is to secure for the public convenience an
adequate, comfortable and rapid systemr of passenger transportation in the portions of New York
which will be served by the Railroad and the Existing Railroads. By the foregoing provisions of the
Lease the Lessee has covenanted, among other
things, to operate the Railroad and Existing Railroads carefulll and skillfully, according to the
highest standards of railway operation; to supply
adequate equipment, to run'trains so as to furnish
adequate service; to use the best safety devices; to
keep the Railroad and Equinpment and Existing
Railroads clean, dry, zcll lighted, heated and ventilated; and to do other things, as hereinbefore set
forth, for the convenience and accommodation of
the public.
"These covenants on the part of the Lessee are
among the principal moving considerations to the
city in making this contract, and any breach thereof
will entitle the city to the remedies in this contract.
If at any time Additions to the Railroad or Equipment or to the Existing Railroads or any change in
the mode of operating the Railroad or the Existing
Railroads or conducting the business thereof are
necessary in order to carry out the purposes of the
Lease in securing service and facilities as shall be
84




safe and adequate and in all respects just and reasonable the Comrnmission may direct the provision
or construction of such Additions and the making
of such changes in the mode of operation of the
Railroad or the Existing Railroads or in the conduct of the business thereof as may be necessary to
accomplish such purpose."
Section 49, Sub. 2 of the Public Service Commission
Law, provides that
"Whenever the commission shall be of opinion
* * * that the regulations, practices, equipment,
appliances, or service of any such common carrier,
railroad corporation or street railroad corporation
in respect to transportation of persons * * * are
unjust, unreasonable, unsafe, improper or inadequate, the commission shall determine the just, reasonable, safe, adequate and proper regulations.
practices, equipment, appliances and service thereafter to be in force * * * in such transportation
of persons * * * and so fix and prescribe the same
by order to be served upon every common carrier,
railroad corporation and street railroad corporation
to be bound thereby, and thereafter it shall be the
duty of the railroad * * * to observe and obey
each and every requirement of every such order so
served upon it, and to do everything necessary or
proper in order to secure absolute compliance with
and observance of every such order by all of its
officers, agents and employees."
and under Section 50, it is provided:
"If in the judgment of the commission * * *
additional equipment, facilities or device for use by
any common carrier * * * or in connection with
the transportation of passengers * * * ought rea35




sonably to be provided, or any repairs for improvements to or changes in any thereof in use ought
reasonably to be made * * * in order to secure
adequate service or facilities for the transportation
of passengers * * * the commission shall * * *
make and serve an order directing such repairs, improvements, changes or additions to be made within
a reasonable time * * and every railroad corporation * * * is hereby required and directed to make
all repairs, improvements, changes and additions
required of it by any order of the commission served
upon it."
and under Section 51:
"If, in the judgment of the commission * * "
any railroad corporation or street railroad corporation does not run trains enough or cars enough, or
possess or operate motive power enough, reasonably
to accommodate the traffic * * * or does not run
its trains or cars with sufficient frequency or at a
reasonable or proper time, having regard to safety,
or does not run any train or trains, car or cars upon
a reasonable time schedule for the run, the commission shall * * * have power to make an order directing any such railroad * * * to- increase the
number of its trains or of its cars * * * or to
change the time for starting its trains or cars or to
change the time schedule for the run of any train or
car or make any other suitable order that the commission may determine reasonably necessary to accommodate and transport the traffic * * *."
and under Section 51a:
"The commission shall have exclusive power to
make an order fixing the maximum number of passengers that may be carried on any car * *."
86




Thus, there was specific provision in our transit laws
which empowered the Transit Commission to abate each
of the "disgraceful" conditions, which constituted the
"emergency" for the relief of which the Transit Commission was created. The question naturally presents
itself, how expeditiously and to what extent, the Transit
Commission, after it came into office on April 25, 1921,
directed its activities to that end.
We have it from the mouths of the Commissioners
themselves that they have slept on those powers, and
thatl they did not even commence an inquiry, into the
service of the companies, until eleven months after the
Transit Commission came into office-March 15, 1922.
Not a single order was made requiring any change of
schedules, by increasing the frequency or numbers of the
trains, not a single direction that the transit companies
purchase additional cars, not a single mandate that the
defects and dangers in the roadbed, structures and
equipment be removed, not a single request that the railroad companies add to their equipment of conductors
and guards both in and out of cars, was made until more
than a year after the Transit Commission came into
office, and then, the orders which they gave were ignored,
and no steps were taken to enforce them to this very day.
The first service hearings which the Transit Commission conducted were into conditions of operation of the
I. R. T. These commenced on March 15, 1922, and
continued until April 12, 1922 (McAneny, pp. 155 -157). During these hearings the I. R. T. urged that
it be not compelled to improve its service and to operate
more trains because of its financial inability and because
of the alleged excuse of lack of repair, inspection and
storage facilities (McAneny, p. 179). This hearing resulted in the so-called service order in May, 1922, by


37




which the I. R. T. was directed, from its then equipment,
and without the addition of any new cars to add 360
trains daily. The company was also ordered to make
arrangements for the purchase of 350 cars, 100 immediately, 50 during the following summer and 200
when the additions to the Lenox Avenue repair shop
would be completed (pp. 195-196). At that time the
equipment of the I. R. T. consisted of 1935 cars.
The equipment of the B. R. T. then consisted of 907
wooden cars and 900 steel cars. There are carried
1,314,000,000 passengers per annum, or about four millions a day in this inadequate equipment.
Reverting again to this service order of May, 1922,
which required the addition by the I. R. T. of 360 trains
daily, a coal strike followed, with the result that the
Transit Commission deferred the order until September
18, 1922 (p. 209). The I. R. T. took the position that
the order was impossible of performance, and offered
in support of its claim a report )by engineers Gibbs and
Hill. Apparently the order was not recognized by the
company and the additional trains did not come. Nine
months after it was issued, the company sought a modification and the application was formally denied, but
apparently this service order was not honored or obeyed
by the company (pp. 183-223), except that in August,
1923, it added 100 new cars to its equipment and within
the last few months an additional 100, making the total
equipment 2135 cars (p. 229), which carried during the
last year, 714,000,000 passengers (p. 227).
Since the presentation of the Board of Estimate's
charges against the Transit Commission on November
12, 1924, the Transit Commission acquired new life and
began a new service hearing on November 14, 1924,


38




and requested the I. R. T. to submit new schedules
for train operation (p. 228).
A similar service hearing was commenced as to the
Brooklyn Company on April 17, 1922 and continued
until July 13, 1922, and resulted in an order effective
August 15, 1922 requiring the addition of 100 cars
daily from its then equipment, and the purchase of 50
new cars (pp. 237-239). These 50 cars were likewise
not delivered until the fall of 1924, making the total
equipment 950 steel cars and 907 wooden cars to carry
over 600,000,000 passengers a year.
A new order has been recently made (since the
charges were filed) that the B. M. T. purchase 100
additional cars (p. 248).
The reason assigned for this inactivity of the Transit
Commission and its failure to even attempt a relief of
congestion on our existing lines was very plainly stated
by Commissioner McAneny (p. 261) as follows:
"Now as to the time that elapsed between that
date (April 1921 when the Commission came into
office) and May, (1922) our inquiry was turned
immediately to the financial condition of all of these
companies. We had many sessions lasting for
weeks; we examined their auditors, their books and
the whole thing in the minutest fashion. If we had
attempted to put out a service order at that time,
for which there was no money, we should have
found ourselves in the position of attempting to
enforce a confiscatory proceeding and that as you
know, would not have held water for a minute,
Therefore, our first duty was to find out not only
what the financial condition of the companies were,
but what might be done to improve them and put
them in a position where our orders would really
39




count and amount to something and we did that
through forcing the reorganization of the Interboro
Company in such a fashion that the money could
be yielded."
VWe shall see how the Transit Commission "forced"
the reorganization of the Interboro Company and how
"that money" was "yielded."  There remained only a
deficit after the "yielding" (McAneny, p. 261).
But for the fact that these are the words of McAneny
himself, it would seem incredible that the public interests were so ignored. It is unnecessary to describe the
condition of traffic in our subways. It is claimed that
they are operated to capacity during rush hours. It
was pointed out by Mayor Hylan that the traction
companies, apparently with a view to further harassing
the public, to the end that it may be coerced into consenting to increased fares, pursues the "method of turning trains back, putting on trains shortly after rush
hour starts, taking them off before the rush hour ends,
and then curtailing the service on trains all day long
to keep people crowded in cars. I know the method
of switching trains back before they reach where they
might go on to the terminal, dumping the people out on
the way and crowding them in already crowded cars,
and going on to their destination" (Hylan, pp. 1138 -1139).
The remedy would come, if as the Mayor says, "The
Transit Commission would not spend so much time
worrying about the finances of the B.-M. T. and the
I. R. T., and compel them to give a little better service
for the people-they would not be in their mixup today"
(Hylan, p. 1181).
Further, "It needs a Transit Commission who are in
a little sympathy with the people, to compel any rail40




road company to perform its duty to the people that
they are trying to serve" (Hylan, p. 1140).
"There is no reason in the world why people should
be standing up after the rush hour and before the rush
hour begins *      * crowding people in like sardines *  *   f." "It is not an engineering problem,"
says the Mayor, "It is common sense. All they have
got to do is to put on an additional car or two and serve
the people" (Hylan, pp. 11.47-1148).
"The trouble is with the Transit Commission that
they take testimony, and testimony  *  * *  and do
not act. Although all they have to do is to give these
people an order, and make them live up to the order"
(Hylan, p. 11.79).
Of course, marked improvement could come in many
ways. In the first place, the stations on the old I. R. T.
subway, contracted under Contracts No. 1 and No. 2,
are not long enough to accommodate ten-car local trains
which are necessary. Under Contract No. 3 the Interboro is required to pay one-half of the cost of lengthening the stations. Under Contract No. 4 with the
Brooklyn Company the city bears the entire expense
(McAneny, p. 182). The matter of lengthening the
Interboro stations has been considered. It will cost
$12,000,000 of which the Interboro must bear $6,000,000
but to use the language of President Hedley of that
company.   "The Interboro Railroad have not got
$6,000,000 to put in for anything just now."
So, too, the Dekalb and Myrtle Avenue platforms
accommodate only six-car trains and the Pacific Street
station only seven-car trains (p. 1095). That matter
was considered by the Conference Committee in 1923
(p. 1094). On January 14, 1924, it recommended the
lengthening of these stations to the Board of Estimate


41




(pp. 1094-1096). On February 15, 1924, the Board
of Estimate voted $282,000 for that purpose (p. 1096).
The Company pays nothing.
The Mayor besides made suggestions as to how the
present service of both the I. R. T. and the B.-M. T.
might be decidedly improved (p. 1168). He submitted
to Commissioner McAvoy a memorandum dated December 9, 1924, entitled "Lines Where Service Should
Be Increased."  This is annexed as Exhibit "J."
Naturally, when railroad companies become insolvent
and receivers operate their lines and those receivers are
only appointed to protect the creditors and stockholders,
and the roadbed, structures and equipment are permitted to deteriorate during a long period of receivership
(such as that of the B. R. T. which endured for four and
one-half years), and there is no governmental agency interested in anything except the financial rehabilitation
of the companies, something must happen,-and it did
on our rapid transit lines.
The first serious accident during the regime of the
Transit Commission happened on June 25, 1923, on
the B. R. T. lines. A train was wrecked at the curve
of the elevated road running from Fifth Avenue into
Flatbush Avenue; two wooden cars, fell from the elevated structure into the street-the result, seven passengers killed and seventy injured. The wreck was
due to rotten and defective guard rails and wooden ties,
and because the spikes holding the rails to the ties were
not in contact with the rails, and many of the bolts holding the ties to the steel structures were loose. As a
result of this accident, the Board of Estimate on
July 13, 1923, adopted a resolution by which the Committee on Transportation Facilities was appointed to
investigate and report, on the condition of the cars


42




and road equipment in use on all the elevated lines in
the city, giving first consideration to the older structures in the Borough of Brooklyn, and next to the older
ones in the Borough of Manhattan. This Comnnittee
consisted of John H. Delaney, Arthur S. Tuttle and
George P. Nicholson. Upon the appointment of this
Committee there was organized a Joint Commission of
Engineers consisting of Robert Ridgway, Chief Engineer of the Transit Commission, Dr. George F.
Swain, Professor of Civil Engineering at Harvard UlTiversity, representing the Board of Estimate and Apportionment, and Eugene Klapp of the firm of Parsons,
Brinckerhoff and Klapp, representing the railroad.
This Commission investigated and made a report on the
condition of cars, road and equipment of the B.-M. T.
It commenced its work on July 26, 1923, and finished on
January 4, 1924, when it made a written report. The
Transit Commission, according to the testimony of
McAneny, concurred "in every finding" of this Joint
Commission of Engineers (p. 357).
Specifically this report found that on the Brooklyn
elevated structures, 2,590 outer guard timbers (p. 329),
19,000 ties (p. 3336), 77,620 inner guard timbers (p.
343) and 14,910 joints (p. 345) required immediate
replacement for the safety of the riding public, that
the elevated structures were corroded and required
painting, that the columns carrying the structures and
the live weight of long trains filled with passengers, were
corroded and that the bases were receptacles for ice,
dirt and rubbish (p. 345). It was found that the
wooden cars (to the danger from the use of which reference will be made later) lacked the modern "dead
man's button," device, by which, if the motorman is rendered unconscious and his hand removed from the master


43




controller, the power is automatically shut off and the
brakes applied. The finding of the Joint Commission
with respect to the necessity for the "dead man's button"
on all of these wooden cars is as follows:
"The Committee calls attention to the fact that
the electric control equipment of the cars includes
a master controller of the current and a 'dead manl's
button,' the purpose of which is to cut off the current automatically when the hand of the motorman
is removed from the master controller as it would
be if the motorman should have a sudden attack
which would incapacitate him. The 'dead man's
button' performs this function properly but it
would not apply the brakes. If a motorman should
die suddenly at his post, or faint, when his train
was going at full speed, although the electric current would be cut off, the train might be approaching a curve around which it would pass at too high
speed and an accident might result; or a collision
might take place with a train ahead. The modern
'dead man's button' is so arranged that when the
hand of the motorman is removed from the controller not only is the current cut off but an emergency application of the brake is made.
"It seems obvious to the Board that it would be
desirable, as suggested by the Committee, that this
modern form of the 'dead man's button' should be
used. The steel subway cars are already so equipped and the company is planning to equip similarly
about 50 per cent. of the wooden cars."
The Transit Commission concurred that the conditions existed as found in the report. Of course they did
not arise suddenly. They had existed for a long time.
They had become aggravated through inattention.
44




On April 21, 1924 the report of this Joint Commission of Engineers, together with a supplementary report
by the Committee on Transportation Facilities, was presented to the Board of Estimate and Apportionment
and resulted in a resolution, which in part reads as follows.
"The Board of Estimate and Apportionment has
no power to take action to enforce compliance with
any of these recommendations, such power being
vested bv law in the Transit Commission. As the
report of the Joint Committee of Engineers is
unanimous, it is to be inferred that the Transit
Commission and the operating company itself will
recognize the justice of all the recommendations
made and will cooperate to carry them out * *
"It is recommended that the Transit Commission
be requested to give its immediate attention to the
elimination of the defects reported by the Joint
Committee of Engineers and to the need for a general improvement of the elevated railroad facilities
as disclosed by this investigation, giving particular
attention to the report of the Equipment Committee of the Joint Committee of Engineers, contained
in Appendix VI of the Joint Committee report."
With respect to the recommendation by the Board
of Estimate that "it give immediate attention to the
elimination of the defects reported by the Joint Committee of Engineers and to the need for a general improvement of the elevated railroad facilities as disclosed
by this investigation" the testimony of Commissioner
McAneny is that he regarded that recommendation "as
a bit of humor" (p. 338).


45




Notwithstanding the concurrence of the Transit
Commission in every finding of this report, it is the
startling admission of the Transit Commissioners that
they took absolutely no steps, and never made any order
to the railroad companies, requiring the elimination of
any of the defects or replacements recommended by the
Joint Committee of Engineers (McAneny, p. 358).
The explanation for this gross neglect of duty is as
follows:
McAneny says (page 346) that they (the transit
companies) "haven't the money to spend on paint"inferentially, much less to make the recommended replacements and remedy the defects. That was (April,
1924) nine months after the B.-M. T. reorganization,
when $26,000,000 new money was invested; the very
month in which the B.-M. T. paid dividends on preferred stock; and the year for which the B.-M. T. reported a net profit of $4,022,000. Every single joint of
the 14,910 found defective, every spread of the 19,000
ties which were rotten, every span of the 77,620 inner
guard timbers and 2,590 outer guard rails, every oxidized column upon which the elevated structure rested,
presented a source of potential danger to the great mass
of humanity that travels on our elevated lines. Much
is made by the Commission, of the fact that the Joint
Committee of Engineers gave the opinion that the
elevated system was generally safe. The Engineers are
to be commended for their diplomacy. It would have
been grossly indiscreet to have spread a public alarm
of the unsafety of these structures, which the public are
compelled to use. The psychological effect would have
wrought serious consequences, but they gave the facts,
from which there can be but one inference.


46




The Transit Commissioners admitted that these conditions of deterioration were unknown to them until the
reports of the engineers was made. This likewise supports one of the charges that the Transit Commissions
maintained an inadequate and insufficient inspection
body. The fact is, as was admitted, that while the railroad companies have in the aggregate 5,000 inspectors
on their roads, the Transit Commission employed only
30 inspectors to check up their work and to investigate
defects and compliance with orders and to recommend
improvements (pp. 310-333).
This accident and report did not bring any activity
among the Commissioners and soon another accident
happened.
On July 30, 1924 a wreck occurred at the Sunnyside
Yards of the Long Island Railroad, as a result of which
one human being was killed and many others were
seriously injured. The Grand Jury of Queens County
made inquiry into this wreck, and found that the direct
cause thereof was the throwing by hand of a switch
under a moving train which caused the derailment of
the last three cars; that there was no excuse for the
operation of this switch aby hand; that the operation of
the switch should have been included in the interlocking
system of the railroad which was in operation within
ten feet of the switch. The Grand Jury, among other
things, made its presentment as follows:
"The Transit Commission has a large number of
experts and the operation of the Long Island Railroad in the Greater City of ANew York is under
its jurisdiction. The control and operation of this
switch at the time of the wreck is now condemned
by the engineers of the Transit Commission. As
the Commission now condemns the switch and its
47




operation as antiquated and obsolete, it must have
been antiquated and obsolete before the wreck and
that being so it was the duty of the Commission
to have ordered and required the removal of the
switch and the installation of the safe method of
operation it now recommends.   The criminal responsibility for the wreck must be placed on the
railroad company and its employees, but that does
not relieve the Transit Commission for its failure
to properly and adequately function in its control
of the railroad."
and concluded as follows:
"We condemn the failure of the Commission to
take proper action for the removal of this condition
before the disaster and for its very evident policy
that 'anything is good enough' until the contrary is
proven by a disaster costing human lives, and we
also condemn the officials of the railroad company
above named for their neglect to take the initiative
in the adoption of ways and means for the protection of human life and for their total disregard of
their responsibilities.
An independent investigation into the cause of this
wreck was made by the United States Inter-State Commerce Commission and resulted in a report by the Director of the Bureau of Safety of that Commission. That
report was received in evidence before Commissioner
McAvoy and in it the Director says: "It is probable
that had these switches been interlocked and operated
from the tower, this accident would not have occurred.
It is believed that the traffic conditions on this road at
this point amply justify the recommendation that these
switches be made inter-locking and their operation controlled from the 'II' towler." The engineers of the
48




Transit Commission also recommended this extension of
the interlocking system, but the recommendation has not
been adopted by the Transit Commission (p. 365).
Then came within a few days thereafter, the wreck
at Ocean Parkway Station of the Brighton Beach line
of the B.-M. T. A train, consisting of six wooden cars,
crashed into a train of seven steel cars which were at a
standstill with the result that the roof of the first car of
the wooden train telescoped over the roof of the last car
of the steel train, and the after part of the roof of the
same first wooden car telescoped over the forward part
of the second wooden car. The forward platform of the
second wooden car was crushed, and as a result of this
wreck, one human being was killed and thirty passengers
were injured, fifteen were removed to hospitals. The
wooden cars were as follows: the first and colliding car,
No. 1080; and the following Nos. 845, 1051, 47, 1078,
904. None of these cars were equipped with the modern
"dead man's button."  In fact, it was admitted at the
hearings by the Transit Commission, that no orders were
given by the Company for the installation of the "dead
man's button" until after this accident, notwithstanding
that it was recommended for installation by the Commission of Engineers on January 4, 1924, seven months
before this accident.
The first car, No. 1080 was built in 1903, and it, together with cars Nos. 1051 and 1078, both built in 1902,
were included in Group A required by Contract No. 4
to be retired from service prior to January 1, 1924, as
will be indicated. Car No. 845 was built as a steam
coach in 1887; Car No. 47 was likewise built as a steam
coach in 1884, and Car No. 904 built in 1898; Cars Nos.
1051 and 904 were the subject of the last mentioned investigation of the Joint Commission of Engineers fol49




lowing the disaster of June 25, 1923. The motorman
claimed at the time of the accident, that the brake handle,
controlling the brakes of the first car, No. 1080, failed
to function, and the brakes were not applied. Of course,
this accident would not have happened if the car had
been equipped with the "dead man's button". Nothing
was said by the Transit Commissioners at the hearings
about this accident except that it, like the Sunnyside
Yards accident, was due to "man failure". There would
have been "no man failure" if the switch in the case of
the Sunnyside Yards accident had been interlocked, and
there would have been no death and no injuries in this
instance, if the cars were of steel instead of wood, and
no accident if the cars had the "modern dead man's button".
It is claimed by the Board of Estimate in Charge 1
that these accidents were due to the culpable negligence
of both the officials of the B.-M. T. and subsidiary company, and of the Transit Commission in permitting the
"continuance and operation of, and failing to abate and
remove, the aforementioned wooden. dangerous and unsafe cars, and in failing to require the B.-M. T. to keep
its roadbed and structures in proper and safe condition".
There remains to be considered the situation with respect to the continued use of wooden cars by the
B.-M. T., particularly in the Center Street loop. The
condition of danger which that use presents has been
often referred to and was emphasized by the Mayor at
the hearings (p. 1282). There is no excuse for the use
of these wooden cars, particularly in our subways, where
any day they may become fire traps for the destruction
of human beings. The obligation of the company to
remove these wooden cars from service is very clearly
50




fixed in Contract No. 4. It is provided in that contract
as follows:
"On the dates given in the following schedule,
the Lessee shall pay out of its own resources into the
Depreciation Fund for the Existing Railroads provided for in paragraph 55 of Article XLIIX the
following amounts representing depreciation accrued upon the properties stated in the schedule
prior to January 1, 1914."
SCHEDULE OF ROLLING STOCK OF EXISTING RAILROADS
INCLUDING DATES OF ESTIMATED RETIREMENT AND
ACCRUED DEPRECIATION.
Item  Date of    Accrued
No. Retirement Depreciation
1  Jan. 1, 1924 $240,058.00 Bodies and Trucks of Group A
2   " 1,1929   526,249.00  "   "    "       "   B
3   " 1, 1929  622,904.00  "   "    "       "  D
4   " 1,1934   240,263.00 Equipment         I   A
5   " 1, 1936  388,951.00    "              "   B
6   " 1, 1936  338,711.00 Bodies and Trucks of Group C
7   " 1, 1936  499,724.00 Equipment         "   C
8   " 1,1946   35,680.00     "              "  D
Group A comprises 118 converted motor cars
bearing the following numbers:
No. 1000-1078 inclusive
No. 1080
No. 1082-119 inclusive
Group B comprises 236 rebuilt motor cars bearing the following numbers:
No. 600 683 inclusive
No. 700-743      "
No. 745-758      "
No. 800-816      "
51




No. 818-820 inclusive
No. 822-859      "
No. 900-935      "
Group C comprises 306 motor cars bearing the
following numbers:
No. 684, 817, 936, 993, 1079, 1081.
No. 1200-1499 inclusive.
Group D comprises 268 trailer cars bearing the
following numbers:
No.   1-    6 inclusive
No.   8-  81    "
No. 83-125
No. 127-271     "
The dates cited in the above schedule represent the
estimated date of retirement of the car bodies, trucks and
equipment named in the schedule."
This schedule makes it clear, that, at the dates mentioned, the company agreed to retire from use, certain
cars classified in Groups A, B, C and D-Group A comprising 118 converted motor cars bearing the numbers
1000 to 1078 inclusive, No. 1080 and 1082-1119 inclusive, the date fixed being January 1, 1924. Car. No.
1080, the colliding car, and cars Nos. 1051 and 1078 of
the Ocean Parkway Wreck, are in this group.
Commissioner Harkness says that this provision in
Contract No. 4 does not mean what it says, that it does
not mean that the cars shall be actually physically
retired on the dates specified, but that it has reference
only to payments to be made into the Depreciation
Fund, and he says further that it was so understood by
McAneny, who negotiated the contract, and by himself
who drew it (1214-15). We do not permit authors and
52




scribes of contracts, which are clear and unambiguous
to interpret them for us, to distort their language
and to give them a meaning which does violence to their
plain words. "Retirement" means "retirement" and not
payment into depreciation funds. True, McAneny corroborates Harkness in his interpretation (p. 276). It is
singular how these contracts are always interpreted by
these Commissioners against the city. McAneny says
that the Commission took no steps to direct the retirement of wooden cars and "will direct the retirement of
no part of these wooden cars until their usefulness has
ceased" (p. 274).
The excuse of the Transit Commissioners for the continuance in service of the wooden cars of the B.-M. T. is,
that their replacement will cost about $60,000,000.
Again, human lives are weighed with dollars. Besides,
it is urged that steel cars in accidents topple from elevated structures into the street, but they were wooden
and not steel cars which fell from the elevated structure
into the street in the Flatbush Avenue accident.
Unfortunately for the Transit Commissioners, besides
the plain language of the contracts, we have the conduct
of Harkness which shows that in the beginning, he interpreted the contract clearly, and according to its plain
language. On January 9, 1917, Mr. Harkness was the
Chief of Rapid Transit of the then VPublic Service
Commission of the First District. On that day there
was addressed to him a communication by Daniel L.
Turner, then Acting Chief Engineer of the Public Service Commission, in which, among other things, was discussed the operation of wooden cars in the Centre Street
Loop, and in which Mr. Turner says, in part, as follows:
"In the above, consideration has been paid only
to the matter of safety of operation and to the pur58




chase of sufficient steel cars to provide the same
passenger capacity as is not obtained with the
present wooden equipment."  *  *
"I recommend that the New York Municipal
Railway Comporation be required to provide the
necessary steel cars for operation in the Centre
Street loop and put these cars into operation as
soon as the physical charges necessary can be made
and the company can obtain the cars." * * *
"Judging from the standpoint of ability to construct and deliver these cars, they probably could
be provided within two years."
It is to be borne in mind that this was on January 9,
1917, and that the two year period ended on January
9, 1919
Acting upon this recommendation the same Mr.
Harkness then, January 1917, addressed a communication to the Public Service Commission in which he
said as follows:
"I therefore concur in the recommendation of
the Acting Chief Engineer that the Railway Corporation 'be required to provide the necessary steel
cars for operation in the Center Street Loop and
put these cars into operation as soon as the physical
changes necessary can be made and the company
can obtain the cars.'"
The physical changes necessary for the operation of
these steel cars in the Center Street Loop were concededly completed in about one year, because in January, 1918, there appears in the Public Service Record,
the official publication of the Public Service Commission, an announcement which reads as follows:


54




"Early in January the changes necessary to permit the use of the new B. R. T. steel subway cars
on the Broadway-Myrtle Avenue elevated lines in
Brooklyn were completed. As a result some 70
of these cars have been placed in operation, affording a very considerable relief to traffic. Seven of
these steel cars are approximately the equivalent
of 10 of the old type of wooden elevated line cars
and in addition to the increased capacity and increased service made possible by them, add a very
considerable factor of safety to the operation in
the Center Street Loop. The Commission has
been for some years steadily pursuing a policy of
getting wooden cars out of subway operation, having completed such work in reference to the First
Subway operation lby the Interborough Company
early in 1916. There are still some wooden cars
operated through the Center Street Loop and
their removal from that operation will not be possible before the completion of changes now being
made by the Brooklyn company to its East New
York yards. When those changes are completed,
which is looked for during the present year, it will
be possible to operate the large steel cars over the
Broadway and connecting lines as well as over the
Broadway-Myrtle Avenue line, thus making unnecessary the further use of the wooden cars on
these lines. At the same time a large number of
wooden cars will be released for use on other elevated lines not connecting with subways."
The situation with respect to these wooden cars is,
that after the charges were filed against the Transit
Commissioners, they ordered the withdrawal of all
wooden cars, except 100 from operation in the Center
55




Street loop, and these 100 wooden cars are at this very
moment in use in that service (p. 2380).
It is claimed that when in 1922, the Transit Commission ordered the B.-M. T. to buy 50 new cars, it was
intended that they would be placed in the Center Street
loop service, but say the Commissioners, that, without
consulting them, the company placed them into the
Brighton Beach line, and that their withdrawal would
embarrass that service (p. 2380).
Not only have the Transit Commissioners taken no
action looking to the withdrawal of these obsolete
wooden cars from service, but they have embarked upon
a plan to permanently retain them in the service by
subterfuge. They have agreed with the B.-M. T. that
about one-half of the present wooden equipment be reconstructed into 150 three car wooden units, each consisting of two motor cars, with trailer car between,
permanently connected together and operated as a
single three-car "articulated unit."
On June 10, 1924, the Transit Commission approved
the construction of 50 of such wooden cars in violation
of the plain language of Contract No. 4 that these
wooden cars be retired from service. This avoidance
and evasion by the Transit Commission of the provisions
of Contract No. 4 is the basis of Charge No. 11.


56




CHAPTER IV


THE LEGACY
UNCOMPLETED CONSTRUCTION UNDER CONTRACTS 3 AND 4
At least 50 per cent of the record made before Commissioner McAvoy has been devoted to what remained
undone under Contracts 3 and 4 when the present City
administration went into office, January 1, 1918. It
has already been pointed out, that under the terms of
the Dual contracts they were required to be fully completed on January 1, 1917. Apparently, therefore, the
responsibility for the non-performance of these contracts in the first instance, rests elsewhere than upon
the present administration. Had the work been done
in 1915 and 1916 there would have been a huge saving
to the City.
When the present administration came into office it
attempted to ascertain what portions of the subways
and facilities embraced under Contracts 3 and 4 remained uncompleted. It sought this information from
the then Public Service Commission but it was not until
the end of the year 1918, that any list was furnished by
the Public Service Commission (Craig, p. 1986).
Immediately thereafter and in January or February,
1919, the Board of Estimate and Apportionment committed itself by resolution to expedite the completion of
that work. The subways and facilities then remaining
unfinished were as follows:
(a) The Fourteenth Street-Eastern Line, running
from Sixth Avenue in New York to East New
York for service to Brownsville section;


57




(b) The Nassau-Broad Street Line, one-half mile,
intended in 1913, when the contracts were
made, as a connection between the Centre
Street Loop and the Montague-Whitehall tunnel; and
(c) The construction of additional repair and inspection shops and storage yards of the Interborough system, as well as additional facilities,
if necessary, for the Brooklyn system.
(d) The continuation of the Queensboro Line under
42nd Street from Grand Central Station to
8th Ave.
These items of unfinished work will be separately
discussed.
(A) FOURTEENTH STREET-EASTERN LINE
This consists of two parts-Section 1 which runs as
a subway from Sixth Avenue in New York under Fourteenth Street and the East River to Montrose Avenue
in Williamsburg; and section 2 from Montrose Avenue
to East New York, a distance of about two miles, projected as an elevated structure under Contract 4.
Neither section was built when the present administration commenced. The present administration proceeded
with the construction of the New York section. Difficulties and delays were encountered, owing principally
to strikes against the contractors, increased costs of
labor and material, the abandonment by the contractor
of his contract and the necessity for a reletting at
increased expense to the City. Finally that section
was completed, requiring only tracks, stations and
equipment, when the present Transit Commission came
into office; was opened for operation in 1924 and is now
in use.
58




The two mile section from Montrose Avenue to East
New York has not been constructed.  The delay has
been attributed by the Transit Commission to the city.
If there had been a delay, it has been solely in deference
to public sentiment.
The record with respect to that construction is as
follows:
In June, 1920, when Mr. John H. Delaney was
Transit Construction Commissioner he laid out the
routes for that elevated structure and they were
promptly validated by the Board of Estimate and Apportionment and approved by the Mayor in that same
month (McAneny, p. 450). Then there developed an
agitation, by property owners and civic associations
from the locality affected, against the construction of
these elevated lines.  Since 1913 there has spread a
movement for the removal of all elevated structures in
congested sections and the position which they took was
that the City should not build elevated structures, which
eventually would be destroyed, and that its investment
should be in the more permanent construction of a subway. Representatives of these organizations appeared
before the Transit Commission and registered their protests. The Transit Commission communicated with
Mr. Garrison, who then was the Receiver of the
B.-M. T. To effect this substitution from elevated to
subway it was necessary to secure the railroad company's consent. Mr. Garrison refused such consent.
The Transit Commission, heedless of the public's protestations, Commissioner O'Ryan dissenting as I understand, advertised for and proceeded to let contracts for
this elevated structure and submitted the same for approval to the Board of Estimate and Apportionment in
March, 1922. The Board of Estimate and Apportion

59




ment, heeding the public demand and realizing its merit,
refused to approve these contracts (McAneny, p. 463).
Nothing was done by the Transit Commission, in fact
nothing could be done until the Receiver was discharged.
That was in June, 1923.
In December, 1923, Mr. Menden the new President
of the B.-M. T. indicated his willingness to consent to a
modification of Contract 4, to permit the construction
of the subway (McAneny, pp. 464-467).
Then in February and in April, 1924, the Transit
Commissioners again submitted routes for this construction but they were again objectionable because they
provided for part subway and part elevated, and the
Board of Estimate and Apportionment rejected their
last route on June 20, 1924 (McAneny, p. 470).
The Board of Transportation came into office on July
1, 1924. It proceeded most expeditiously in connection
with this construction. On July 5, 1924 it sent a route
for one section, to the Board of Estimate and it was
validated and approved on August 21, 1924. The remaining route was sent to the Board of Estimate on
September 30, 1924 and approved October 10, 1924.
Construction work, for the actual building of this line
has, according to Commissioner McAneny's own admission, been let (p. 472). Some difficulty in connection
with the phraseology of the contract has developed, due
to objection from the B.-M. T., but I understand they
have been for all practical purposes adjusted, and the
Fourteenth Street-Eastern Line is a closed chapter in
the history of rapid transit construction in this City.
(B) NASSAU-BROAD STREET LINE
Nobody seriously urged the building of this line,
realizing its uselessness, until recently when the B.

60




M. T. discovered that its insistence thereon might be
helpful in connection with a suit which the B.-M. T. has
brought against The City of New York for the recovery
of $30,000,000 damages, for alleged breaches by the
City of Contract No. 4.
The Nassau-Broad Street Line was projected in Contract No. 4 as a tunnel, about one-half a mile long, running from the terminus of the subway under the Municipal Building, underneath the narrow streets of Broad
and Nassau to connect at about Whitehall Street with
the B.-M. T.'s line running through the MontagueWhitehall tunnel.
When the City administration first received its list
of unfinished work under the dual contracts at the end
of 1918, the Nassau-Broad Street tunnel, to use the language of Comptroller Craig, was "last in order to be
done-if ever". Putting this Nassau Street Line "in
this position meant indefinite postponement" (Craig, p.
1987).
Apparently the Transit Commission shared in this
view until March of 1923, when for the first time it advertised for bids for the first section of this half mile
tunnel. The lowest bidder was one Patrick McGovern,
whose bid was $5,376,035 (p. 542). The original estimate in 1913 of the cost of the entire tunnel was $5,000,000. On the basis of McGovern's bid it would cost over
$11,000,000. The contract was sent to the Board of
Estimate for approval on March 23, 1923 (McAneny,
p. 542). The Board of Estimate and Apportionment
referred this contract to a Committee of One, consisting
of Mr. John H. Delanev.
Prior thereto and on November 13, 1919 Mr. Daniel
Turner who, together with Mr. Robert Ridgway are admitted by everybody to be perhaps the best informed


61




persons on subway construction, and who, was the Chief
Engineer of the Transit Construction Commission and is
at this moment the consulting engineer of the Transit
Commission, wrote a letter to then Transit Construction
Commissioner John H. Delaney in which he said with
reference to this Nassau-Broad Street tunnel in part
as follows:
"The real question is whether or not the money
to be spent on the Nassau Street Line would not
result in Brooklyn being better served if spent
somewhere else.
"There can be no excuse for running new trains
to the Montague Street tunnel which are to be deflected through the Nassau Street line and returned
immediately to Brooklyn via the Manhattan Bridge
without traversing upper Manhattan (p. 774).
"In other words, the Nassau Street branch will
be used to save the car mileage, to the detriment
of the character of the service furnished to Brooklyn
passengers" and in which he concluded with the
statement:
"I believe that the money necessary to build it,
although it will be of convenience to some people
travelling through the Centre Street loop could be
spent to better advantage in providing additional
facilities from Brooklyn to Manhattan for Brooklyn
people."
In the light of this letter and his own judgment, Commissioner Delaney recommended to the Board of Estimate and Apportionment the rejection of these contracts, and such rejection was made by the Board of
Estimate on July 25, 1923 (McAneny, p. 546) upon


62




grounds which the Mayor very tersely gave in his statement, in advance of his testimony before Commissioner
MecAvoy as follows:
"1. That the plan for construction was not
in accord with the general plan of construction
adopted by the Board of Estimate in 1912 or 1913,
when the route was originally approved, because
it provided for a two-track reservoir or spur, extending under Broad Street, below Wall Street,
which was not described in the general plan at the
time it was originally adopted.
"2. That there was doubt as to the obligation
of the city to appropriate any more money under
the terms of Contract No. 4, for the reason that
the amount which the Board could legally applropriate in 1913 had already been exceeded (see also
Craig, p. 2018).
"3. That the Nassau Street line would not provide for additional service for the travellers on the
rapid transit line, but merely furnished an operating convenience and that the amount which it would
cost to construct should be applied to serve localities not included in the existing system."
And the position of the City with respect to this line
is, that it will not waste this money and will not construct this spur, except upon judicial decree.
(c) SHOPS AND YARDS
In order that there may be efficient transit service
there must be adequate facilities in which to inspect and
repair rolling stock. About half of the record before


63




Commissioner McAvoy consists in discussion of the lack
of these facilities to the Interborough, as the excuse
both for the intolerable service on our existing lines,
and for the failure of the Transit Commission to direct
the purchase of new cars. Briefly stated, the excuse is
couched as follows: 1)urinlg rush lhouIrs, says the Transit Commission, the lines are operated to capacity and
no additional cars can be added. Witl respect to the
practice of placing cars in operation after the commencement of the rush hour peak and the withdrawal
of cars from operation before the termination of the
rush hour, resulting in the chaos, confusion and jamming from which the public has been suffering, and
about which so much public complaint has been made
by our Mayor, and with respect to the failure to furnish additional cars during non-rush hours, when passengers are crowded and compelled to stand without
reason, the excuse is, that if more cars are run they
will wear more, and if they wear more, they will require
more repairs and more facilities for repairs, and that
the failure of the Transit Commission to require the
companies to give improved service, and of the companies to operate more cars was due to insufficient sloops
and yards, which under Contract 3 the City was required to build.
This chant of the lack of shops and yards continues
through the record, sung in varying tones, scales and
harmonies. That subject would be deserving of extended consideration but for two incidents, unfortunate
for the Transit Commissioners. One, was the fact that
the Mayor himself, before giving his testimony, personally visited the shops and yards where it is claimed
facilities are lacking, and saw and told that they are
not in use-that inspection pits are boarded up so that
64




they may not serve for repairs, and that endless tracks
are empty.  Photographs were received in evidence,
descriptive of these conditions.
These physical facts are not, cannot be and were not
denied by the Transit Commissioners. Against that,
we have a mass of tabulations, data and statistics that
sink into insignificance in the light of the results of
the Mayor's personal inspection. But most unfortunate for the Transit Commissioners was the testimony
of Commissioner O'Ryan. It must be admitted that
he was not properly prepared. He, to use the vernacular, "Iet the cat out of the bag" and destroyed the
Commission's entire alibi for failing to give the people
proper service on our transit lines. He too was questioned with respect to the shops and yards and he
directed attention to the fact that there was a differ.
ence of situation between the shops and yards of the
B.-M. T. and those of the Interborough. He said quite
truthfully:
"I had a lot of experience with people in passing the buck and I believed that the company
frankly was trying to pass the buck in relation to
service, by pleading lack of adequate shop facilities" (p. 2436).
HIow eloquently this tells the whole tale.
He says that he personally had charge of the B.-M. T.
situation; that Menden "strongly urged that the then
existing shops at 39th Street in Brooklyn be extended
by the construction of additional buildings"; that the
property on which these shops were, was owned by the
South Brooklyn Railroad Company, "which leased it
to the B.-M. T. in several parcels" upon different


65




rentals and for different terms. Commissioner O'Ryan
says:
"It seemed to me very unwise for the City to
make an investment of any considerable amount in
the construction of shops to be built upon property
that they did not own"' (p. 2433).
He recommended that the City build its own repair
shops. General Andrews, chief executive officer of the
Transit Commission, was directed to find the site, which
he did near Coney Island Creek. The City approved it
and appropriated $10,000,000 for its construction
(O'Ryan, p. 2434). The electrical repair shop is in
process of construction and the contracts for the remainder are ready for letting (Harkness, p. 2373).
Surely nothing need be added to this recital. The
B.-M. T. was not lacking in shop facilities. The Transit Commissioners so admitted. No contracts for the
construction by the City of any additional shops for
the Brooklyn system were sent by the Transit Commission to the Board of Estimate from April 1921 to May
7, 1924 (p. 67).
The B.-M. T. never claimed that shops were lacking
until it appeared to it to be a plausible basis for damages
in the suit which it recently brought against the City.
There remains to be considered the shop and yard
facilities of the I. R. T. It has six yards. The principal repair shop of that Company is at 148th Street
and Lenox Avenue. Its other principal yards are at
239th Street, Livonia Avenue, Westchester Avenue and
Jerome Avenue (Delaney, p. 567).
Contract 3 obligates the City to build additions to
shops and yards. It was arranged that there should
be three additions to the repair shop at 148th Street


66




and Lenox Avenue. The first addition was intended
to increase the capacity of that shop from 500 to 900
cars, and the second and third to further enlarge the
capacity. Pending the construction of these permanent
additions, the Transit Commission recommended the
construction of temporary shops, which recommendation the Board of Estimate rejected as a waste of City's
money, and the companies provided such temporary
structures themselves (IMcAneny, p. 2021).
The city has been engaged in constructing these additions. The condition with respect to inspection and
storage yards has been "satisfactory," according to the
testimony of Harkness himself since 1923 (p. 2373).
With respect to the repair shop (the only further
facility required by the Interborough), the alleged lack
"is overcome," as Harkness admits; the second and third
additions to this repair shop have been fully equipped
and the railroad companies have taken possession (pp.
2372-2406-2407).
Harkness says that the storage barn capacity is 150
percent more than it was in 1912, a very "satisfactory
condition." One-half of this addition was made in 1919,
and the other in 1924. There will be in the immediate
future storage capacity for the I. R. T. of 2805 cars.
The present equipment consists of 2135 cars (Delaney,
p. 887).
Chief Engineer Ridgway of the Board of Transportation testified that all yards of the I. R. T. are ready,
including the repair shop at 148th Street and Lenox
Avenue with the exception of the Westchester yard,
which is being graded; the foundations are being placed
for sheds which will cover the inspection pits; steel for
the structure is being fabricated (pp. 1969-1970).


67




Commissioner Delaney testified "they have ample
storage facilities" (p. 570). * * * "there are proper
means of inspection" (p. 571) and at p. 586 he said:
"The record of the first two or three days, as I
have read the testimony of the preceding witness,
would create the opposite impression-that storage
yard provision should be made for all of the cars
on the system; which means that they would be a
bedroom for the cars when they ought to be in
operation."
The City has expended about $7,000,000 for shops
and yards (p. 869).
Notwithstanding the claim of the I. R. T. and the
Transit Commission of lack of facilities, as the cause
of the intolerable present service on our transit lines, it
is a conceded fact, that although it has ample space in
yards for storage, the I. R. T. finds that storing cars
on tracks is more to its convenience. The I. R. T. as
far back as February 1918, requested that the City defer
building additions to yards, because of the financial
inability of the company to bear the expense of equipment (pp. 902-904).
Much has been said in the record bv the Transit Commissioners, before Commissioner McAvoy as to the refusal of the Board of Estimate and Apportionment to
validate appropriations for construction of shops and
yards, resulting in unnecessary delays. The fact is, as
was established before Commissioner McAvoy, that
there were before the Board of Estimate and Apportionment from the Transit Commission between May 2,
1921, and December 2, 1924, in all about 372 contracts;
that 249 of these contracts were approved in the first instance, and the requested funds furnished; that 8 con

68




tracts were withdrawn by the Transit Commission; that
39 were referred back, and only 27 disapproved; 11
failed of adoption because of necessary votes; 28 because
of intervening circumstances which rendered the proposals ineffective, and of the 27 which were disapproved
and of the 11 which failed of adoption, in many instances
they represent contracts which were subsequently approved, after readvertising, resulting in savings to the
City of hundreds of thousands of dollars.
1 call particular attention to the fact that the Transit
Commission proposed certain contracts for the construction of additions to the shop at 148th Street and
Lenox Avenue for $456,191.50; that the Board of Estimate rejected these contracts; that upon readvertisement a contract for a lower amount was again submitted
to the Board of Estimate and again rejected, and that
finally upon the third advertisement a contract for
$313,154.50 was let, and approved by the Board of
Estimate and Apportionment at a saving to the City
of $143,000.
With respect generally to the disapproval by the
Board of Estimate and Apportionment of contracts
proposed by the Transit Commission, it was to be expected, that there would be a difference of judgment
between the members of the Board of Estimate and Apportionment and the Transit Commissioners. If the
law contemplated that the Board of Estimate's approval
should be merely formal, and not based on independent
judgment, it would not have required any approval.
Surely, the Board of Estimate and Apportionment
is not subject to criticism because it discharged the
duties imposed upon it by law and when the interest
of the city so required, it exercised its veto power, with
a resultant large saving of the City's money.


69




Besides, and in connection with the same subject
matter, account should be taken of the status of the
Transit Commission at the time when most of these disapprovals occurred July 1921.
The Transit Commission came into office on April
25, 1921. It brought with it a threat, embodied in the
law of its creation, to nullify the dual contracts, to
destroy whatever rights were saved to the city under
those contracts, including the five cent fare, and to impose upon the city by purchase, our entire transit system
including the old elevated and obsolete surface lines, at
prices to be fixed by agreement with the traction companies.
The City then had an investment of $300,000,000 in
subways. It had received no return on $240,000,000. It
was loath, as the Mayor well stated it, to invest any
more money in so unbusiness-like a venture. Besides,
the City was then challenging on constitutional grounds,
the legality of the Transit Commission and its powers,
particularly with respect to the plan of readjustment,
which made its appearance from the Transit Commission shortly after its appointment. It was not until
January, 1922, that the Court of Appeals decided that
the Transit Commission was a legally constituted body.
It would have been inconsistent for the City, in the
one breath to challenge the legality of the Transit Commission's creation and at the same time to recognize that
legality by approving its proposals.  But the City's
interest was in no case prejudiced by any of the disapprovals, because as was proved by the record of proceedings before the Board of Estimate which was received
in evidence before Commissioner McAvoy, in every
instance, pending the litigation, where delay would have


70




injured the City, the contracts were approved with a
stipulation reserving the City's rights.
Criticism is made of the fact that after the decision
by the Court of Appeals in January 1922, it was necessary for the Transit Commission to make three applications to the Appellate Division for orders requiring the
Board of Estimate and Apportionment to honor their
requisitions for expenses.  That all occurred before
May, 1922. During that time the appealability of the
Court of Appeals determination to the United States
Supreme Court was under consideration. Concededly
the opposition to these applications, in the Appellate
Division, made by the Corporation Counsel, was merely
perfunctory and to preserve the City's rights (Harkness, p. 2363). And it is important to remember, that
the only question which was decided by the Court of
Appeals in January, 1922, was that the Board of Estimate and Apportionment was required by law to approve the requisitions of the Transit Commission for its
alleged expenses. The question of the power of the
Transit Commission to put into effect its plan to buy all
of the existing lines, to nullify the dual contracts and
the five-cent fare, was not decided by the Court of
Appeals but was specifically saved for future determination, and cannot be raised until the Transit Commission takes its first step to put that plan of readjustment into effect. That has not yet been attempted.
The extension of the Queensboro line by continuation
of the subway from Grand Central Station to 8th Avenue is entitled to but passing comment. No criticism is
made by the Transit Commission of the City administration about that construction. The contracts were let by
the Transit Commission to Bowers and Kennedy, approved by the Board of Estimate and Apportionment in


71




March, 1922, and the construction has proceeded since,
and will be completed in about a year and a half (McAneny, 2527).
CONSTRUCTION NOT EMBRACED IN DUAL CONTRACTS
Besides the work which was done in completing the
construction of subways under the Dual Contracts, certain additions were made to subways not provided for
under these contracts. The Board of Estimate and Apportionment in May, 1923, approved the contract for
the construction of an additional one mile of subway
connecting Corona with Flushing (p. 2501) at a cost of
$3,600,000 and extending the Fourth Avenue line to
Fort Hamilton at a cost of $1,700,000.
The City has recognized the necessity for the construction of a passenger and freight tunnel connecting
Staten Island with Brooklyn. Such necessity is very
clearly set forth in Mayor Hylan's recent statement in
which he says:
"Practically all commerce and trade between
Brooklyn and Queens and the major portion of the
United States is floated over the water barrier which
separates these boroughs from the rail terminals of
the trunk line railroads on the westerly side of the
Port. For this reason the population of these boroughs has been said to live a 'hand to mouth' existence and in time of stress caused by bad weather,
ice, harbor congestion, marine strikes and the like,
the supply of actual necessities in these boroughs is
not only seriously curtailed, but has actually been
in danger of being entirely cut off. Despite the
fact that this portion of the greater city is but about
one hundred and fifty miles from the anthracite coal
fields there occurs as regularly as cold weather appears the usual danger of a scarcity of coal.
72




"The construction of the Narrows Tunnel will
provide a direct rail route connecting with most of
the trunk lines that serve the Port of New York
and will afford the means of supplying Long Island
waith the necessities of life and trade at all times regardless of weather conditions and other hazards to
wvhich the existing system of transportation is exposed. By means of the tunnel it will be possible
also to avoid centers of congestion and to deliver
freight via a 'back door' route to Brooklyn and
Queens, and by affording new points of receipt and
shipment for freight it will be an important factor
in the development and expansion of freight facilities.
"Brooklyn and Queens consume upwards of
7,500,000 tons of coal annually which in general
nIust be supplied as required. It requires no imagination to picture what it would mean in a time of
serious coal shortage to be able to haul coal in quantity by fast freight over one of the trunk line railroads and then over the Narrows Tunnel line into
Brooklyn and Queens for distribution to consumers.
Under these conditions relief would be but a matter
of hours rather than days or perhaps weeks and the
resulting benefits would be incalculable. The illustration need not be applied only to coal; it will serve
as well for milk, and for food, once the bulk of the
city's food supply comes to New York over the
railroads which terminate on the New Jersey side
of the Port.
"The railroads terminating in New Jersey handle
upwards of 21,000,000 tons of Brooklyn and
Queens freight annually, exclusive of the many
tons of freight transferred directly between lighter


73




and ship along the Brooklyn waterfront in connection with foreign and coastwise commerce. Upwards of 6,000,000 tons of railroad freight are
handled each year at Bay Ridge in the vicinity of
the tunnel line, the major portion of it being destined for movement through Brooklyn, Queens, the
Bronx and on into New England. All of this
freight is subject to the delays and expense incident
to its movement through congested waterfront
terminals on the New Jersey side of the port and
its transfer in various forms of marine craft across
the intervening waterway to again pass through
congested waterfront areas on the Long Island side.
The Narrows Tunnel when in operation will make
it possible to move a larger volume of railroad
freight expeditiously and economically from one
side of the port to the other by avoiding congested
terminals and cross currents of traffic. It will permit the delivery of freight to inland points in
Brooklyn and Queens and thereby reduce many of
the long trucking hauls that are now necessary. It
will also relieve waterfront congestion by making
it unnecessary to pass through waterfront freight
stations much of the freight that is not destined for
waterfront delivery.
"The city in cooperation with the Federal Government has undertaken the development of a
modern seaport at Jamaica Bay. This territory,
surrounded as it is by a large and densely populated
area, where there is plenty of land available at reasonable prices for the erection of factories and
homes, where the cheapest and most efficient water
connections may be had, is sure to develop rapidly
and become a great commercial and industrial cen

74




tre if rail connection is provided. With direct rail
and water transportation facilities available, Jamaica Bay will also afford a much needed opportunity for the location of heavy industries which require extensive space at reasonable cost. There is
no question but Jamaica Bay can be made an asset
of tremendous value to the City of New York.
"Under existing transportation methods the commercial and industrial development of Jamaica Bay
will be slow and uncertain. Its full degree of usefulness and efficiency will not be attained until it is
connected directly by rail with every trunk line
railroad serving the Port of New York, so that
direct shipment in standard cars, without breaking
bulk, will be possible between Jamaica Bay and all
ports in the country. The Narrows Tunnel will
provide the means of a physical connection between
the trunk lines on the easterly and westerly sides of
the Port District and the plans for the project
have been formulated in such a manner as to permit
of a direct extension from Bay Ridge to Jamaica
Bay either by way of the Long Island Railroad or
by an independent line, in order to provide adequate rail connections for the extensive harbor and
terminal facilities contemplated for Jamaica Bay.
"The construction of the Narrows Tunnel should
result in the development of a railroad line connecting four of the Boroughs of New York City with
the New England States to the east and with the
mainland to the west, with numerous attending advantages in the way of favorable freight rate
adjustments, the establishment of additional, convenient and efficient freight and passenger terminals, the curtailment of trucking and resulting re

75




lief from vehicular congestion, the elimination of
delays caused by weather and congestion on the
waterways, and in conjunction with the Stapleton
piers and the development of Jamaica Bay, by increasing the number, capacity and efficiency of
terminals secure for the Port of New York facilities comparable with any in the world."
Two shafts have already been built for this subway.
Two million dollars have been spent. Two million five
hundred thousand dollars more have been appropriated
(pp. 73-76). That tunnel will run from the neighborhood of about 65th Street, Bay Ridge, Brooklyn, under
the Narrows to St. George, Staten Island (p. 2548).
There was introduced in evidence before Commissioner MlcAvoy, as a basis for comparison, the record of
the moneys appropriated for municipal purposes during
the seven years of the present administration, and the
appropriations during the seven years preceding, a
resume of which is as follows:


Appropriated    Appropriated
from January     during seven
1, 1918, to    years preceding
Purposes           December 31, 1924 January 1, 1918
Schools...................  $173,865,000    $36,395,000
Facilities for Commerce and
Traffic Docks and Ferries.  70,378,000     32,000,000
Rapid Transit.............    54,750,000    170,000,000
Street Cleaning...........   11,754,000      1,051,000
Hospitals..................   12,788,000     15,707,000
Parks....................     11,490,000      7,235,000
Public Markets............    22,500,000........
Police and Fire............    5,954,000      6,113,000
Roads, Streets and Public
Buildings................   52,240,000     35,668,000
76




In the Transit Commission rested the sole duty and
power to provide for new rapid transit construction for
over three years. The rapid transit appropriations in
the foregoing table in a measure reflect the extent of
that Commission's activities in this direction.


77




CHAPTER V


THE FRUITS OF GREED
BROOKLYN RAPID TRANSIT CORPORATION REORGANIZATION
The Board of Estimate, in its presentment to the
Governor, charged that in connection with the reorganization of the B. R. T. into the B.-M. T., the Transit
Commission was guilty of dereliction of duty in permiting the reorganization, upon the basis of an inflated
capitalization, dividends on which will bring the imposition of unwarranted and illegal burdens upon the public;
that the reorganization concealed and continued, by the
issuance of both common and preferred stock without
par value, the watered capitalization of the B. R. T. and
in permitting the B.-M. T. to be organized as a business
corporation instead of a railroad corporation; and in
permitting the B.-M. T. on its books immediately after
reorganization to value its no par common stock at $54
per share, thereby laying the foundation for prospective
dividend distributions upon the basis of this fictitious
value, and in permitting the diversion of its assets to the
payment of dividends instead of applying them to make
safe, adequate and convenient the operation of its transit
lines; in permitting the B.-M. T. to be governed by a
directorate and officers, some of whom are serving in
dual and antagonistic capacities, some of whom are
primarily interested in the manipulation of prices and
sales of stock and bonds of the B.-M. T.; and in permitting the B.-M. T. to be managed and controlled
largely with a view to favorable action of its securities on the stock market, and not in the interest and
for the comfort of the traveling public; and in permitting the B.-M. T. to divert its moneys for the
78




advertisement and acceleration of a movement for increased fares and to misrepresent and deceive the public
as to the responsibility for the present intolerable transit
conditions and to wrongfully arouse an unwarranted
public indignation against the City authorities, and to
wrongfully shift the responsibility for the same from the
B.-M. T. and operating companies, to the city.
This charge was before Commissioner McAvoy.
I specifically direct your attention to the fact that no
inquiry was made as to the affiliations of the directors of
the B.-M. T. with enterprises engaged solely in Wall
Street operations, and for the purpose of ascertaining
whether or not these directors were really serving the
company or serving other hostile private interests; that
in fact no serious effort was made to ascertain the
capitalization of the reorganized company, in relation to
the value of its assets or the capitalization of its predecessor; that whenever reference was made to this charge
it was simply the occasion for an opportunity to the
Transit Commissioners to give such explanation as
they saw fit, which were accepted at par, and with no
attempt on the part of the interrogator, Mr. Sherman,
to pursue the inquiry or ascertain the real facts. There
is not even a reference to the charge that the B.-M. T.
diverted its funds, for which it is accountable to the city
under its contract, in accelerating a movement to discredit the city administration by propaganda, and to
secure an increased fare.
An analysis of the B. R. T. reorganization will bring
to light in a large measure the causes which from time
to time have brought about the collapse of our transit
companies and the public's painful experiences with
receiverships.


79




The B. R. T. was organized in 1896 as a successor to
the Long Island Traction Company. At the time of
its receivership it owned the power plants, operated certain railroad facilities and controlled through the ownership of stocks, bonds and instruments of indebtedness,
the companies operating the subway and elevated rapid
transit lines and street surface railways of this system.
Its subsidiary, the New York Municipal Railway Company was the lessee under Contract No. 4. It in turn
subleased to the New York Consolidated Railroad
Corporation, which owned the old Brooklyn elevated
lines, and operated those lines, together with the subways under Contract 4.
The B. R. T. also owned the entire stock of the
Brooklyn Heights Railroad Company, the Nassau
Electric Railroad Company and the Coney Island and
Brooklyn Railroad Company, including the DeKalb
Avenue and North Beach Railroad Company, the
Brooklyn, Queens County and Suburban Railroad
Company, South Brooklyn Railway Company and
subsidiaries, the Coney Island and Gravesend Railway
Company, Brooklyn and North River Railroad Company, which operated tracks over the Manhattan
Bridge. The Brooklyn Heights Railroad Company
also operated the tracks over the Williamsburg Bridge
leased to the Bridge Operating Company by the City.
The B. R. T. controlled the operation of 138 miles
of surface lines besides 107 miles owned by the Brooklyn City Railroad Company, under lease to which reference is later made.
It and its subsidiary companies claim to have invested
$46,177,000 in equipment and contribution to construction of subways under Contract 4, and $41,823,000 in
extending and tracking its old elevated lines, a total of


80




$88,000,000 under Contract 4; its old elevated lines and
equipment which were valued by the Transit Commission as of 1921 at $22,240,000, but for purpose of reorganization and in order to justify the new capitalization this figure was forced up by the Transit Commission to $28,000,000. As elsewhere indicated $20,000,000
is a charitable estimate of its value. Besides its surface
lines which the Commission valued at $52,000,000, represent in part obsolete and about-to-be discarded
lines and constantly diminishing values because their
usefulness is gradually disappearing. Thus the total
value of its principal assets at the time of reorganization
was $168,000,000, but if the elevated lines are valued
at $20,000,000 and the surface lines at one-half of their
Transit Commission valuations, the value of the assets
is reduced to $134,000,000.
On December 31, 1918, because of insolvency it went
into receivership and the receivership continued for
four and one-half years until June 14, 1923. The subsidiary companies were likewise in receivership from
July 14, 1919, and were so continued until reorganization. Mr. Lindley M. Garrison was the receiver. Two
of the smaller surface lines survived without receivership. No explanation is given for the continuance of
the receivership for these four and one-half years.
It is needless to recite the conditions of the service on
the B. R. T. rapid transit and surface lines during the
period of receivership, including the additional burdens
imposed by the discontinuance of free transfers upon
abrogation by the receiver of the lease of the Brooklyn
City Railroad Company and the return to it of its
properties in October, 1919.
Commissioner Harkness in his opinion of June 4,
1923, in approving the reorganization says:


81




"The receivership has now continued for about
four and one-half years, and as is common to receiverships has been marked by disintegration, by
restricted capital expenditures and improvements
and for its earlier period by greatly restricted
service."
Notwithstanding, later in the opinion he says:
"The claim that the company has not been living
up to its obligations is a contention unsupported
by the evidence. On the other hand, the reports
to the Commission by its inspectors show that the
company is and has been in good faith living up to
the service orders of the Commission."
In other words, Commissioner Harkness says that
the public got during the receivership just such service
as it deserved because presumably, if the company had
not given what the Commission regarded as proper
service, orders would have been issued by the Commission for its improvement.
It may be in place at this stage to consider a matter
which was not presented in the investigation, but which
will be all important in the event of future receiverships
of our transit companies. It was assumed throughout
the investigation, and has apparently always been the
position of the Transit Commission, that upon the in.coming of the receiver the control of our transit lines
passed into the court of his appointment and that in
effect the Transit Commission became functus officio.
Our Public Service Commission Iaw and Rapid
Transit Act, Chapter 4, Laws 1891 as amended, fixes
the obligations of carriers of passengers and the powers
of our transit regulating commissions. Franchises to
railroad companies are held subject to the compliance by


82




them with the provisions of these laws and the orders
of these commissions.
When a receiver is appointed of the properties of a
railroad company, he merely becomes the custodian and
entitled to their possession, solely, however, for the
benefit of the company, its stockholders and creditors,
and not for the public. He takes only what the traction
company has, charged with all of its obligations, both
under law and under contract. It is clear that by the
appointment of the receiver of the B. R. T. and its subsidiaries, the obligation resting upon those companies
was not in the slightest degree impaired, suspended or
changed.
Much is said in the record about the financial inability
of the traction companies to give the service which was
required by law and contract. With respect to that, too,
there appears to be misapprehension. The obligation of
a carrier under its franchise and particularly under
specific contract is not lessened or discharged because of
financial inability to perform. The duty of the Transit
Commission to secure adequate and safe service for the
traveling public is not affected, suspended or changed
in the slightest way by the appointment of a receiver or
the insolvency of the carrier. It is by law charged with
the duty of securing service regardless of these contingencies. It was for it, having ascertained the deplorable conditions which it reported in 1921, to have
issued adequate orders for the rem oval of those conditions and for proper service.   The receivership
and financial inability of the traction companies were
not its concern.  The companies were bound to
comply with these orders. They had their choice of
either complying or abandoning their contracts and
franchises. Their physical assets were in the posses

83




sion of the United States Court; foreclosure proceedings of mortgage thereon were pending. Orders from
the Transit Commission, non-compliance, resultant
proceedings for cancellation of contracts and franchises
would have brought a prompt sale of the railroads, presumably into strong financial hands, with adequate capital to rehabilitate them and to provide for necessary improvements and better service. Such should have been
the course of the Transit Commission. Had it been the
public would not have suffered the results of the four
and one-half years of receivership. With respect to the
reorganization, the position of the Transit Commission
seems to have been that it was helpless, and that4 approval by it was compulsory. Here again is a mistaken
fundamental conception. The Transit Commission might
have disapproved any but a proper reorganization;
might have insisted that it take place expeditiously after
it went into office; that otherwise the foreclosure suits
proceed to judgment and sale. It might have ordered
additional equipment and improvement of service, failing which the door would have been opened for remedies
which the law gives.
However, those were not the thoughts and actions of
the Transit Commissioners. After four and one-half
years of receivership the reorganization was approved.
Huge sums were spent in maintaining the receiver, his
counsel, engineers and accountants, clerical staff, all of
whom were concerned only with stock and bond holdings.
Some of that expense curiously enough has been charged
to the "cost of construction" of our subways. The remainder, to use the language of one of the Transit Commissioners, was "absorbed" by the company and a substantial "part charged to the operating expense" in its
account with the city.


84




Before the reorganization of the B. R. T. it had outstanding 755,000 shares of $100 par stock. That stock
was selling at one dollar per share at the time of reorganization. Its market value was $755,000. The bonds,
bank loans and notes aggregated $120,000,000; interest
and other charges had accrued. There were $12,500,000
of receiver's certificates outstanding. It had $8,000,000
in the bank. All this at the time when McAneny says it
did not have enough "money with which to buy paint"
for its corroded structures; this, at the time when the
Joint Committee of Engineers found that 2,590 outer
guard timbers, 14,910 joints, 1,900 ties and 77,000 inner
guard timbers were rotten and required immediate replacement and the installation of the "dead man's button" was imperative.
Thus the total of its outstanding bonds, notes and
receiver's certificates (not including accrued interest)
and the market value of its outstanding capital stock
was under $134,000,000. Of course, the market value
of its bonds and notes was much below par and on that
basis the amount would be much less.
The company was reorganized and the smoothtongued Harkness naively says that the reorganization
meant the squeezing out of $107,000,000 of water
(Harkness, pp. 612-614). The fact is that at least
$75,000,000 of new water was added on the basis of
prevailing market valuations. The B. R. T. was reorganized into the B.-M. T. The B.-M. T. has an authorized capitalization of 350,000 shares preferred stock, no
par value, but for all purposes treated as of the value
of $100 per share, and 850,000 shares common stock,
no par value. There were issued, as of October 8, 1924,
249,468 shares of preferred stock and 769,911 shares
of common stock, 6 per cent. B.-M. T. bonds aggre

85




gating $92,000,000; underlying bonds aggregating
$47,000,000, an aggregate of $139,000,000 in bonds,
besides $25,000,000 preferred stock, a total of $164,000,000 bonds and preferred stock. That is the capitalization to which Mr. Harkness refers when he speaks
of the squeezing out of water. How convenient it is to
forget 769,911 shares of common stock. How easy it
is to wipe out $75,000,000 (par value of B. R. T. commQn. stock) for the consumption of the riding public
by merely changing the "R" into an "M" in the name
of the company, and the name of the stock and calling
it "no par value." A little thing like fourteen thousand
shares of additional common stock has escaped Mr.
Harkness' notice. But it was another story in relation
to Wall Street. Before the ink of Mr. Harkness' signature of approval of this plan of reorganization was
completely dry a balance sheet was prepared by the
B. M. T., the common stock acquired a real value and
on the first balance sheet which came to light after the
reorganization the common stock was valued at
$41,596,190, or at the rate of $54 per share-this supposed equivalent of common stock of the B. R. T. which
sold the day before at $1 per share. Adding that
$41,596,190 for common stock to the $164,000,000
aggregate of bonds of preferred stock, the total is $205,000,000. It is indeed singular that this figure so nearly
corresponds with Commissioner Harkness' value of
$201,105,711 on page 11 of his opinion approving the
reorganization. Of course that may be a mere accident.
Before the reorganization took place the Corporation
Counsel seriously objected to the incorporation of the
B.-M. T. as a holding company. The Transit Commission's alibi is, that the B. R. T. was and the B.-M. T.
is a holding company organized under the business cor86




poration law; that only railroad companies are subject
to the direction and control of the Transit Commission
(Harkness, pp. 622, 623). Of course, if the Transit
Commission had compelled the B.-M. T. to organize
as a railroad corporation, it would have had the power
to inquire into the details of the reorganization, to fix
the proper capitalization and to ascertain where the
huge sums went which were spent on the reorganization; who received these sums and for what purpose.
But the Corporation Counsel's objections were overruled. There can be no question as to the merit of this
objection.
I quote from the plan of reorganization of March
15, 1923, page 5. "The Brooklyn Rapid Transit Company is a corporation * * * owning directly the power
plants of the system," and at the bottom of page 6 and
top of page 7 as follows: "The power plants, repair
shops, car barns, etc., common to the use both of the
surface lines and the subway and elevated lines were
operated by the B. R. T. itself and the principal power
plants are also owned by the B. R. T. * * * many of
the common facilities are owned by the rapid transit
companies and many by the surface companies."
Section 5 of the Public Service Commission Law provides:
1. Jurisdiction, supervision, powers and duties
* * * shall extend under this chapter to common
carriers, railroads, street railroads, etc.
2. * * * to the manufacture, sale or distribution of gas, electricity for light, heat or power.
Section 2, subdivision 8, provides:
"The term railroad corporation when used in
this chapter includes every corporation, company,
87




association, joint stock association, partnership and
person, their lessees, trustees or receivers appointed
by any court whatsoever owning, operating or
managing any railroad or any cars or any equipment used thereon or in connection therewith."
The title to the power plants and the right to operate
the repair shops, car barns and other facilities wvas
vested in the B. R. T. before reorganization and passed
directly to the B.-M. T. upon reorganization. Surelv,
power plants, car barns and repair shops are equipment,
and yet the Transit Commission permitted the organization of the B.-M. T. as a business corporation, thus
placing it beyond the control of the Transit Commnissaon.
Under Section 55, Public Service Commission Law,
it is provided that the capital of a consolidated or
merged corporation shall not exceed the capital of th(
corporations consolidated, at par value thereof and any
additional sum actually paid in in cash. This section
naturally contemplated that a reorganized company
could be incorporated only with par value stock, because otherwise it would be impossible to apply this
section. The Transit Commission approved the reorganization of the B. R. T. with no par value stock, both
common and preferred, so that Section 55 was not complied with.
How well the B.-M. T. succeeded in creating a situation where for the purposes of the Transit Commission
the capitalization would be one amount, and for the
purpose of stock manipulation it would be another, may
be inferred from the foregoing comparison of the testimony of Mr. Harkness in which he fixed the capitalization at $164,000,000, and the records in Wall Street


88




showing a capitalization of $204,000,000, not taking into
account the earnings and surplus since reorganization.
Annexed hereto is Exhibit "K" which I have caused to
be prepared, which discloses that the aggregate market
value of the outstanding B. R. T. stock and bonds at
the time of reorganization, June 7, 1923, together with
a sum sufficient to discharge all of its obligations as they
were in fact discharged, is $123,042,936.
With that sum all of the stock and properties owned
by the B. R. T. could have been acquired by purchase
in the open market and sufficient would have remained
to clear it of its debts. Compare this sum with the
$204,000,000 capitalization claimed by the B.-M. T.
Simple arithmetic proves at least $80,000,000 of water.
That that stock was intentionally watered is proved by
its subsequent performances in Wall Street. It first
appeared for trading on the stock exchange in October,
1923; shortly thereafter the common stock sold at $9.25
per share. Then appeared the financial statement that
it was worth $54 per share, and so it jumped from $9.25
to $40 per share, an appreciation of 31 points or over
$23,000,000. That is not taking into account the appreciation of the preferred stock and bonds of the
B.-M. T. and all this notwithstanding that it is claimed
that subways cannot be operated successfully on a 5c
fare. Of course, that is only for the riding public. In
the financial district, it was told that for the first year
after receivership the B.-M. T. earned over $4,000,000;
10 per cent. of the highest price at which the common
stock sold and about 45 per cent. of its lowest price.
The effects which will inevitably come from this overcapitalization are clear to anyone who has in mind the
history of the finances of the traction corporations in
this city. The same B. R. T. paid out $35,000,000 in


89




swollen dividends on its prior watered capitalization.
We have the admission that such capitalization was
watered in Mr. Harkness' own opinion. The inevitable
result will be, as it always has been, that every effort
will be strained, under pressure from those who have
paid $40 and more for their stock and who are now
called investors, to pile up alleged surpluses, dividends
will be paid, capital expenditures and replacements will
be forgotten, the capital will be impaired, another
period of depression will come, and the same tale will
be told again.
It will be interesting to observe what the financial
status of the B.-M. T. will be when the city recaptures
its subway under Contract 4. It will then have left
the surface lines, power plants, etc., valued by the Transit Commission in 1921 at $52,000,000, with subsequent
additions, but surely not saleable at even $26,000,000;
its old elevated lines valued by the Commission in 1921
at $22,400,000, together with about $36,000,000 invested
in improvements, extensions and third-tracking under
Contract No. 4, a total of $58,400,000 (surely no one
will claim its real value to be that sum), and other and
current assets over current liabilities, $10,000,000.
An approximate balance sheet of the B.-M. T. upon
such recapture will be as follows:
Assets
Cash from City for subways......$..... $52,995,000
Surface lines, power plants, etc........  26,000,000
"LJ" line and improvements......5.....  58,400,000
Other and current assets over liabilities..  10,000,000
Total Assets.................... $147,395,000


90




Liabilities
Outstanding bonds.................. $139,000,000
Preferred stock at $100 a share.........  25,000,000
Common stock at $40 a share..........  30,000,000
Total Liabilities............... $194,000,000
There is a good reason why friends of the B.-M. T'.
should be opposed to a "recapture" of the subways.
It is claimed that $26,048,015 new money went into
the reorganization of the B.-M. T. It did, but it did not
all stay there. About $5,000,000 was immediately taken
out as expenses of reorganization. More will be said
on this subject later. That $26,000,000 was raised by
assessing each holder of 100 shares of stock of B.-M. T.
$3,500, for which he received $2,187.50 bonds and $1,312.50 preferred stock. The aggregate amount of bonds
so issued was $16,280,000, and of preferred stock $9,768,000, an aggregate of $26,048,000. These figures are
important because deliberate falsehoods have been told
with reference thereto, even before Commissioner McAvoy.
Before the preferred stock was issued, it was provided
in the plan of reorganization and also in the certificate of
incorporation that dividends on the preferred stock
should be cumulative from and after July 1, 1926; that
means that until July 1, 1926 the holders of the preferred stock could not as of right expect any dividends.
There was a reason why that provision was inserted in
the plan and certificate of incorporation.
Mr. Harkness in his opinion discusses gross income
and estimated expenditures of the company as reorganized. On page 9 he takes into account interest on bonds
and operating expenses. He says there are no sinking


91




fund requirements on bonds, by agreement until 1927
(p. 624) and then he says that in view of the desirability
of in every way assisting the reorganized company, and
"although there may theoretically be a distinction between the sinking funds and depreciation funds in respect of deferred payments, it seems to me that under
all the circumstances the new management is entitled to
a year's grace in order to get the new company well
started. I, therefore, do not make any deduction from
the figures of present earnings to cover depreciation but
leave that to future action." That means that the
B.-M. T. was told that it need not set anything aside
for depreciation except to the small extent to which it
had been accustomed. Of course, to make the situation
presentable and consistent it was necessary for the
gentlemen engineering the reorganization to display a
spirit of intended economy and conservation and that is
why in the certificate of incorporation it is provided that
the preferred stock shall not be cumulative as to dividends until July 1, 1926. That provision served its usefulness the moment the reorganization was approved;
the plan of reorganization and the certificate of incorporation were forgotten by both the Transit Commission and the B.-M. T. by April, 1924. Nine months
is a long time to wait for dividends, when there is feverish anxiety that the price of stocks advance in Wall
Street.
Accordingly, in April, 1924, the very month in which
the Joint Committee of Engineers made its report on the
causes of the Flatbush Avenue accident and found defects in the B.-M. T. structure requiring immediate
remedying for the safety of the public, a quarterly dividend of $11/2 or at the rate of $6 per annum was declared
on the preferred stock, and it has been paid since. That


92




stock sold only a few months before at $34.50 per share.
This dividend meant a return of 18 per cent. on that
basis. Commissioner Harkness says the Transit Commission could not forbid the declaration of dividends,
but it could have made orders for additional cars and
improved service to be paid for out of the million and a
half dollars annually which this dividend requires.
The Transit Commission feels and the B.-M T. felt,
that the declaration of this dividend required some explanation and we find that explanation in almost in
the same words from the company and the Transit Commission. At the time when a dividend was declared in
April, 1924, the Chairman of the Board of Directors of
the B.-M. T. stated: (I am quoting from the Standard
Corporation Records issued August 15, 1924):
"That the dividend was to be considered as in the
nature of interest on the money contributed by
stockholders at the time of reorganization nine
months ago and was not to be taken as an indication that the company was earning a fair return on
its actual investment or on a fair valuation of its
property."
and quoting from Commissioner O'Ryan's speech over
the radio broadcasting station WAHG on October 30,
1924, as reported in the New York Times of October 31,
1924, he said on the same subject as follows:
"The Brooklyn-Manhattan Company last year
paid dividends on its preferred stock only, nothing
more, and the fact is that this preferred stock represented $26,000,000 of new money recently paid
into the company by the public."


93




-and at the hearing before AMr. Justice McAvoy, Commissioner McAneny says:
"The B.-M. T. declared a dividend on the new
money paid into the treasury at the time of reorganization of the former stockholders" (McAneny,
p. 2580).
In other words, these three gentlemen claim in unison
that the dividend was paid on $26,000,000 of new money
paid in at the time of reorganization. Nothing could
be further from  the truth.  The fact is that only
$9,768,000 preferred stock was issued for new money.
The remaining $16,280,000 of new money was represented by new bonds issued to the stockholders and the
B.-M. T. has paid interest on these bonds at 6 per cent.
since reorganization. In other words, this 6 per cent.
dividend is 6 per cent. on $16,280,000 not represented
by any new money.
Interest at the rate of 6 per cent. per annum on
$26,148,000 is $1,568,880. The company pays $2,473,608 for dividends on preferred stock and interest
on the $16,280,000 of bonds-nearly one million dollars
more per annum than the 6 per cent. on $26,000,000
new money. Why this deceit?
There remains but one other outstanding feature of
the reorganization which deserves comment. It appears
from page 10 of the plan of reorganization which the
Transit Commission has approved that $6,484,119 was
disbursed, for court costs, commissions, taxes, claims,
underwriting and syndicate and other expenses of reorganization. This is a huge sum, and surely required
investigation, yet we have the admission of Commissioner Harkness that he did not even inquire into that
expenditure (pp. 2319-21).


94




The MIayor of this city has for mollths been demanding that a statement be furnished showing how that
money was spent and for what purposes. I direct your
attention to the fact that it is provided in the reorganization agreement, paragraph 17, page 61 of the plan,
that the accounts of the committee shall be filed within
one year with the Board of Directors of the new colmpany. That account has apparently not been filed. At
the close of Mayor Hylan's testimony before Justice
McAvoy, I suggested this inquiry.  Nothing having
been done, by a letter, a copy of which I am annexing,
Exhibit "B," I again directed Mr. Sherman's attention
to it. No inquiry was made. Instead there was introduced in evidence a letter and schedule dated January
2, 1925, addressed to Mr. Sherman by Rushmore, Bisbee and Stern, which contains a statement of disbursements of the reorganization. I am annexing a copy,
Exhibit "L."
It will be noted that no names are given and that the
expenditures are bulked and the purposes not set forth
with particularity. It appears therefrom that $1,432,640.82 was expended as syndicate fees, that the compensation and expenses of counsel, trustees, etc., in connection with defaulted bonds was $1,129,213.04, that
representatives of the stockholders and committees and
counsel received $440,508.33; that it cost to deposit old
and new securities $110,005.86; that engineers and accountants got $51,500; the expenses of receiver, compensation of receiver, counsel, special master, etc., were
$254,500, the reorganization committee and counsel
took $400,000 and expenses incident to securing deposits of securities were $92,885.21. What did these people
do? Who received these enormous sums of money, which
should have gone into improvements and for better., 95.




service of tile transit company? Nobody before Commissioner McAvoy was asked and nobody answered.
WThat did representatives of stockholders and contract
creditors do that entitled them to nearly half of a million
dollars? $2,200,000 was paid to tort creditors and
$1,600,000 to contract creditors. I untderstand that the
receiver and counsel collected $470,000 for only a portion of their services dulring the rleceivershilp and before
reorganization. That item was the subject of adjutstment upon the redetermination of costs. For what did
they receive $254,500 more? The reorganization committee charged $400,000 for what? The reorganization
committee included Gerard M. Dahl. I-e was a menlber of the firm of Hayden Stone & Company. Albert
H. Wiggin of the Chase Securities Co. was the chairman of the committee. Hayden Stone & Co., J. & WV.
Seligman and Chase Securities Companly received
$1,432,640.82 syndicate fees. What were tliose snd(licate fees? Mr. Harkless says in his order of approval
that the organization has been approved by the hold(ers
of the majority of the stock of the B. R. T. Apparently they agreed to pay the assessment. Mr. Dahl in
his book, "Transit Truths," says repeatedly that the
new money was furnished by the stockholders. If that
be so, why did the syndicate receive $1,430,000 from
the treasury of the B.-M. T? Thle plan of reorganization provides that the syndicate shall charge 51/, per
cent. on the entire $26,000,000 of new money and not
merely on any deficiency that they might be required
to pay upon failure of stockholders to respond to the
assessment. How much did the stockholders contribute
-how much the syndicate? Was the arrangement for
compensation to the syndicate fair?  It was money
which otherwise would have gone to make good "de

96




ferred maintenance." The reorganization on this basis
was approved by the Transit Commission.  Should it
have been? Should these matters not have been the subject of inquiry by the Transit Commission? Harkness
evades the subject and says there were 170 banks in an
association which underwrote this $26,000,000. That
explanation is not sufficient. J. & WV. Seligman, Chase
Securities Company and Hayden, Stone & Company
did not need 170 banks to help them to 'finance the
comparatively small amount needed because of the failure of some stockholders to pay their assessment.
It is to be borne in mind that this $1,432,000 represents about $2 per share on 750,000 shares of stock of
the B. R. T., which was then selling at $1. In other
words, the syndicate charged $2 per share for securing
the privilege to stockholders to pay $35 per share assessment on stock which was selling at $1 per share. About
-$4,000,000 went to lawyers, committees and representatives, or at the rate of about $6 per share on the outstanding capital stock of both the new and old companies, and not one cent of this money inured to the benefit
of the riding public.


97




CHAPTER VI


"THE HARVEST"
DISRUPTION OF UNIFIED BROOKLYN SURFACE LINE SYSTEMT
-FAILURE TO RESTORE UNIVERSAL FIVE CENT FARE
There are approximately 245 route miles of surface
car lines in Brooklyn; 138 are operated by subsidiaries
of the B.-M. T., the remaining 107 miles are owned by
the Brooklyn City Railroad Company.
The Brooklyn City Railroad Company is the successor of a number of old horse car lines in Brooklyn,
some originating before 1850. It owns what has been
termed by Commissioner Harkness as "the heart of the
surface line system in Brooklyn".
In 1893, the predecessor of the B. R. T., the Long
Island Traction Co., acquired control of this system
under a 999 year lease from the Brooklyn City Railroad
Company to the Brooklyn Heights Railroad Company,
now a subsidiary of the B. R. T., at a rental which included taxes, interest on nearly $7,000,000 outstanding
bonds of the Brooklyn City Railroad Company, and a
guaranteed dividend of 10 per cent. per annum on
$12,000,000 stock of the Brooklyn City Railroad Company (Harkness, p. 2389).
The B. R. T. operated these lines as part of its surface system, at the time of the surface line receivership,
July 14, 1919. There were at that time over 500 points
of free transfer from the lines of the Brooklyn City Railroad Company to other surface lines of the B. R. T.
Prior to its receivership, the B. R. T. had invested
98




about $10,000,000 in improvements and maintenance,
and various other purposes of the Brooklyn City Company (Harkness, p. 2390).
In October 1919 the receiver of the B. R. T. elected
to terminate the lease with the Brooklyn City Company,
and the lines were restored to that Company and have
since, at least ostensibly, been operated by the Brooklyn
City Company, separate and apart from the surface system of the B.-M. T. as reorganized.
The result of this severance has been a disruption of
the unified surface line system and universal five cent
fare as it existed prior to the receivership. At about 500
points of intersection between lines of the Brooklyn City
and those of the B.-M. T. where previously free transfers were given, the public is now required to pay additional fares estimated in the aggregate, at least
$5,000,000 per annum.
The Legislature in 1921, in creating the Transit Commission, declared, as a measure of relief sought to be
accomplished by the Transit Commission, the unification
and consolidation of street railway lines with a view to
the restoration of the transfer rights which terminated
during the receivership.
It is beyond question that it was within the power
of the Transit Commission to direct the restoration of
transfers between the lines of the Brooklyn City Company and B. R. T. as before the receiverships.
Section 49 of the Public Service Commission Law
distinctly provides:
"That the commission shall have power * * * to
require any two * * * street railroad corporations,
whose lines * * * form * * * connecting lines of
transportation * * * to establish through routes


99




and joint fares * * * for the transportation of passengers, and that if upon the expiration or earlier
termination. of a lease the free transfers * *! * of
passengers theretofore in effect and permitted by
the lessee of a rapid transit railroad * * *1 is discontinued * * * the commission shall have the power
by order to require the companies * * * to continue
or to reestablish such through routes formerly; existing, and to establish joint rates, fares and charges
for the transportation of passengers."
And further enabling legislation on the same subject
is contained in Section 13, Chapter 252, Laws 1884 and
Section 101, Chapter 565, Laws of 1890.
When application was made in June, 1923, for the
approval by the Transit Commission, of the proposed
reorganization of the B. R. T., the City of New York
through its Corporation Counsel, objected to the reorganization save upon the condition, that the B.-M. T.
secure an arrangement with the Brooklyn City Company, by which free transfers and the unified surface
line system of Brooklyn be restored, as before the receivership.
Commissioner Harkness in overruling the objections
of the Corporation Counsel and giving approval for the
reorganization of the B. R. T. without the inclusion of
the lines of the Brooklyn City Company and in giving
sanction to the continuance of the disruption of this surface car system, said in part, as follows:
"Of even greater moment is the absence from
this reorganization of the Brooklyn City Railroad
Company * * * * During the receivership the
lease went back to separate company operation.
This was unfortunate for the riding public because
100




of the cutting off of transfers and the flexibility of
service that had become in a course of over twenty
years almost a necessity. * * * The surface lines
are not reorganized, but their bonds were to be reinstated. The Brooklyn City Railroad Company
formerly leased and operated as part of the B. R. T.
system is not included, but the plan of readjustment contemplates its eventual acquisition."
The reason assigned by the Transit Commission for
its course then was and still is, that it was powerless to
compel a lease between the B.-M. T. and the Brooklyn
City. That is entirely aside the point. In fact these
two companies are inter-related, both in respect to control, and in the operation of their lines. An offer was
made, through the testimony of Deputy Commissioner
Cornelius H. Sheehan, of the Department of Wrater
Supply, Gas and Electricity, to show, that in fact, the
lines and equipment of the B.-M. T. and the Brooklyn
City Company, are used inter-changeably. The offer
was ignored.
The question is not, and was not, whether the Transit
Commission could have compelled leases to unify the
surface lines in Brooklyn.  The Transit Commission
was created to relieve the emergency in the transit situation, including the burdens added by the discontinuance
of these free transfers. Much discretion was vested in
the Transit Commission, with respect to approval or
disapproval of the plan of reorganization, and whilst the
Transit Commission might not have had power to compel the two companies to enter into a lease, it could
have refused to approve the reorganization except upon
the condition that the B. R. T., make an appropriate
agreement with the Brooklyn City Company, whereby
free transfers would be restored. Nobody should doubt
101




that the B.-M. T. would have been able in the briefest
period, to effect such an arrangement.
Commissioner Harkness says: that the Brooklyn
City is not included in the reorganization "but the plan
of readjustment contemplates its eventual acquisition."
Everybody is waiting for the realization of that contemplation. Over a year and a half has passed and nothing
has happened.
Commissioner Iarkness very frankly admitted, upon
the hearing, the power of the Transit Commission under
the provisions of the Public Service Commission and
other laws, to institute through route and joint rate
proceedings which would result in transfer privileges
to the public. But he says, no such proceeding has ever
been contemplated, much less commenced. His explanation is the one oft given. Ile says that the Brooklyn
City is "in good shape" financially. That is beyond
doubt. It earned a net profit, after payment of all
operating expenses and interest on bonds, of 15 per
cent. on its common stock in 1922; 19 per cent. in 1923;
and 17 per cent. in 1924.
But says the Commissioner (pp. 2392-2394), the subsidiaries of the B.-M. T. which operate the rest of the
surface lines in Brooklyn "are in bad shape," almost
insolvent, and are in no position to stand the burden of
the restoration of free transfers.
Of course if the primary consideration is the welfare
of the railroad company, that is a good excuse, but if
the obligation of a railroad company is, as I assume it,
to serve the public, under the provisions of our laws,
financial debility, may be a reason for the abandonment
of its franchise, but it surely is no reason why the Transit Commission should exercise paternalism towards it,
at the public's expense.


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CHAPTER VII
FINANCIAL REHABILITATION
INTERBOROUGH RAPID TRANSIT COMPANY
REORGANIZATION
The Interborough Rapid Transit Company, the
lessee under Contract 3, underwent what the Transit
Commissioners termed a "reorganization," rather "readjustment." That so-called "reorganization" occurred
in October, 1922, effective November 25, 1922, under
the guidance and lupon the approval of Commissioner
O'Ryan. It was that company which, according to
Commissioner Harkness, required nursing and tender
treatment, in order that it might be saved the pains
of receivership.
It has a capital stock of $35,000,000. Its financial
strength endured, at least for the purpose of paying
dividends, until suddenly in 1919, it lapsed into financial
chaos. Its record of dividend payments is as follows:
Year                           Rate     Amount
1904........................  2.   %  $700,000
1905.......................  6.75    2,362,000
1906........................  s.25   2,887,000
1907........................  9.     3,150,000
1908........................  9.     3,150,000
1909........................  9.     3,150,000
1910........................   9.    3,150,000
1911........................  10.   38,500,000
103




Year                         Rate       Amount
1912........................  15.  %  $5,250,000
1913........................  12.    4,200,000
1914.......................  1.   5.,250,000
1915........................  20.   7,000,000
1916........................  20.    7,000,000
1917........................  20.    7,000,000
1918........................  17.50  6,125,000
1919.........................       1,750,000
187.50%  $665,625,000
It should be noted that it even paid dividends in 1919.
Harkness' anxiety to prevent receivership was due to
the fear that, through it, the lease of the Manhattan
Company would end, and, of course, then the earnings
from the subways could not be applied to make good
the losses of the elevated lines. His fret was, that then
there might have been an abolition of free transfers,
and an attempt by the "L" company to charge ten cent
fare under an ancient charter, and that the I. R. T.
might have lost its $43,000,000 investment in thirdtracking and extending the "L" lines, under the related certificates of March 19, 1913. It did not occur
to Commissioner Iarkness that that was not a matter
of public concern, and that the tracks and extensions
were there, to be used so long as elevated structures are
desirable. Nor did it occur to CQmmissioner Harkness
that possibly by a receivership, and the wiping out of
stock which represented no value, and of bonds which
were inflated, and the coming of the Interborough's
properties into strong financial hands, with money for
improvements, the public would be best served.
104




Trlloughout the record will be found the same solicitude
for the financial rehabilitation of these traction companies.
As a measure of justice and relief, and to end the
constant and unwarranted diversions of the earnings
of the city-owned subways to the stock and bond-holders
of the Manhattan Elevated Comnpany, Mayor Hylan
had publicly and repeatedly, and long before there was
any proposal for the I. R. T. reorganization, urged an
equitable reduction of the exorbitant rentals payable
out of these subway earnings for these elevated lites.
It will be seen in a moment that the alleged "readjustment" has merely postponed the day of reckoning.
The "readjustment" was made, by a modification of
the lease with the Manhattan Elevated Coilmpany, by
which, besides paying taxes and interest on $45,000,000
of outstanding bonds, the Interborough instead of p)aring 7 per cent. dividends on the $60,000,000 stock of
the Manhattan Company, is now required to payx, only
out of earnings, for the year ending July 1, 1923, 3
per cent.; for the year ending July 1, 1924, 4 per cent.;
for the year ending July 1, 1925, and thereafter, 5
per cent. (Harkness, p. 2313); by a postponement
of payments into sinking fund, on the I. R. T. 5 per
cent bonds for five years from  January 1, 1921;
by a provision that the dividend rate on the conmmo
stock of the I. R. T. shall be restricted to 7 per cent.
per annum, with no disbursements, until July 1, 1926
(Iarkness, p. 2315), and by an arrangement for a new
security issue of $15,000,000, ten year 6 per cent. notes,
of which $10,500,000 was presently issued and absorbed
by the holders of the Interborough-Metropolitan 41/2
lper cent bonds and Interboroo stockholders. Thus, so
far as finances are concerned, only $10,500,000 addi

105




tional money was raised, from which must be deducted
not only the expenses but nearly $4,000,000 which was
immediately paid as an installment of principal on its
outstanding 7 per cent. notes, besides about $9,000,000
to and on account of the Manhattan Elevated Company for back taxes, unpaid rental and deferred maintenance, leaving a deficit of at least $2,500,000. That
is called "rehabilitation." The net result of this alleged
reorganization was, that all new money was paid out
on old claims, and nothing left for capital improvements or to make good "deferred maintenance"; besides $2,500,000 had to be taken out of current assets.
The capitalization of the I. R. T. as of June 30, 1924,
is as follows:
Capital  Stock......................  $35,000,000
First refunding 5 % bonds............. 162,106,000
N otes..............................  44,833,700
Equipment certificates................  3,370,000
Total........................  $245,309,700
Less sinking  fund....................  8,000,000
Balance......................  $237,309,700
As against this capitalization it has the following
apparent assets:
Its investments under Contracts 1 and 2. $46,000,000
Its investment under Contract 3........ 110,000,000
Its investment in tracking and extensions
of  "L"............................  43,000,000
$199,000,000
It has, of course, current assets from which must be
deducted current liabilities. These assets, in the fore

106




going schedule, must be properly depreciated. At least
one-seventh of the term of the leases has expired. The
depreciation is at least $30,000,000. The value of the
assets of the Interborough, not taking into account that
its Manhattan lease is a real liability, does not exceed
$169,000,000 as against $237,000,000 of capitalization,
and included in the assets are $43,000,000 invested ii
"L" improvement. This last mentioned investment has
little if any real value. And this has been termed a reorganization of the I. R. T.!
It will be interesting to note what the financial position of the I. R. T. will be when the city recaptures its
subway lines under Contract 3. The I. R. T. will then
have left $123,000,000 in cash, which it will receive from
the city for the subways under Contract 3; its investment
in subways under Contracts 1 and 2 of $46,000,000, besides its investment under the lease of the Manhattan
Elevated properties, which is only a burden.
An approximate balance sheet of the I. R. T. upon
such recapture will be as follows:
Assets
Received from City under Contract 3 -Cash............................. $123,000,000
Investment under Contracts 1 and 2.....  46,000,000
Other and current assets over liabilities..  9,000,000
Total Assets.................. $178,000,000
Liabilities
Capital stock.......................  $35,000,000
Bonds, notes, certificates of indebtedness
less sinking fund..................  202,309,700
Total Liabilities.............. $237,309,700
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MORE REHABILITATION-NEW YORK RAILWAYS
REORGANIZATION
This company owns or controls all of the surface lines
in the Borough of Manhattan with the exception of those
of the Second Avenue R. R. Co., Third Avenue R. R.
Co., Eighth Avenue R. R. Co., Ninth Avenue R. R. Co.
and the New York and Harlem R. R. Co., which operates the 4th and Madison Avenue Line.
The New York Railways Company was petitioned
into receivership in March 1919. Mr. Job E. Hedges
was its Receiver. That receivership lasted for five years
until July 8, 1924, when a so-called "reorganization" was
approved, likewise under the guidance of Commissioner
O'Ryan. The Receiver is not yet physically out of
possession.
These lines, so far as they are useful for operation,
have been valued by the Transit Commission as of 1921,
at $48,000,000 as depreciated, and at $22,670,000 original cost less cost of conditioning (see Transit Commission Valuations, 1921). Upon reorganization there
were recapitalized most of the outstanding and underlying bonds, besides 275,000 shares no par value stock.
The old capitalization of the New York Railway system
was as follows:
Fixed charge bolnds —all Companies....  $39,425,198
Income bonds-N. Y. Railways Co.....  30,609,487
Guaranteed stock-of Subsidiaries......  3,836,700
Non-guaranteed stock-N. Y. Railways
Co................................  17,495,060
Total........................ $91,366,445


108




In accordance with the plan of reorganization, the
new capitalization will be as follows:
Underlying New York Railway
and subsidiary bonds...... $14,653,000
Extended underlying bonds....  600,000
New 6th Avenue purchase bonds  300,000
New prior lien bonds.......... 3,800,000
Total fixed charge obligations.......... $19,353,000
New income bonds................... 19,435,472
New preferred stock, 184,830 shares no
par value, rated at $5 a share........  924,150
New common stock, 90,200 shares no par
value, rated at $5 a share............  451,000
Total new securities..............$40,163,622
There would appear to be a squeezing out of water to
the extent of $51,000,000. Commissioner O'Ryan so
claimed at the hearings (pp. 2428-29). But such is not
the fact.
The new shares, no par value stock, common and preferred, for purposes of comparison, must be rated at
$100 a share, as was the old stock. The rights of the
new stockholders are no different from those of the old,
and on that basis the capitalization is as follows:
Total new bonds..................... $38,778,472
New preferred stock, 184,830 shares....  1.8,483,000
New common stock, 90,200 shares......  9,020,000
Total........................  $66,291,472


109




represented by assets valued by the Transit Commission,
original cost, less cost of reconditioning at only $22,670,000.
These are the surface lines which are gradually ending
their usefulness. You may well judge their financial
outlook under this "reorganization".


110




CHAPTER VIII


OTHER PEOPLES' MONEY
DEPRECIATION-DETERMINATION OF COST OF CONSTRUCTION AND EQUIPMENT-COST OF MAINTENANCE
AND OPERATION —POOLING REVENUES
A. DEPRECIATION
The subways and equipment are owned by the City
of New York. They are leased to and operated by the
railroad companies under the dual contracts.  One
would not believe it from the posters of vilification of
our Mayor, to be seen in the B.-M. T. subway cars-all
tending to create a disrespect for government, particularly among the uninformed. This matter was brought
to the attention of the Transit Commission and is the
subject of one of the charges.
The leases will expire in 1962-1964. By the dual
contracts the companies are bound to keep both the
structure and equipment in proper repair. These provisions in Contracts 3 and 4 are substantially similar
(Harkness, 634). The provisions for maintenance are
iltended to provide for the ordinary wear and tear from
iuse. The depreciation reserve is to cover the wastage
alnd obsolescence to which all property is subject, notwithstanding proper maintenance. It is recognized that
all railroad property gradually deteriorates in value,
due to progress in science, inventions and modernized
construction and equipment.
It was not the intention of the dual contracts that
iupon their expiration there should be turned over to the
citv ramshackled and dilapidated structures and equip111




ineint, but on the contrary, that during the leases the
subways and equipment would be not only kept; in
proper repair, but that a reserve would be set up for
replacements and renewals, the balance to be retained
to make good the obsolescence and wastage not saved
by repairs. This depreciation fund both upon the expiration of the lease, or upon the recapture, would pass
to the city, the theory being that whatever depreciation
in value the subways might suffer, would be represented
in the depreciation fund, so that in a general way the
value of the system would remain constant, and the
original investment would be unimpaired.  It is provided in Article 49 of Chapter 2, Part III, subdivisions
4 and 5 of Contract 3, and a similar provision is contained in Contract 4, that from the revenues-there
shall be deducted "an amount equal to 12 per cent. of
the revenues for raintenance, exclusive of depreciation.
and for the first year of operation-an amount equal to
5 per cent of the revenue for depreciation * * * within
thirty days after the 30th day of June following the
beginning of the lease and annually thereafter the Commission and the lessee shall determine the classification
and amount of depreciation and excess maintenance not
covered by the amount set aside in paragraph 4 of this
article during the preceding fiscal year and the dedllction for such year shall thereupon be adjusted to colform with such determination."
Mr. Delaney became Transit Construction Commissioner on July 1, 1919.  Notwithstanding these provisions of the dual contracts for "depreciation funds,"
no such fund has been set up to date under Contract
No. 3.                                          t
With respect to Contract No. 4 there was no fund
created until January 22, 1921, when through the efforts


112




of Commissioner Delaney the depreciation for the entire
Brooklyn subway system was tentatively fixed at $300,000 per annum, for the period beginning January 1,
1920. (See T. C. C. record-R. T. 6505.)
That $300,000 is undoubtedly an inadequate reserve
for that rapid transit system, involving an investment
of roughly, $275,000,000. This inadequacy has been
recognized by the Transit Commission.   Although
tentatively fixed it has continued to date. Mr. Harkness testified that there is some understanding that for
the next year it will be increased to $420,000 (p. 648),
likewise an entirely insufficient sum. At least one per
cent. per annum, namely, two and one-half million dollars, should be set aside as compensation for this "irreparable wear and tear."
With respect to the I. R. T.'s failure to make any
provision for depreciation, a conflict developed between
Commissioner Delaney and the I. R. T. In May of
1920 Commissioner Delaney addressed a communication to President Hedley in which was included a
memorandum in support of Mr. Delaney's view that the
failure of the I. R. T. to make provision for depreciation was in violation of the provisions of the contract.
On December 1.5, 1920, Mr. James L. Quackenbush,
the general counsel of the I. R. T. had prepared a
memorandum supporting the company's position. In
substance it was Mr. Quackenbush's claim that Contract
No. 3 provided for an expenditure by the company of
12 per cent. annually for maintenance; that in view of
increased costs, that cost of maintenance was in excess
of 12 per cent. and that to the extent of the excess the
Company was relieved from making any contribution to
the depreciation fund-in other words, that the contribution to the depreciation fund of 5 per cent. per


113




annum tentatively fixed for the first year would be reduced to nothing when the cost of maintenance reached
17 per cent. He says in summarizing the company's
contention:
" * * * * irrespective of the amount which may have
been expended for maintenance, and irrespective of the
measure of the depreciation fund which may be applied
in any particular year, the deduction which will be made
from revenue for that year for maintenance and for depreciation will be the sum of 12 per cent. of the revenue
and the amount of the year's depreciaton determined in
the manner provided in the contract. Stated in another
way, the Company's contention is that in any year when
the amount spent for maintenance exceeds 12 per cent.
of the revenue, the amount of cash to be turned over to
the Depreciation Fund Board will be the depreciation
for that year, less replacements, diminished by the "excess maintenance"; and conversely, that in any year
when the amount spent for maintenance is less than 12
per cent. of the revenue, the amount of cash to be turned
over to the Depreciation Fund Board will be the depreciation for that year, less replacements, increased by the
difference between 12 per cent. of the revenue and the
maintenance expenditures. There is nothing in the contract to indicate that whatever is spent for maintenance
in excess of 12 per cent. and in the first instance therefor chargeable to 5 per cent. for depreciation shall be
"paid back into the Depreciation Fund at any time."
Mr. Delaney in his memorandum of May 20, 1920,
pointed out the fallacy of this contention.  He says,
"Experience has shown that the day comes when a unit
of equipment, for example, must be retired in spite of
all that may have been done to maintain it at the highest
possible state of efficiency." "It is proper accounting


11 4




practice to charge the cost of such a unit against the
revenue over the entire period through which it is consumed. The contract and the certificate are interpreted
to require that provision be made for that ultimate replacement."
His contention is supported by argument at great
length, which is not referred to now, in view of its subsequent restatement in 1921, to which reference will be
made. This conflict of views between Commissioner
Delaney and the I. R. T. continued without result until
March 12, 1921, when Mr. Delaney determined that the
interests of the City required a determination of this
controversy.
Accordingly, on March 12, 1921, Mr. Delaney addressed to the I. R. T. a communication again restating
his position at length and demanding arbitration under
subdivision 5 of Article 49, which reads: "If within
such period the Commission and the lessee are unable to
agree upon the classification and amount of depreciation * * * the amount thereof shall thereupon be determined by arbitration or by the court."
Mr. Delaney pointed out that the word "depreciation" generally means "wastage from use" and is divisible into two parts: "First, the expired life which is currently replaced by expenditures charged against revenue
in the maintenance account, and second, the expired life,
the replacement of which is necessarily deferred on physical grounds beyond the current accounting period,"
and that the contract makes separate provision for both
of these two elements of depreciation, the former characterized as "maintenance" and the latter as "depreciation"; that "depreciation and maintenance are in a sense
dependent variables, because maintenance postponed
results in deterioration of the principal parts, thus add

115




ing to the amount of depreciation. Therefore, inadequate provision for maintenance necessitates increased
provision for depreciation," and he said, "I contend
that depreciation begins where maintenance stops. You
contend that thorough maintenance obviates depreciation." He called attention to the obligation assumed by
the company to make adequate repairs, replacements,
substitutions and renewals "at least equal to that of the
equipment originally provided" and also that at no time
during the term of the lease should the equipment be
"less in quantity," and at the end of the lease the railroad should be "fully and perfectly equipped" ready for
operation "to the full limit of their capacity; to make
certain that these requirements would be observed, the
negotiators provided a guaranty fund, deducted from
revenue currently in cash * * * not a mere book reserve-and then provided for the adjustment of the
maintenance and depreciation accounts annually to conform to the determination of the amount required during the year for these purposes in accordance with the
record of the depreciation of each class of construction
and equipment *   * * twelve per centum of revenue
is simply a tentative deduction toward the full amount
necessary for maintenance and depreciation and when
the annual accounting is made after the close of the fiscal
year the actual amount of each is known and then
provided."
Accordingly, on March 12, 1921, the Transit Construction Commissioner named as his arbitrator Mr.
Milo R. Maltbie, former Public Service Commissioner;
on April 19, 1921, Mr. Charles F. Uebelacker was
named by the Interborough Rapid Transit Company
as its arbitrator, and the Hon. Luke D. Stapleton was
chosen as the third arbitrator on June 13, 1922. Judge


116




Stapleton having died, the Hon. Abel E. Blackmar was
named in his stead on October 15, 1923, and he accepted
that appointment on November 12, 1923.
I have referred to this matter at length because of
its large importance to the city, and because of the attitude towards, and the disposition of it subsequently,
by the Transit Commission.
Mr. Harkness testified that the amount involved as
of June 30, 1924, according to Mr. Delaney's formula
for depreciation, was $12,000,000 (p. 642-3). There
can be no question that the amount is at least $30,000,000. The aggregate investment of the city and the company under Contracts 1, 2 and 3 is about $300,000,000.
Assuming the probable life of the structure and equipment as a whole, at one hundred years, the depreciation
would be 1 per cent. per annum. This is a conservative
figure. The probable life of the equipment is not over
thirty years. While the subway, so far as it is a tunnel,
will endure forever, it is already demonstrated that modern construction and improvements will render it more
or less valueless as time progresses. The inadequacy
of the tunnel under Contracts 1 and 2 is! the subject
of daily comment. It is too narrow, not properly ventilated and has not sufficient exits. In fact, because of narrower bore, the cars from the B.-M. T. system cannot
be operated on the tracks of the I. R. T. Taking the
system as a whole its usefulness will end in much less
than 100 years. Be that as it may, even the Transit
Commissioners have recognized that both under the
dual contracts and as a matter of justice there should be
annual contributions to this fund. Yet not onlv have
no steps been taken by the Transit Commission to press
this arbitration, but the Transit Commission has abandoned the city's claim and apparently intends to over

117




look the plain obligations of the I. R. T. to maintain
this fund.
Mr. Iarkness says: "The attitude of the companies
on that, brought into play another theory on depreciation that has been very vigorously contended for lby
utilities throughout the country. That is what may be
called the 100 per cent. rule. That is based on this:
Where you have a railroad property, such as the Interborough, with various classes of equipment, with rolling stock of different ages, with that property going
through the repair shops all the time, and being maintained up to 100 per cent. efficiency, that there is no
depreciation" (Itarkness, p. 638). The answer to that
contention is apparent.
First, that it is contrary to the fact. The I. R. T.
does not maintain its lines in a condition of 100 per cent.
efficiency, and second, the contract distinctly provides
that there shall be a depreciation fund. The explanation of Commissioner Harkness of the failure of the
Transit Commission to safeguard the city's rights and
for the abandonment of the city's claim is as follows:
He says that when the Transit Commission came into
office on April 25, 1921, the Interborough was in financial difficulties and was threatened with receivership;
that all interested parties were prompted by a spirit of
cooperation to financially resurrect the Interborough.
That accordingly, as already indicated, the stockholders of the I. R. T. agreed to raise ten and a half million dollars in cash; the bondholders agreed to postpone
their sinking fund requirements for five years; the Manhattan Railway Company agreed to modify its lease as
to rentals, and to use the language of Mr. Harkness,
"it would be atrocious morally and unsound from a business standpoint to insist on that payment (into a depre

118




elation fund) at that time, when all of the city's rights
could be scrupulously preserved, and the claim in whole
or in part enforced later on, as condition developed."
That was before October, 1922. More than two years
have passed. The city's rights are still "preserved,"
rather "buried." The provision for the depreciation
fund, which today should be in excess of $30,000,000
imposed an obligation on the I. R. T. It was for the
city's benefit. In large part it would be the city's money
on recapture. It was not for the Transit Commission
to waive this obligation and surrender the city's rights.
This false charity of which the Transit Commission is
so proud, is nothing short of a betrayal of a public trust.
Harkness calls it "a potent bit of help that it (the Transit Commission) gave in connection with the Interborough reorganization."  This is the subject of Chargoes
4 and 5.
B. DETERMINATION OF COSTS
The contracts provide that from the pooled revenues,
shall be paid interest to the city on its investment under
Contracts 1 and 2, expenses of operation, maintenance
and depreciation, the preferentials, and then a certain
per cent. on the company's contribution to the cost of
construction and equipment. So, too, upon recapture,
the purchase price shall be such cost of construction and
equipment plus a bonus. Of course, it was most important, as the construction and equipment proceeded,
that the cost of the construction to the railroad companies be accurately determined. The contract fixed
the procedure which was followed. The Chief Engineer
of the Transit Commission and formerly of the Transit
Construction Commissioner and the Public Service
Commission of the First District, at the end of every


119




three months determined the cost of construction and
equipmIent, of both the city and companies, and these
determinations came to be known as "quarterly determinations" (Harkness, pp. 650-652). A copy of each
determination was forwarded to the Transit Commission and the companies, and they had the right to object.
Upon objection the engineer had a right of re-determination, and upon such re-determination the Transit Commission and the Companies had a right of review, either
by arbitration or to the court. The city had no right
to object.
Prior to March, 1921, many of these objections to
determination of costs had accumulated. I am annexing hereto Exhibit "O," a schedule of items which were
the subject of determination and re-determination, and
subsequent objection, by the Transit Construction Commissioner and his predecessors, under Contract 4. Besides, there was objection by the Transit Construction
Commissioner to a charge, of a portion of $470,000 expenses of receiver, counsel, accountants, engineers, for
printing and other purposes in connection with the receivership of the B. R. T.; that sum is in addition to
the $254,500 already referred to-which was paid at the
time of the reorganization of the B. R. T. This $470,000
was also the subject of an objection by Commissioner
Delaney, because a part of it was included in the cost of
operation to which reference will be made. Having
failed to secure satisfactory disposition of these disputed
items, Commissioner Delaney resorted to arbitration.
On March 21, 1921, the Transit Construction Commissioner named as his arbitrator Mr. Charles S. Hervey, and on April 18, 1921, the Brooklyn Company
named Mr. Benjamin G. Paskus. The Transit Construction Commissioner then passed out of office and the
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Transit Commission, his successor, abandoned the arbitration.
The explanation of the Transit Commissioners is, that
after they came into office they agreed ixith the company to effect an adjustment of the disputed items, in
conference, by a committee consisting of representatives
of the Transit Commission and the railroad company.
The representatives of the Transit Commission were:
Mr. Cooper, the assistant chief accountant; Mr. Wilcock, the auditor of rapid transit costs, and Mr.
Fullen, the counsel of the Transit Commission (Hlarkness, pp. 655-2326-2327).
Harkness says that all matters in dispute were adjusted; that the adjustment was in the nature of a
recommendation to the Chief Engineer of the Transit
Commission, that the Chief Engineer of the Transit
Commission approved the recommendations and that
the approval served as a re-determination of these determinations of cost; that before the conferences began,
a written agreement was entered into, under which the
Transit Commission and the companies agreed not to
object to any adjustments of the Conference Committee.
The only parties having a right to object or to appeal
to the court or to arbitration were the Transit Commission and the companies. The City had no right to
object to this adjustment. Mr. Harkness conceded
that after this adjustment was made, the Corporation
Counsel objected thereto, and urged that the Transit
Commission, on the city's behalf, press these objections,
but that the requests and protestations of the Corporation Counsel were ignored, and that these objections
of the Corporation Counsel were not forwarded because,
to use the language of Mr. Harkness, it would be "up

121




setting an adjustment so laboriously worked out"
(Harkness, pp. 2334-2335).
This adjustment in conference was made public on
June 30, 1924. I call attention to the fact that on
November 7, 1924 the Corporation Counsel wrote the
members of the Transit Commission and stated:
"On behalf of the City of New York I respectfully request that pursuant to articles 29 of chapter
5 of subway contract No. 3 you give written notice
to the lesssee that you require such redetermination
to be submitted to arbitration or to the court as
provided by article XXX of chapter 6 of said
contract. Will you kindly advise this department
at your earliest convenience whether or not you
will comply with the request herein and if so when
such action will be taken."
and to another communication from the Corporation
Counsel wherein is set forth specifically the items
objected to, which concludes as follows:
"In addition to the objections above set forth,
further objection is made to the items so determined by the Chief Engineer by reason of the fact
that they are deemed by the City of New York
to be excessive, improper and unauthorized.  I
therefore respectfully request that you 'file on behalf of the City of New York with the Chief
Engineer objections to his determinations and redeterminations."
Commissioner Harkness says that this adjustment
committee disposed of "all the outstanding determinations of disputes between the city and the Interborough
Company" (p. 656). There were two adjustment com

122




mittees, one for the Interborough and the other for the
Brooklyn Company.
An examination of these adjustments will disclose
that in the largest measure they consist of a waiver and
abandonment of the city's objections.
With respect to the $470,000 charged to cost of construction and cost of operation and maintenance, Commissioner Harkness explains that a portion thereof,
amounting to $106,816.70 which represented the compensation of receiver and counsel during the years 1919,
1920, 1921 and 1922 (p 2334) was charged to the companies' cost of construction and equipment. It is difficult to conceive, how an adjustment whereby over
$100,000 paid to a receiver and counsel, in a proceeding
brought about solely through the insolvency of the traction company as a charge to cost of construction and
equipment of a subway, can be said to be a disposition
of a dispute at all fair to the city.
With respect to the seven items of objections in the
annexed Exhibit "O," it will be found that only two were
adjusted, namely, the sixth and seventh, and that the
remaining five were practically ignored and nothing appears to have been done.
I call particular attention to the third of these objections. That has reference to the salary of Mr.
NWilliarns, the former president of the B. R. T. Notwithstanding that the company was sufferinlg financial
reverses, his salary as president of the New York Municipal Railway Corporation, the operating company
under Contract 4, was increased from $50,000 to $75,000 a year. Curiously enough his whole salary was
charged to cost of construction of our subways. Objection was made by the Transit Construction Commissioner to this $25,000 increase. After objection, the


123




Chief Engineer arranged with the company for a reduction of this $25,000 increase, as a charge against construction, the difference being charged to other companies in the B. R. T. system, but before that arrangement was made the $25,000 had already been included
in the cost of construction, and the demand was made
by Commissioner Delaney that it be removed-apparently the objection did not prevail in the adjustment
conference.
The conduct of the Transit Commissioners in connections with these objections to determination of cost and
the abandonment by them of the arbitration proceedings
initiated by Transit Construction Commissioner Delaney constitutes the subject matter of Charge 8.
C. COST OF OPERATION AND MAINTENANCE
The dual contracts provide, that from the pooled
revenues, there shall, among other things, be deducted
the expenses of operation and maintenance and preferentials, and thereafter the interest due the company and
city. Naturally the amount of such expenses determined
the city's prospect of realizing anything on its investment. It was the claim of Commissioner Delaney that
large items of expense were improperly charged against
these pooled revenues. As was )ointed out by Commissioner Harkness, provision was made in the dual contracts for objections to such charges, and in the event
of disagreement, for arbitration, as in the case of objections to determinatiols of cost (Harkness, p. 650).
With respect to Contract No. 4 the principal objection, was, that there was included in the cost of operation
and maintenance the large expenses of the receivership,
to which reference has already been made.
This aggregate expense as Commissioner Harkness
pointed out, was $470,000 for the years 1919 to 1922,
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and presumably in proportion, up to June 14, 1923 when
the receiver was discharged. That does not take into
account the final payments of $254,500 made to the receiver and counsel as per the statement of disbursements
of Rushmore, Bisbee and Stern, elsewhere referred to.
On March 15, 1921 (302 R. T. 6922 of Transit Construction Commissioner record) Mr. Delaney filed his
objection to such receivership expenses, as a proper
charge to maintenance or operation, and on March 18,
1921, he designated as his arbitrator Mr. Edward Ward
McMahon. On March 29, 1921 the receiver designated
as his arbitrator Mr. Benjamin G. Paskus. So, too,
similar objections were made to certain items charged to
cost of operation and maintenance, under Contract No.
3 on January 27, 1921-principal of which was an item
of $84,472.65, being 60 per cent. of $140,000, the' cost
of an investigation made in 1919 by a committee, acting
solely in the interest of the bondholders of the Interborough Consolidated Company, as successor of the Interborough Metropolitan Company, for the purpose of protecting the interests of those bondholders. This item had
been charged as deduction from revenue.
The Transit Construction Commissioner on March 3,
1921 named as his arbitrator Mr. George V. S. Williams and the Interborough on March 9, 1921, Mr.
Frank R. Ford. Hon. Luke D. Stapleton was named
as third arbitrator. Hon. Abel E. Blackmar succeeded
him on April 5, 1923. Nothing has come of these arbitrations. They have apparently been abandoned.
The explanation of the Transit Commission is the
same as that given with respect to the arbitrations upon
objections to determinations of cost.  "all disputes
have been settled."
As already indicated with respect to ithe item of


125




$470,000, the expenses of the receiver for the years
1919-1920-1921 and 1922, $106,816.70 has been charged
to cost of construction and the balance was, to use the
language of Commissioner Harkness, "absorbed by the
company out of its own funds-receivership expensesor it may eventually go into operating expenses."
It is respectfully submitted that when the dual contracts were made it was contemplated, that there should
be charged against the gross income the usual and ordinary expenses incurred in the operation of a transit line
by a solvent carrier. The insolvency of the B. R. T.
was not of the City's making. In no event should the
City have been held accountable for its consequences,
or be charged with any of the expenses of the receivership, either in computing the company's contribution to
the cost of construction and equipment, or as an expense
of operation or maintenance. Apparently the City has
been so charged. That $470,000, or a major portion
thereof, is reflected in the deficit from operation, which
the company clainms, and which must be paid before the
City receives any return on its investment. But this
has "all been adjusted," says Commissioner Harkness,
and the adjustment is final and conclusive upon the
City.
The City through the Corporation Counsel has requested that objections be filed, but, say the Transit
Commissioners, these objections have been ignored and
overruled, because to honor them would be to upset "an
adjustment so laboriously   worked  out."   It is
submitted that the Transit Commission failed in
its duties and sacrificed the City's interests by abandoning the remedy by arbitration which Commissioner Delaney set in motion. This matter is the seventh charge
against the Transit Commissioners.
126




D. POOLING REVENUES
The City's chances of a return on its investment are
dependent upon the revenue being large, or the expenses
of operation being small. To safeguard the City's interest with respect to the revenue, it is provided in Article
49, Chapter 2, Part 3, of both contracts that
"s  * * the gross receipts from whatever sources
derived directly or indirectly by the lessee or in its
behalf in any manner from or out of or in connection with the operation of the railroad and existing
railroad * * * shall be combined during the term
of the contract and the City shall receive for the use
of the railroad * * * a specified part * * * of
the income, earnings and profits of the railroad and
the existing railroad. The amount of such income,
earnings and profits shall be determined as follows:"
It is thus clear that the gross income of the railroads
for purposes of an accounting with the City, is its "comibined income" derived directly or indirectly out of or in
connection with the operation of our rapid transit lines.
Both companies have from time to time made public
reports of their gross income from all sources wvhatsoever, and whether or not related to the dual contracts,
and have also from time to time reported to the Transit
Commission their alleged gross revenue subject to accounting with the City under the dual contracts.
A comparison of these reports had indicated that the
companies withheld from their account with the City,
their substantial revenues. The Commission has knowledge of this situation and concededly has done nothing
to protect the City. This constitutes the subject matter
of the Board of Estimate's sixth charge.
127




It appears that with respect to Contract No. 4 the
Brooklyn Company has excluded and retained from the
revenues an aggregate of at least one million dollars.
The items thus improperly excluded and retained by the
companies may for purposes of convenience be classified
into four groups:
a.  Payments received by the 3Brooklyn company
from the Nassau Electric Railway Company for
trains operated by the Nassau Company over the
Brooklyn company's tracks;
b.  Similar payments made to the Brooklyn company by the South Brooklyn Railroad Company;
c. Payments received by the Brooklyn company
from the Long Island Railroad Company;
d.  Interest received by the Brooklyn company on
bank balances.
These moneys were collected by the Brooklyn company from the other railroad companies for use by the
other companies of its cars and facilities.
These revenues, as already indicated, were reported
by the Brooklyn company in its annual reports as nonoperating revenue but were excluded by it from its income in its statements of "pooled revenues" under Contract No. 4.
As indicating to some extent the amount involved
the following schedule of non-pooled revenues is given:
1914    1915    1916    1917   1918
Nassau Elevated$107,601 $116,120 $90,127  $67.
South Brooklyn. 48,181  54,549  56,474  68,103 $58,630
Long Island....  8,948  3,404  34,892  28,236  9,056
Interest on
Bank Bal.... 10,058  12,303  16,186  9,807  9,800
Total...... $174,788 $186,3'76 $197,679 $106,213 $77,486
The aggregate of these amounts to June 30, 1918, is
$752,542. It is assumed that this practice has con128




tinued to date. No explanation of the failure to assert
the city's rights in respect to the non-inclusion of these
revenues is furnished by the Transit Commission, except
that Commissioner Harkness says that there is no "provision in the contract in respect to income, no way to
object and force an arbitration on the part of the company to make credits to the accounts" (Harkness, p.
659); that in 1916 he was assistant counsel to the Public
Service Commission; that the counsel to the commission
had advised that no suit for an accounting against the
companies would lie "until some amount, however small,
was coming to the city.  Therefore, he advised that
there was no basis for an accounting action, that we
have to wait until there was a right of participation-an
actual participation" (Harkness, p. 660); that means
"forever" according to the present outlook.
It hardly needs argument that the city is not without
remedy. Without doubt an appropriate action will lie
for an intermediate accounting between the city and the
company, in which the question of the liability of the
company to account for this revenue can be determined.
According to Harkness the railroad company may withhold any portion of its income, until 1962 and 1964,
when the leases expire, unless at some earlier time there
is a balance due to the city. A mere statement of this
claim is its own refutation.


129




CHAPTER IX


AN ESSAY IN FINANCIALI JUGGLERY
TRANSIT COMMISSION PLAN OF READJUSTMENT ANI) UNIFICATION OF TRANSIT LINES AND RAPII)
TRANSIT CONSTRUCTION PROGRAMI
Much was said before Commissioner MeAvoy about
the "plan of readjustment" of our existing transit system, and the Transit Commission's program for construction of new subways, and the opposition which the
city administration made to this plan and program. To
a proper appreciation of this controversy it is necessary
to refer to Chapter 134, Laws of 1921 (The Act which
created the Transit Commission).  That law was of
most extraordinary character, without parallel in the
history of legislation. It constitutes an affront to the
people of the City of New York. It created the Transit
Commission as a lordship over the municipal government of the City of New York. It was a grant of an
unlimited agency to the Transit Commission, in the
name of the city and jointly with the traction companies, to rehabilitate the traction companies at the ex,
pense, and without the consent of the city and
over its objection-an   objection which the Legislature knew would come, and which by express
provision in the law, it permitted the Transit Commission to overide. That law empowered the Transit
Commission to negotiate with the traction companies
and prepare a plan for the acquisition of their
properties, to fix the price with them, to fix the rate of
fare to be thereafter charged the public, and to lay down
a plan for the control and operation of these properties
180




so acquired; to nullify all existing contracts between
the city and the traction companies, to strip the people
of their vested right to be carried under the dual contracts at a five-cent fare and to make contracts for the
use of the city streets-all without the consent and over
the objection of the local authorities.
The City authorities have contended and still contend
that this power is in violation of Section 18 of Article
III and Section 3 of Article XII of the Constitution of
the State of New York, which vests exclusively in the
municipal government the right to fix the terms and conditions of street railway franchises. That question, as
elsewhere indicated, remains undetermined by the
courts. The Transit Commission was not slow to commence the exercise of these great powers. The Commission went into office on April 25, 1921. By September 29, 1921, it had evolved a fantastic and gigantic
scheme which has since been called the plan of "readjustment." It made it public. The railroad companies
were requested to give a statement of their views
thereon, which they did. The City was never asked to
express any views with respect to it. The Transit Commission never finally adopted this plan, and never held
any public hearing upon any "adopted plan" as the law
requires. Commissioner O'Ryan says that the Transit
Commission might have adopted it without the City's
consent. Its reasons for failing so to do are not made
public. It appeared as if it were abandoned. We are
assured, however, by him, that the Commission will go
ahead "at the proper time." When that will be, he
does not say (O'Ryan, 2497-2498).
This plan provided for the organization of a consolidated company which would purchase all of the existing
lines, subway, elevated and surface, at prices to be fixed


131




by agreement with each of the forty companies which
own the 1,000 franchises existent in the City of New
York. It provides for the formation of three other operating companies, under the control of the consolidated
company. The consolidated company would pay the
purchase price for the existing lines, in bonds bearing
interest at the rate of 5 per cent. plus 1 per cent. for
amortization.  After the consolidated company acquired these properties by the issuance of these bonds
secured by purchase money mortgages it would transfer
the property subject to the mortgages to the City of
New York. The City would thus own all of our existing subway, elevated and surface cars, charged, however,
with the lien of the mortgage, in an amount equal to the
purchase price of the lines to be fixed by agreement
between the Transit Commission and the railroad companies. The City would then lease the lines to and they
would be operated by the operating companies.
In explaining this arrangement recently Commissioner O'Ryan said: "No state or city commission can
roughly seize the property of these companies. Their
property can only be obtained by purchase or due process of law." Of course that only means, that since
there is no process of law by which these lines can be acquired, that eventually the price to be paid would be
what the companies ask. It is also provided in the Plan
that besides this 5 per cent., and 1 per cent. amortization,
not more than 3 per cent. of the amount of the bonds,
payable out of the revenue, shall be applied annually for
what the commission characterizes as reward for efficient management, to be divided 11/2 per cent. to the
bondholders and 11/2 per cent. to the management. The
Commission caused valuations of the railroad companies'
properties to be made. The companies do not agree


132




with these valuations. They claim that they are worth
about $190,000,000 more, not including the I. IR. T.
roads or Brooklyn Rapid Transit Lines under the Dual
Contracts.
The total valuation which the Commission has placed
on the Manhattan elevated, old B. R. T. elevated lines,
B. R. T. surface lines and the other surface lines in Manhattan, Staten Island and Queens, was $225,627,621.
The valuation claimed by the companies is $416,000,000.
Besides there must be added the investment of the
I. R. T. and the B.-M. T. under the dual contracts including their expenditures for third-tracking and extending existing elevated lines. The Commission's valuation of these investments is $174,000,000 for the I. R.
T. and $88,000,000 for the B.-AI. T., a total of $262,000,000, but the companies claim at least $250,000,000
more-a valuation of $512,000,000 making the grand
total valuations claimed by the traction companies $928,000,000. The purchase money bonds and mortgages
according to the plan of the Transit Commission would
be in this amount. Included in the valuations of the
Transit Commission are the huge exaggerations intended to justify the capitalization of the I. R. T.,
B. R. T. and N. Y. Railways upon reorganization, elsewhere referred to.
It is provided in the plan of readjustment that after
the expiration of one year from the time it becomes effective the rate of fare to be charged for a single ride by
the consolidated service shall be determined as follows:
"After payment of operating expenses and fixed
charges (the fairness of the amounts of which is
insured by the valuation of the properties by the
Transit Commission and the control over expenditures by the Board of Control), the surplus moneys
133




are to be paid into a contingent reserve or
barometer fund. If the available surplus keeps
this fund above a specified maximum, the fare is to
be automatically lowered: if the fund falls below a
specified minimum, the fare is to be automatically
increased until the reserve is restored."
Of course it needs no argument that this barometer
fund means a fare beginning at least at 8 cents and
increasing to what amount no one can tell. Besides this
$928,000,000 there will be represented the city's
investment of $300,000,000, a total of roughly a
billion two hundred million dollars. It was proposed
in the plan that there be paid 5 per cent. interest on the
outstanding bonds, 1 per cent. amortization and 3 per
cent. for efficient management, a total of 9 per cent.,
or $108,000,000. Under municipal operation and
with interest and amortization at 43/4 per cent. per
annum, the charge would be $57,000,000.  In other
words, the city could borrow more than another billion
dollars for public improvement at no greater interest
cost.
Since the plan was made public it has been consistently opposed by the Mayor of the City of New York.
His position is very tersely stated as follows:
"The Transit Commission's plan provided,
among other things, for the purchase of elevated
railways and surface lines; which while rendering
a public service at this time, are for the most part
of an obsolete type of transportation, which the
city will have to scrap for a better type as an aid
in the solution of its acute traffic problems and as
a measure of general public improvement. The
134




surface lines will ultimately have to give way to
bus lines and the elevated lines to subway transit."
Realizing the force of this argument, and in the light
of the overwhelming public disapproval which this plan
received at the November election in 1921, when it was
the real issue, and when the public supported the Mayor
and his administration by their re-election to office,
Commissioner O'Ryan now for the first time insists that
it was not part of the plan to include all of the surface
lines. He says that some were to be "discarded," "not
included in the plan." Such was his testimony before
Commissioner McAvoy (2474-2476).
It is too late to make such complete reversal of position. The Mayor's objections were made immediately
after the plan was made public. There was then no disavowal by the Transit Commissioners of their intention
to purchase all of the surface lines. In the plan it is
stated that its purpose is as follows:
"All existing corporations and their franchises
under leases and securities are gradually to be eliminated or extinguished except such underlying lines
carrying a low rate of interest as the commission
deems it advisable not to disturb. Existing securities with such exceptions are to be replaced by an
issue of bonds of the consolidated company representing a fair and honest valuation of the properties."
And as late as October 20, 1924, Commissioner
O'Ryan said into the microphone at Station WNYC
that
"These are the fundamental features of the transit
situation, namely, the great number of franchises
185




that should be surrendered, the large number of
operating companies whose activities should be consolidated," etc., and * * * "We have, therefore,
caused expert engineers employed by the Transit
Commission to make inventories of all of the property owned and used by all the companies now
operating in the City of New York. * * * Our
plan proposed that when the property values have
been agreed upon, this city owned company will
take over the properties and pay for them, not with
money, but with its bonds equal in amount to the
value of the railroad property taken over. * * * "
The valuation to which Commissioner O'Ryan refers
includes the valuations of every single surface line in the
city, including those which he now admits should be
scrapped. Furthermore, "franchises cannot be extinguished and surrendered" without the agreement of the
railroad company and as he has very clearly stated it,
they will not agree to such surrender, except upon payment of what they believe is the value of their lines.
Furthermore, since the plan is dependent upon separate agreements with all the railroad companies (pp.
2471-2472) they surely will not agree to sell what is
good and keep, what is to be scrapped, unless the price
beso high for what is bought that they can afford to keep
what is rejected. The inclusion in this plan of those
surface lines was one of the principal grounds of objection by the city administration.
Furthermore, it has been repeatedly pointed out by
the Mayor that the claim of the Transit Commission
that the purchase price would not be paid by the public,
is a deceit. The plan provides that the railroad companies shall be guaranteed that the fares will be suffi

186




cient to pay the interest and the principal of the bonds,
to be amortised annually. Since, as has already been
pointed out, the great majority of the people of our city
use our transit lines, in effect the Transit Commission's
plan is, that the public pay in fares not only carrying
charges, not only interest at 5 per cent. per annum,
not only 3 per cent. for alleged efficiency, but the amortization annually of the entire principal of these bonds, to
be given in payment of the purchase price of these lines.
The Mayor's position always has been and still is,
that this is a deliberate attempt to deceive the public;
that new subways are needed; that they should be
built with public moneys, raised directly by the public
at interest and amortization charges of 43/4 per cent.
and not 9 per cent.; that when built they should be
operated by the city; that the city should from time
to time recapture the existing subways under the dual
contracts, make necessary connections, changes and
improvements, improve existing service to the standard
that the law requires and to which the people are entitled, and that eventually the city will not only own
on paper, but own and operate in fact, its own rapid
transit system, and use the profits therefrom for construction of future subways. It is further the position
of the Mayor that by a justifiable constitutional amendment all the money needed for these purposes will be
available to the City.
It was pointed out at the hearings that repeated
appeals have been made to the legislatures in recent years, for the adoption of a Constitutional amendment by which the bonds heretofore issued for rapid
transit purposes, would be placed in the same class as
water bonds, that is, they would not be counted
against the 10 per cent. assessment debt limit, "pro

137




vided they are not issued to an amount in excess of water
bonds that are outstanding and self-supporting, which
amount to $270,000,000" (Craig, 2164).
So, to use the language of Comptroller Craig, "the
amount of transit bonds to be exempted from a charge
against the debt margin, shall be measured by the
amount of water bonds, that are outstanding at the
time and are self-supporting out of water revenue"
(p. 2161).
It has already been shown that if this $270,000,000
is released, there will be available at least $550,000,000
before January 1, 1928 when this Constitutional amendment can be made effective. The cost of recapture of
all the subways is less than $200,000,000; leaving
$350,000,000 available before January 1, 1928. The
Board of Transportation's program  for future construction involves an expenditure of only $254, 000,000,
and with its extensions an additional $150,000,000.
Commissioner O'Ryan says that the consummation
of the Transit Commission's plan of "readjustment"
will mean that the city will receive interest on its
$300,000,000 present investment in subways; that the
city's outstanding rapid transit bonds will thus become
self-supporting and not counted against the city's debt
margin, and in that way that sum will be available to
the city for future construction. A much more simple
remedy would be to give the railroad companies the
increase in fares which they have sought. I am quite
confident that they would be willing to pay the 4 per
cent. interest on the city's investment if the city administration permitted them to charge an 8 or 10 cent
fare, and after all, that is what the Transit Commission
proposes shall be done under its "plan of readjustment."


138




Commissioner O'Ryan speaks of honest valuations
in connection with the plan of readjustment, but he
forgets to state that it would involve the payment of
$38,000,000 to the New   York Railways System;
$34,000,000 to the T'hird! Avenue Railway System;
$59,000,000 for the B. R. T. and Brooklyn City Conmpany lines and $57,000,000 for the antiquated Manhattan Elevated lines.
Besides, the valuations of these obsolete systems,
are full of over appraisals.  They include power
plant facilities at full original cost, with no deduction
for depreciation. These power plants could not possibly be operated under the plan. They contain duplications which pile up the amount to be paid by the
city.
In speaking of this plan the Mayor stated:
"I was, am now, and always will be, opposed to
such gigantic scheme to loot the public. I believe
that the public should raise money * * * that
when the money is raised it should be put into new
subways, and that with respect to the present subways tand other means of transit, they are here
and everything should be done to compel safe and
ade(luate service for the public as is required by law
and contract."
To understand the City's opposition to the program
of the Transit Commission for construction of new subways, it is most important to bear in mind that all of
these plans for future construction were supplementary
to this plan of readjustment. New subways were suggested only as additions to and extensions of the existing
lines which the "Plan of Readjustment" proposed that
the city should purchase.


139




Commissioner McAneny testified that the policy of
the Transit Commission in relation to the construction
of our future subways was "in favor of building extensions to the existing lines" (MeAneny, pp. 2568-2570),
and it is equally true that the Mayor, Comptroller and
Mr. Delaney are opposed to the extension of private
operatioIl of our transit lines by our traction companies
and are in favor of the construction of independent lines
to be owned and operated by the City (see pp. 2050,
1025). Having in mind these diametrically opposed
policies and the fact that the Transit Conmmission until
July, 1924, had exclusive power to initiate future construction and that the City was absolutely without
power, it will be easy to understand the helplessness of
the City Administration to relieve the transit situation,
in the City of New York until the advent of the Board
of Transportation on, July 1st, 1924
The first subway contracts were made in 1900 and
1902. The Dual contracts were executed in 1913. The
City grew, its traffic increased but nothing was done to
build new subways until Commissioner John H. Dclaney became Transit Construction Commissioner. His
Chief Engineer was Daniel L. Turner. Under his directions Mr. Turner prepared a plan which was made
public on July 29, 1920 and provided for a comprehensive program of rapid transit construction for 25 years,
estimated to cost about $350,000,000 (p. 78). He was
requested by Mr. Delaney to work out the details of
routes for immediate construction. Before this could be
(one the Republican Legislature turned Comm. Delaney
out of office. That was April 25, 1921. The Transit Commission was not concerned in the beginning with construction of new subways. It first wanted to insure
the financial rehabilitation of the traction companies. It


140




was not even concerned with improving the service on
the existing lines as has been pointed out. It promptly
made public its plan of readjustment in September,
1921, and in May of 1922 it sent to the Board of Estimate plans for the construction of new subways (p. 95.)
The plans provided for four routes; two may be disposed of, the extension of the Fourth Avenue line to
Fort Hamilton and of the Corona line to Flushing. That
work was done. The other two were the so-called WVashington Heights line and the Brooklyn Crosstown line.
The Washington Heights line was intended to run from
about 193d Street and Fort Washington Avenue down
through Amsterdam Avenue to 64th Street and there
to connect with the two-track line of the B.-M. T. which
were already congested by traffic from lower Manhattan, about which so much was said before Commissioner
MeAvoy. It was proposed that the heavy traffic from
Washington Heights be diverted into that two-track line
of the B.-M. T.
Certain engineering objections developed because of
the location of the water mains in Amsterdam Avenue
and the large cost of changes, with the result that the
Transit Commission withdrew and modified its plan and
provided for the construction along Central Park West.
The Brooklyn Crosstown line was intended to run
from the Queensboro Plaza to the central part of Brooklyn traversing seven subway and "L" lines operated by
the I. R. T. and B.-M. T (McAneny, p. 2606).
It was proposed that this line should run to Fulton
Street to a connection with the B.-M. T. subway at
DeKalb Avenue (pp. 982-997), again adding to the
congestion at DeKalb Avenue, the neck of the bottle.
The Mayor immediately opposed this plan. His
position was, as it always has been, that he is opposed to


141




linking up any new subways with the existing lines.
His reasons therefor are as follows:
"I have vigorously opposed the Transit Commission's efforts to put into effect transit plans, similar
to those foisted upon the people under the dual
contracts, that will tie the City of New York for
generations to the traction corporations now operating the City-owned subways.
Over ten years have passed; the money has been
invested; the business has been more prosperous
than was ever contemplated; the subways are more
packed than was ever expected; more nickels are
coming in than could possibly have been calculated,
but the net result is that the City has not received
one cent interest.
The City regards that as a poor business investment for the people and I regard those with whom
the City had that investment as not good partners;
and my point of view is that if the City is to continue in the same line of business, it certainly does
not want to continue with the same partners, where
it can expect the same results-in other words,
more money and no return.
The proper attitude of a business man would
be, after he has invested $300,000,000 with certain
partners who promised him a return, which he
never got, that for the future he would have no
business with those partners; on the contrary, he
would go in business on his own account, and especially is this so, when I am unable to reconcile
the failure of the City to get any return with the
extravagance, wastefulness and 1bad faith, both of
the companies and the State Transit Commission,


142




which was charged with the duty of supervising
their affairs.
My position in this matter is, that as the business representative of the City of New York, it
would be folly to put more money in an enterprise
with partners who have promised a return which
they have never made."
This program by the Transit Cormmission for future
construction was claimed by it to involve an investment
of $218,000,000 for construction and about $100,000,000 for equipment, a total of $318,000,000 with which it
proposed to construct about 321/2 miles of new rapid
transit lines.
On September 6, 1922 the Mayor published his plan
for future subways. It is to be borne in mind that
neither the Mayor nor the Board of Estimate had any
power to put that plan into effect. It operated at most
as a suggestion to the Transit Commission. The law
provides that the City may make such "suggestions" for
new subways, but the Transit Commission refused to
adopt those suggestions. That plan provided for the
building of 111 miles of new rapid transit lines in The
City of New York at a total expense of $600,000,000.
The Mayor was in favor of a Washington Heights
line but he did not want it to end in 64th Street, and to
connect with the line of the B.-M. T. His proposal was
for a trunk line from Washington Heights down
through Eighth Avenue to the end of the Island, with
proper connections to Brooklyn and Queens.
He was also in favor of a crosstown line in Brooklyn.
The line which the Transit Commission proposed would
cost $44,000,000 and would not be serviceable except in
partnership with the B.-M. T.


148




The Mayor proposed an independently operable crosstown line in Brooklyn, self-sustaining from beginning of
operation, from Queens Plaza through the large industrial section of Greenpoint, to cross Fulton Street to
Franklin Avenue, to Washington Avenue and eventually Sheepshead Bay and Coney Island and to cross the
East River to connect with the sections of Manhattan,
from the vicinity of Huron Street to the neighborhood
of 23rd or 34th Street in Manhattan, and then crosstown to the Sixth or Eighth Avenues to connect with the
Washington Heights line (pp. 1044-1045).
The result of the Transit Commission's submission of
their plan to the Board of Estimate was its rejection
in November 1922. Nothing further was done. The
Transit Commission did not adopt any of the Mayor's
proposals.
In June of 1923 a conference committee was appointed consisting of Messrs. Delaney, Tuttle, the City's
Chief Engineer, and Mr. Murray Hulbert, Borough
President; the Transit Commissioners and Engineers
Turner and Ridgway. Fourteen of these conferences
were held.
After five conferences, the Conference Committee reccommended generally the Brooklyn Crosstown and
Washington Heights routes, upon the understanding
that the details of these routes would be worked out in
the Committee, and on August 3, 1923, the Board of
Estimate and Apportionment approved these routes.
Nine conferences were thereafter held by the Joint Committee representing the Board of Estimate and Apportionment, Transit Commission and the Engineers.
These two lines were the principal subjects discussed.
There developed, as from the outset, disagreements
based on the fundamental differences of policy. The


144




proposals of the Transit Commission all looked to the
construction of the new lines as additions to our existing
subways. The suggestions of the City's representatives
were all in the direction of independently operable lines.
Commissioner Delaney very clearly stated his position
with respect to the Brooklyn Crosstown line as follows:
"I opposed the tie-up of routes and I was not
in favor of the line laid down for the crosstown
route" (p. 978).
In the conferences "the Transit Commission proposed
that the lines should be run through Fulton Street to a
connection with the B.-M. T. subway at DeKalb Avenue." The City's representatives favored the continuations of this line into Lafayette Avenue, having in
mind its eventual operation as an independent line. Two
separate reports, one favoring the Lafayette Avenue
line and the other the Fulton Street line, were submitted to the Board of Estimate and Apportionment
respectively by the Transit Commission and the City's
representatives (pp. 993-994).
From the latter part of August, 1923, until March,
1924, and while these conferences were in progress, the
Mayor was prevented from discharging his duties by
serious illness. At the time of his return to office, the
1924 amendment to the transit laws by the creation of
the Board of Transportation was in process.
It was clear from all that had transpired in the Committee, that the Transit Commission was determined to
carry out its policy of "new construction only as extensions of the existing lines," thereby further binding the
City to a joint venture which had proved so disastrous
to the City, and that the Mayor's proposals for "independent lines" had been completely ignored. Accord

145




ingly the Mayor upon his return refused to lend himself
to these policies of the Transit Commission and so announced, in a letter dated March 21, 1924, a copy of
which is annexed, marked Exhibit "M," in which, among
other things, he says in respect to the Brooklyn Crosstown line:
"A connection of this kind will tie up a $44,000,000 subway proposition with the Brooklyn-Manhattan Transit Company (formerly the B. R. T),
to be operated by that company. Such a connection and operation will provide nothing but deficits
to be made up by the taxpayers in the yearly
budget, in addition to the $10,000,000 which the
taxpayers are now forced to provide in the budget
under the present subway contracts" (p. 1044).
The 1924 amendment to the Transit Laws creating
the Board of Transportation, was enacted May 1, 1924,
but by its terms that Board did not come into office
until July 1, 1924.
Notwithstanding the Transit Commission had due notice that its construction powers would end on July 1,
1924, apparently for purposes of embarrassing the new
Board, it let a contract for the construction of one mile
in the middle of the proposed Brooklyn Crosstown line,
at a cost of $3,500,000, and submitted this contract for
approval to the Board of Estimate and Apportionment
(pp. 143, 1010-1018).
The matter was referred to Commissioner Delaney,
who was about to become Chairman of the Board of
Transportation, and he, in a letter dated June 3, 1924,
addressed to the Mayor, recommended the disapproval
of this contract (Delaney, 1016, et seq). A copy of
Commissioner Delaney's letter to the Mayor, dated


146




June 3, 1924, is annexed and marked Exhibit "N."
In it he said, among other things:
"It seems to me that the new Board of Transportation should be given an opportunity to study
the situation before your Board definitely adopts a
policy. Otherwise the new Board will come into
office on July 1st under conditions similar to those
which prevented initiative in respect to the route by
your recent Conference Committee" (p. 1017).
The matter which received the principal consideration
of the Conference Committee in the Fall of 1923 was the
Washington Heights line.
It will be remembered that the Transit Commission's
plan for that route was, that it run under Central Park
West (after it had been changed from Amsterdam
Avenue), and that it end at 64th Street, there to connect
with the B.-M. T. lines; that plan was rejected by the
Board of Estimate in November, 1922.
On May 15, 1923, the Transit Commission presented
to the Board of Estimate for its approval a route beginning at 59th Street and Seventh Avenue, proceeding
under 59th Street, Central Park West, Manhattan
Avenue, St. Nicholas Avenue, and terminating at 162nd
Street. On June 1, 1923, it was thelsubject of discussion
before the Board of Estimate. The result was the
appointment of the Conference Committee to which reference has been made.
On June 15, 1923, the Conference Committee held its
first meeting, and a report recommending the general
approval of this route was submitted, as already indicated, and on August 3, 1923, the Board of Estimate
and Apportionment formally gave its approval.
On October 2, 1923, the Chief Engineer of the Transit


147




Commission suggested to the Conference, that the route
as adopted be changed so that it would proceed from
59th Street to 110th Street under Central Park; then to
Eighth Avenue instead of Manhattan Avenue, to 121st
Street, and then through St. Nicholas Avenue.
The suggestion that the line be constructed under
Central Park, instead of under Clentral Park West,
was made because of an alleged estimated saving of $5,000,000. The matter was referred to the Board of Estimate, public hearings were held, and strong opposition developed to such use of the park. Then Commissioner McAneny suggested a modification and a
resubmission of the route through Amsterdam Avenue,
which had previously been rejected by the Board of Estimate. The Committee again took into account the existence of the extensive water mains and conduits under
Amsterdam Avenue, the reconstruction of which would
cost about $5,000,000, and reached the conclusion, that
engineering and other difficulties which were the cause
of the previous rejection by the Board of Estimate,
were of sufficient magnitude to prevent concurrence in
the proposed change of route, and the Committee notified the Transit Commission that it would not agree to
the Transit Commission's recommendation of this Amsterdam Avenue route. That occurred on December
20, 1923.
A suggestion was then made for the first time that
consideration be given to a substituted route in Columbus Avenue. The matter had not been previously
discussed. Chief Engineer Tuttle then stated that before making any definite commitment as to this proposed route, he desired further information as to the
character of the subsoil and structures, cost of underpinning the elevated railroad structure and probable


148




land damages which would be involved in joining the
portion of the road under Broadway with the stub ends
of the Broadway-Seventh Avenue Line, and that he
desired to consider other features of the proposition, and
requested an adjournment until January 3, 1924, which
was taken.
There was no agreement or understanding that the
Columbus Avenue route would be accepted in place for
the Central Park West route, which had been approved
by the Board of Estimate. During the recess and on
the eve of the publication of the Governor's message to
the 1924 Legislature, which recommended the abolition
of the Transit Commission, there unexpectedly appeared from Chairman McAneny of the Transit Commission a public statement, in effect that the Columbus
Avenue route had been agreed upon in the Committee,
with, to quote the Hon. Murray Hulbert, "the presumptous declaration" on the part of the Chairman of the
Transit Commission that "the other members of the
Board of Estimate and Apportionment can hardly
withhold their approval to start the shovels moving
dirt." It is to be borne in mind, that on August 3,
1923, the Washington Heights Line, proceeding along
Central Park West, had been approved by the Board of
Estimate on the Transit Commissioners' recommendation.
This statement by McAneny indicated clearly, that
his participation in the conferences with the City's representatives was not in good faith, that it was never his
intention to depart from the original policy of the Transit Commission, viz.: To embark upon such construction only, as would benefit the traction companies, and
that his purpose was, if this could not be accomplished,


149




at the appropriate time, to end the conferences, which
he did by this public statement.
The Transit Commission did nothing further of a
constructive character, in regard to either the Washington Heights Line or the Brooklyn Crosstown line, except that it expended $361,000, in preparing useless
maps and drawings (p. 140), and except that it let, to
use the language of Mr. McAneny, a contract for a
"very fragmentary bit of that line which happened to
come under the site of a proposed public school-at some
thing like $240,000 which was sent to the Board of Estimate and approved". Besides, on June 3, 1924, with
knowledge that the Board of Transportation would take
hold of construction work on July 1, 1924, the Transit
Commission suddenly developed a great activity and advertised for a bid on a section of the proposed Washington Heights route covering thirteen City blocks from
160th to 173rd Streets, St. Nicholas Avenue and Broadway. No beginning point and no ending point had at
that time been determined for this route. Without
"rhyme or reason" thirteen blocks of subway in midsection were to be contracted for. On the 6th of June,
1924, upon learning of this advertisement, Mr. Delaney
wrote Mr. McAneny to discontinue the same, which he
did. There ended the "inactivities" of the Transit Commission in relation to construction of new subways.
The record in regard to proposed subway construction would be incomplete without a reference to the Ashland Place Connection. Under the dual contracts, no
provision was made for any additional rapid transit service to the central part of Brooklyn. It was left dependent on the Fulton Street Line, which runs through
downtown Brooklyn, over the Brooklyn Bridge to the
Park Row terminal, but not through Manhattan (pp.


150




669-670). Under a "related certificate" granted with
contract No. 4 this line was to be third-tracked. The
third track was added from East New York to Nostrand Avenue, when opposition developed to further
third-tracking down Fulton Street, the main business
district of Brooklyn and, accordingly, the third-tracking ended in 1915 or 1916 (p. 670). Then there developed a movement to connect this Fulton Street line
at Ashland Place with the Broadway-4th Avenue line,
(p. 671). The B. R. T. was opposed to this connection because it involved an expense of several million
dollars for new equipment; the old rolling stock of the
lulton Street line was not serviceable for subway operation (p. 671).
In 1917, it appears that the B. R. T. indicated its willingness to consent to this connection (p. 672).  But
nothing appears to have been done in that direction until
Mr. Delaney, as Transit Construction Commissioner,
took up the matter and worked out a new agreement
with the B. R. T. for this connection, but at that time
the B. R. T. was already in receivership (p. 672) and
nothing, of course, could be done.
The matter was again taken up in the Conference
Committee in the Fall of 1923 (pp. 673-674) and with
the B.-M. T. in December of 1923 (p. 676). There
had developed in November 1923 "a new agitation in
Brooklyn for this line". The result of the negotiation
with the B.-M. T. was that an agreement of modification of Contract No. 4 was drawn, in which the B.-M. T.
proposed to consent to the construction of this Ashland
Place connection but upon conditions, however, among
others, that the city build the Broad-Nassau Street line
(pp. 676, 678, 684).


151




Of course this proposal by the B.-M. T. was not made
in earnest, because it well knew that the City would not
consent to these conditions (p. 692).  Furthermore,
the proposal for the Ashland Place connection has always been regarded by those informed, as impracticable
and not a solution of the transit problem of that locality,
but rather, as tending to aggravate it.
The connection was proposed to be made with the
4th Avenue line above DeKalb Avenue, thus adding the
traffic from the Fulton Street line to the congestion,
already existing at DeKalb Avenue (p. 672).
The engineers of the railroad company "fought the
proposal steadily" and pointed out that the introduction of additional trains into DeKalb Avenue would result in further congestion at that point and reduce
the service for the outlying districts." Mr. Turner,
the present Chief Engineer of the Transit Commission,
was likewise opposed to this construction (p. 780).


152




CHAPTER X


DAWNING LIGHT
BOARD OF T11ANSPORTATION S SUBWAY CONSTRUCTION
PROGRAM
This Board was created by Chapter 573, Laws of
1924, signed by the Governor, May 1, 1924, effective
July 1, 1924. It transfers the power to construct rapid
transit lines, from the Transit Commission to the Board
of Transportation, named by the Mayor of the City
of New York. The members of the Board are John
H. Delaney, William A. DeFord and Daniel L. Ryan
(p. 557).
The Transit Commission still retains its regulatory
powers over our existing transit lines. It also has
regulatory jurisdiction over all future extensions and
additions to the existing lines (p. 82).
This law contains novel features. It provides that
the city may operate all newly constructed lines, at
a five-cent fare, for three years, but thereafter, they
must be self-supporting.
It directs that, accompanying all proposed routes
or general plans of constuction, for the approval by the
Board of Estimate, shall be a statement, signed by at
least two members of the Board of Transportation, and
countersigned by its Chief Engineer, setting forth the
estimated cost of construction and equipment of the
proposed line, the estimated time required for its construction and equipment, together with an estimate


153




for ten years, of the prospective results of operation of
such rapid transit railroad (p. 1048).
This Board of Transportation has proceeded expeditiously with the construction of new subways. It
is working in harmony with, and has the cooperation of
the city administration. Its Chairman is, by reason of
long and varied experience in transit and kindred
service, and natural ability and fitness, highly qualified
to carry forward the work of new construction. There
remains no doubt that under the directions of this
Board, the people will have the subways for which
they have been clamoring, and which are sorely needed.
The legislation of 1924 gives only partial relief. The
Board of Transportation has no authority to direct
better service on our existing lines.
Immediately upon coming into office, the Board
of Transportation proceeded to lay out a comprehensive
new trunk subway line for the City, running from
about 215th Street in the Borough of Manhattan,
through Fort Washington Avenue, to Fulton or Wall
Street, with projected tunnel connections under the
East River, in the neighborhood of 53rd Street and
Wall or Fulton Street, to Queens and Brooklyn respectively. Beginning at 193rd Street and Fort Washington Avenue, it will be a four-track line, except
possibly for a short distance at the northerly end, down
Fort Washington Avenue to Broadway, thence through
St. Nicholas Avenue to Eighth Avenue, thence from
110th Street to 64th Street, along Central Park West,
then as a six-track line from Eighth Avenue to Greenwich Avenue, down to Church Street, and then running
east, under the river either at Fulton or Wall Street,
with a connection west, across 53rd Street, to Sixth
Avenue, and a two-track line down Sixth Avenue, and


154




east through 53rd Street under the East River to
Queens, and another connection crosstown at 139th
Street to the Harlem River, a distance of l1/2 miles,
where there will be the terminal yards and shops for
those lines, also a connection at Houston Street east
to the Bowery with possible extension to Brooklyn (pp.
1052-1055).
Although it is generally conceded that it takes at
least nine months to prepare plans for a subway construction, this comprehensive plan was proclaimed by
the Board of Transportation on December 9, 1924 (pp.
1047-1048). The route in its entirety has not yet been
validated by the Board of Estimate (pp. 1051-1052),
but the Board of Transportation is proceeding to advertise for and let contracts for the portion of the line
between 64th Street and 193rd Street, under prior
validations (pp. 1054-1073).
The route from Pearl and Wall Street to 193rd
Street and Fort Washington Avenue has already been
laid out. Shortly, the details of the route from 193rd
Street to Overlook Terrace will be completed. That
will provide 18.53 miles of subway with 65.57 single
track miles (Ridgway pp. 1880-1882).
The cost of construction of the routes laid out, will
be about $181,000,000, and, together with equipment,
in all, $254,000,000. It will take three years to build
and one year to equip the subway (Ridgway, 1927 -1928.) Attempted comparisons were made at the hearings between the estimated cost of this new construction, and the cost of construction under Contracts
1, 2 and 3, operated by the Interborough.
It appears that the old subway has 217.4 miles of
single track. Its cost was $264,000,000 but of this con

155




struction 85.8 miles represents elevated structure, the
cost of which is only one-fourth of subway costs (pp.
1920-1922). Engineer Ridgway explained that the new
structure will not be a mere duplicate of the present
I. R. T. subway. It will be a "modern" rapid transit
line. The bore of the tunnel will be greater to accommodate wider cars; there will be emergency exits, and a
proper system of ventilation lacking in the old subway.
The stations will be longer and be adaptable for
use of at least 12 car trains on both local and express
lines (pp. 1924-1925), thereby adding not only to the
comfort and convenience of the riders but to the passenger bearing capacity of the line.
These estimates of cost of construction and
equipment, resulted in speculations by the Transit
Commissioners and their specially employed public
accountant Mr. S. Herbert Wolfe, as to how much
will be lost annually from operation of the new line
on a five-cent fare.
Mr. Wolfe and Commissioner Harkness, both concurred that the result of operations on this new line,
on a five-cent fare will be an annual loss to the city of
$7,500,000, according to the former, and $7,000,000
according to the latter (see Wolfe, p. 2283); (Harkness, pp. 2298, 2302, 2303).
Commissioner Harkness says that the cost of carrying a single passenger in the new subway will be eight
and three-quarter cents; Commissioner O'Ryan says
that the cost will be ten cents (p. 2461).
Notwithstanding, the Transit Commission apparently
approves the line of the Board of Transportation, so
that there is unanimity of opinion as to the necessity
for this new subway, except that there is the disappoint

156




mlent by McAneny that it will not be linked up with
the B.-M. T. and I. R. T. (pp. 2569,2606,2608).
It is difficult to conceive the purpose of the Transit
Commissioners in venturing estimates of deficits from
operation of the new line. Clearly it is necessary, and
will serve to relieve the disgraceful congestion in our existing rapid transit lines. Are we to understand that
the Transit Commission could construct new lines for
less money?-no such claim is made. Is the city to continue the McAneny policy of only talking about new
subways and not building them, which the Transit Commission pursued for four years, because standards of living have changed and cost of construction is higher than
in 1913? Concededly there are deficits aggregating
$100,000,000 under the dual contracts. Are we to
understand that had the Transit Commission foreseen
these deficits, the subways would not have been built?
Is it not the fact that McAneny anticipated that there
would be deficits from the operation of the subways
under the dual contracts?
It is undoubtedly true, that if the new subway be
operated by the traction companies, who pay exorbitant
rates of interest, indulge every now and then in receiverships, suffer waste and extravagance, there will
be more deficits on a five-cent fare. But the city, intends
to operate the new subway itself, and these conditions
will not obtain.
Reference has already been made to calculations, set
forth in annexed schedules, which demonstrate that
even on the basis of an increase of 125 per cent. in cost
of construction and equipment, subways can be operated
by the City of New York, on a 'five-cent fare, at a profit.
Comptroller Craig called attention before Commissioner McAvoy to the fact that past experience has
157




proved that the cost of operation and maintenance, is
about 60 per cent of the gross revenue, and he says:
"If you have forty per cent of the gross on the
new lines to cover interest and sinking fund
charges, you will very likely be able to build some
new lines out of the surplus" (p. 2244).
Besides, there is every expectancy that this 60 per
cent. for operation, will be reduced by the elimination
of unnecessary expenses and extravangances and substantial savings in the cost of power and other items of
service (Craig, pp. 2250-2251).
BUSES
The bus problem has been the subject of discussion
and litigation. The "bus" has come to be recognized
as a satisfactory means of transportation. Repeated
attempts have been made to secure from the legislature
in recent years the power for the City of New York
to purchase and operate its own bus lines, without success. The Fifth Avenue Coach Company operates
buses, on a ten-cent fare, at a cost of operation it is
claimed of 8.4 cents per passenger (p. 2264). Our bus
operation has been the subject of litigation in certain
cases resulting in injunctions secured by surface line
companies (p. 2669). The buses in operation in the
city, are privately owned and operated, upon temporary
permits issued by the Commissioner of Plant and
Structures of the City of New York (p. 2667). There
are 36 of such bus lines carrying approximately 188,710
passengers per day (p. 2669).
It was suggested at the hearings that the city's traffic
problems have become aggravated by the large increase


158




in the number of taxicabs on the city streets. A record
of the number of taxicabs in operation is as follows:
1918- 4,700
1922-13,449
1923-15,000
1924 17,550
It is estimated that the gross revenue from taxi operation is about $5,000,000 a year, as against $52,000,000
from all of the surface trolley lines operating in the city.
The city is about to embark upon the program of acquiring and operating its own bus lines. Difference of
opinion has arisen, as to the power of the city under the
recent Home Rule law to undertake this municipal
operation. Undoubtedly that question will be speedily
determined and then the way will be open for an extension and enlargement of that service.


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CHAPTER XI


SUMMARY AND CONCLUSIONS.
The hearings before Commissioner McAvoy were
closed on January 8, 1925. I have attempted to set
forth in this report a summary of the principal subjects
of the inquiry amplified by evidence essential to a proper
understanding of the problem. Owing to lack of space
and time, many of these matters have received but
skeleton presentation. I have felt that it is urgent that
at the earliest moment you be advised of the outstanding
factors in the situation, because immediate relief must
come to the public by appropriate legislation, vesting in
a single body, complete control over both new subway
construction and the service on our existing lines.
"Shameful" and "disgraceful" have been the words,sed in the inquiry, as descriptive of the treatment of the
riders on our rapid transit lines. Undoubtedly a full
measure of relief could have been given during the last
four years, when the Legislature first declared the
emergency, but none has come.
Our present intolerable conditions of service are due
)primarily to the persistent refusal of the Legislature to
vest in the city the power to build its own subways with
its own money. Until July 1, 1924, the State Transit
Commission had the exclusive power to lay out new lines.
subject only to veto by the local authorities. As the
Governor well staled in his January, 1924 message:
"Division of power divides responsibility, and in
the case of the City of New York has resulted in a


160




deadlock which can only be broken by placing the
statutory powers in the municipality already vested
with the constitutional powers necessary for authorizing construction."
There is a promise of relief by the creation of the
Board of Transportation appointed by the Mayor of
the City of New York, but that relief will come only in
the future when the subways which that Board has laid
out are completed. For the present the people are helpless.
The Transit Commission's failure to direct and secure
better service was due entirely, as it admits, to financial
consideration, and the insolvency of the traction companies, brought about by over-capitalization upon organization and reorganization, wastes, extravagances,
costly and embarrassing receiverships, and the diversion
of about $100,000,000 in swollen dividends which should
have been used for development and improvement of
service. The Transit Commissioners approached every
proposal for the alleviation of the public's suffering with
a tender solicitude for the balance sheets of the traction
corporations.
That these things happened, and that these causes
brought about the collapse of the traction companies, is
not disputed by the Transit Commissioners. They say,
in effect, we found those conditions, when we came into
office, and it was our "duty" to rehabilitate these companies even at the expense of the public. The I. R. T.
is still financially embarrassed and unable to make necessary capital expenditures, according to the testimony of
its own President. The B.-M. T. persists that it cannot give good service on a five-cent fare, but it can and
does pay dividends on its preferred stock. The stock
speculators have profited.
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The remedy is plain. The regulatory and construction powers should be vested in a single Board named by
the local authorities, and that Board should immediately
order necessary changes and improvements, such, among
others, as the lengthening of the stations on the I. R. T.
line, the addition of new cars, the furnishing of more
guards and conductors, revision of schedules by increasing the number of trains during non-rush hours and the
maintenance of full service before and after the commencement of the rush period. By Constitutional
amendment our rapid transit bonds should be exempted
from charge against the city's debt limit, thereby releasing nearly $275,000,000 for future construction;
the proceeds, together with amounts from time to time
otherwise available, should be applied to carry out the
general plan of construction of the Board of Transportation, and for a recapture of all of our rapid transit
lines under Contracts 3 and 4.
The remedy will come only by less talking and more
building of new subways, and by securing more and
better service on our existing lines.
New York, January 29, 1925.
Respectfully submitted,
HARRY A. GORDON.


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EXHIBIT A


CHARGES
Hon. ALFRED E. SMITH,
Governor of the State of New York.
Honorable Sir-The Board of Estimate and Apportionment of the City of New York hereby prefers
charges of wilful neglect and failure to discharge
duty, and misconduct in office, and inefficiency, against
George McAneny, Leroy T. Harkness and John F.
O'Ryan, as Transit Commissioners appointed pursuant
to Chapter 134 of the Laws of 1921, and respectfully
request and demand that each of them be removed by
you from such office by reason thereof and by reason of
the matters and things hereinafter set forth:
First Charge-That in and by Section 26 of the Public Service Commissions Law of the State of New York
it is provided that
"Every corporation, person or common carrier
performing a service designated in the preceding
section, shall furnish, with respect thereto, such
service and facilities as shall be safe and adequate
and in all respects just and reasonable."
That in and by the Rapid Transit Contract No. 4
entered into by and between the City of New York and
the Railroad Company, for the unification, consolidation and extension of then existing subway, street and
elevated car lines, and for the construction of additional


163




subways, it was, among other things, provided (substantially same provisions in Contract No. 3):
"The principal object of the City in making this
contract is to secure for the public convenience an
adequate, comfortable and rapid transit system of
passenger transportation in the portions of New
York which will be served by the Railroad and the
Existing Railroads. By the foregoing provisions
of the Lease the Lessee has covenanted, among
other things, to operate the Railroad and Existing
Railroads carefully and skillfully, according to the
highest standards of railway operation; to supply
adequate equipment; to run trains so as to furnish
adequate service; to use the best safety devices; to
keep the Railroad and Equipment and Existing
Railroads clean, dry, well lighted, heated and ventilated; and to do other things, as hereinbefore set
forth, for the convenience and accommodation of
the public. These covenants on the part of the
Lessee are among the principal moving considerations to the City in making this contract, and any
breach thereof will entitle the City to the remedies
provided in this contract. If at any time Additions
to the Railroad or Equipment or to the Existing
Railroads or any change in the mode of operating
the Railroad or the Existing Railroads or conducting the business thereof are necessary in order to
carry out the purposes of the Lease in securing
service and facilities as shall be safe and adequate
and in all respects just and reasonable the Commission may direct the provision or construction of
such Additions and the making of such changes
in the mode of operation of the Railroad or Exist

164




ing Railroads or in the conduct of the business thereof as may be necessary to accomplish such purposes."
That in and by the Act, to wit, Chapter 134 of the
Laws of 1921, Messrs. McAneny, Harkness and
O'Ryan, as Transit Commissioners, succeeded to powers and duties of the former Transit Construction Commissioner, and as such were charged with the duty of
planning and building of rapid transit railways in the
City of New York, and of completing the subway work
then remaining unconstructed under such contracts, and
of securing compliance by the Railroad Companies with
all of the terms and conditions of the aforementioned
Rapid Transit Contracts Nos. 3 and 4, and as successor
of the Public Service Commission for the First District,
as well as of the Transit Construction Commissioner, of
regulating, and insuring to the public, the safety, and
convenience and operation of structure, equipment and
track of all rapid transit lines in the City of New York,
and of securing the performance and observance by al'
Rapid Transit Railroad Companies, of all their duties
and obligations imposed by law and contract, and of
making a study and investigation, and preparing a plan,
for the relief of the intolerable transit conditions and
emergency existing at the time of the appointment of
said Commissioners, and of effecting a radical and permanent readjustment of the then existing transit system.
That said Commissioners entered upon the discharge
of all their duties in or about the month of April, 1921,
and that at all times since, said Commissioners have
failed, neglected and refused to secure for the public
rapid transit service and facilities such as are safe and
adequate, have failed, neglected and refused to secure


165




from the Railroad Companies performance of and compliance with the provisions of Contracts Nos. 3 and 4, but
on the contrary, have permitted the said Railroad Companies to breach said contracts, and to evade and avoid
the performance thereof, the construction of work and
the rendition of safe, adequate and convenient transportation thereunder; and have permitted the structure,
cars and equipment to become and remain dangerous
and unsafe, and the public to be jammed, crowded and
inconvenienced in the service thereof, and have permitted, through their gross culpable negligence, said
dangerous and defective conditions to be and remain
unabated, and that as a result thereof, various and divers
persons have been killed and large numbers severely
injured by said railroad Companies.
That on or about June 25, 1923, a train operated by
the Brooklyn-Manhattan Transit System was wrecked
at the curve of the elevated railroad from Fifth Avenue
into Flatbush Avenue; that two wooden cars which said
Commissioners permitted to be and remain in the service and in operation, fell from the elevated structure
into the street, and as a result thereof seven persons were
killed and seventy injured. Said wreck occurred and
said lives were lost and injuries sustained, by reason of
the rotten and defective guard rails and wooden ties,
and because the spikes holding the running rails to the
ties were not in contact with the rails, and many of the
bolts holding the ties to the steel structure were loose,
and because the said Commissioners failed and neglected to abate said nuisance and dangerous condition. That
as a result of said accident, and at a meeting of the
Board of Estimate and Apportionment held on July 13,
1923, of which said Commissioners had knowledge, a
resolution was adopted under which a Committee on


166




Transportation Facilities was appointed by said Board,
to investigate and report as to the condition of the cars
and road equipment then in use on all of the elevated
railroad lines in the City of New York, giving first consideration to the older structures in the Borough of
Brooklyn, and next to the older ones in the Borough of
Manhattan.
That upon the appointment said Committee, there was
organized by said Committee a Joint Commission consisting of three persons, representing the Board of Estimate and Apportionment, the Transit Commission and
the Railroad Company, as follows: Robert Ridgway,
Chief Engineer of the Transit Commission, Dr. George
F. Swain, Professor of Civil Engineering at Harvard
University, representing the Board of Estimate and
Apportionment, and Eugene Klapp, of the firm of Parsons, Brinckerhoff & Klapp, representing the railroad.
That thereafter the said Joint Commission was directed
to investigate and report on the then condition of the
cars and road equipment in use on all of the elevated
railroads of the Brooklyn-Manhattan Transit Corporation, and it commenced its work on July 26, 1923 and
concluded the same on January 4, 1924. That a copy
of the Report of said Commission was duly forwarded
to the Transit Commissioners of the City of New York,
together with a Supplemental Report made by the
aforementioned Committee on Transportation Facilities
to the Board of Estimate and Apportionment on or
about April 21, 1924.
That in and by said Report of said Joint Commission it was, among other things, found, that the tracks
of the Brooklyn-Manhattan Transit Corporation elevated lines were and had for a long time been in respects
defective, unsafe and required replacement and repair;
167




that many of the guards and rails, the purpose of which
was to guide a derailed car, and to prevent the same
from falling from the elevated structure in the event it
was derailed by reason of defective equipment or track,
were defective on almost all of the Brooklyn-Manhattan
Transit Corporation elevated lines; that the safety of
the traveling public required the replacement of the inner guard timbers by steel rails, and the removal of
the many defective outside guard timbers; that the
structure of the Brooklyn-Manhattan Transit Corporation elevated lines lacked necessary automatic signal
stops or other means of insuring safety; that the method
and system which for all time had been in force on the
Brooklyn-Manhattan Transit Corporation elevated
lines, for the inspection and removal of railroad ties,
was nondependable and did not insure safety of carriage; that the elevated structure upon which the Commissioners tolerated and permitted the elevated cars to
be operated, was insufficient and inadequate to sustain
the load, required steel bracing and supporting, was corroded, unpainted and unclean, and dangerous to life
and limb; that there were operated and maintained on
said Brooklyn-Manhattan Transit Corporation elevated
lines obsolete and unsafe wooden cars; that the danger
was augmented and increased by the absence from said
cars of the usual "dead man's button," a device by which
if the motorman is rendered unconscious and his hand
removed from the master controller, the power is auto
matically shut off and the brakes applied; that the absence of said automatic device, coupled with the use of
said obsolete wooden cars, rendered transportation of
the public on said lines unsafe, and that said Joint Commission did recommend the installation of said modern
automatic "dead man's button."


168




That in and by the Report of the Committee on
Transportation Facilities dated April 21, 1924, to the
Board of Estimate and Apportionment, of which said
Commissioners then had due notice, the attention of
said Transit Commission was called as follows:
"The Board of Estimate and Apportionment
has no power to take action to enforce compliance
with any of these recommendations, such power being vested by law in the Transit Commission. As
the report of the Joint Committee of Engineers is
unanimous, it is to be inferred that the Transit
Commission and the operating company itself will
recognize the justice of all the recommendations
made and will co-operate to carry them out." * * *
"It is recommended that the Transit Commission
be requested to give its immediate attention to the
elimination of defects reported by the Joint
Committee of engineers and to the need for a general improvement of the elevated railroad facilities
as disclosed by this investigation, giving particular
attention to the report of the Equipment Committee of the Joint Committee of Engineers, contained
in Appendix VI of the Joint Committee report."
That the Brooklyn-Manhattan Transit System's elevated and subway rolling stock consists substantially of
907 wooden cars and 900 steel cars; that substantially
all of said wooden cars were constructed many years ago
and are obsolete, inadequate and insufficient for the
safe, adequate and convenient transportation of passengers. That in and by the Rapid Transit contract
No. 4 it is provided that the Railroad Company shall,
and the Railroad Company, a party thereto, has agreed
to, provide money for new cars and to commence the re169




tirement of such wooden cars not later than January 1,
1924. In said contract, among other things, it is provided:
"On the dates given in the following schedule,
the Lessee shall pay out of its ownv resources into
the Depreciation Fund for the Existing Railroads
provided for in paragraph 5 of Article XLIX the
following amounts representing depreciation accrued upon the properties stated in the schedule
prior to January 1, 1914.
SCHEDULE OF ROLLING STOCK OF EXISTING RAILROADS INCLUDING
DATES OF ESTIMATED RETIREMENT AND ACCRUED DEPRECIATION
Item  Date of  Accrued
No. Retirement Depreciation
1  Jan. 1, 1924 $240,058.00  Bodies and trucks of Group A
2    " 1, 1929  526,249.00  "   "    "   "   "  B
3    " 1, 1929  622,904.00  "   "    "   "   "  D
4    " 1, 1934  240,263.00  Equipment    "   "  A
5    " 1, 1936  388,951.00         "       " "  B
6    " 1, 1936  338,711.00  Bodies & Trucks  "  "  C
7    " 1, 1936  499,724.00  Equipment    "   "  C
8    " 1,1946   35,680.00    "           "   "  D
Group A comprises 118 converted motor cars
bearing the following numbers:
No. 1000-1078 inclusive
No. 1080
No. 1082-1119 inclusive
Groups B comprises 236 rebuilt motor cars bearing the following numbers:
No. 600-683 inclusive
No. 700-743
No. 745-758
No. 800-816
170




No. 818-820 inclusive
No. 822-859
No. 900 —935
Group C comprises 306 motor cars bearing the
following numbers:
No. 684, 817, 936, 998, 1079, 1081.
No. 1200-'1499 inclusive.
Group D comprises 268 trailer cars bearing the
following numnlers:
No.   1-   6 inclusive
No.   8-  81 inclusive
No. 83-125 inclusive
No. 127-271 inclusive
The dates cited in the above schedule represent the
estimated dates of retirement of the car bodies, trucks
and equipment named in the schedule.
That the Transit Commissioners have failed, refused
and neglected to secure compliance by the Railroad
Company with the aforementioned provisions of said
Contract No. 4, and have failed, refused and neglected
to secure the retirement, prior to January 1, 1924, of
the 118 wooden cars embraced in Group A; that all of
said cars are wooden and are old, obsolete, dangerous
and unsafe, and that said Commissioners have permitted
said cars to be and remain in operation and in the service of the Brooklyn-Manhattan Transit Corporation,
and the operating companies whose stocks it holds and
controls, after January 1, 1924, and at the time of the
wreck hereinafter set forth.
That among said wooden cars required by Contract
No. 4 to be retired prior to January 1, 1924, and permitted by said Commissioners to be and remain in ser171




vice and in operation, was car No. 1080 hereinafter referred to. That said Commissioners failed, neglected
and refused to require the removal and replacement of
the dangerous cars, structure and equipment in use in
the Brooklyn-Manhattan Transit System, reported by
the aforementioned Joint Committee and the Committee
on Transportation Facilities, and failed to secure the
retirement of the aforementioned wooden car in pursuance of the provisions of Contract No. 4, and that such
conditions continued and remained in force at the time
of the wreck hereinafter mentioned.
That on July 30, 1924, a wreck occurred at the
Sunnyside Yards of the Long Island Railroad, as a
result of which one human being was killed and many
others were seriously injured. The Grand Jury of
Queens County that ma(le inquiry into the circumstances
and causes of this wreck and the responsibility therefor,
found that the direct cause thereof was the throwing by
hand of a switch under a moving train which caused the
derailment of the last three cars of this train; that there
was no excuse for the operation of this switch by hand;
that the operation of said switch should have been included in the interlocking system of the railroad which
was in operation within ten feet of the switch. The
Grand Jury, among other things, made its presentment
as follows:
"The Transit Commission has a large number of
experts and the operation of the Long Island Railroad in the Greater City of New York is under its
jurisdiction. The control and operation of this
switch at the time of the wreck is now condemned
by the engineers of the Transit Commission. As
the Commission now condemns the switch and its
operation as antiquated and obsolete, it must have
172




been antiquated and obsolete before the wreck and
that being so it was the duty of the Commission to
have ordered and required the removal of the switch
and the installation of the safe method of operation
it now recommends.
"The criminal responsibility for the wreck must
be placed on the railroad company and its employees, but that does not relieve the Transit Commission for its failure to properly and adequately
function in its control of the railroad.",
and concluded as follows:
"We condemn the failure of the Commission to
take proper action for the removal of this condition
before the disaster and for its very evident policy
that 'anything is good enough' until the contrary
is proven by a disaster costing human lives, and
we also condemn the officials of the railroad company above named for their neglect to take the
initiative in the adoption of ways and means for the
protection of human life and for their total disregard of their responsibilities."
That said wreck was due to the culpable negligence
of said Commissioners in failing to properly inspect the
properties used at the place of said wreck by said Long
Island Railroad, and in failing to require the installation of necessary automatic switching, interlocking and
other automatic safety devices.
That on August 5, 1924, a wreck occurred at the
Ocean Parkway Station of the Brighton Beach Line of
the Brooklyn-Manhattan Transit Corporation operating under Contract No. 4 with the City of New York.
A train, consisting of six wooden cars, crashed into a
train of seven steel cars which were at a standstill, with


173




the result that the roof of the first car of the wooden
train telescoped over the roof of the last car of the steel
train and the after part of the roof of the same first
wooden car telescoped over the forward part of the
second wooden car. The forward platform of the
second wooden car was crushed, and as a result of said
wreck, one human being was killed, and thirty passengers were injured, fifteen of whom were removed to
hospitals. That said train of wooden cars was composed
of wooden cars numbered as follows: The first and colliding car, No. 1080; and the following, Nos. 845, 1051,
47, 1078, 904. None of said cars was equipped with the
modern "dead man's button" for the automatic cutting
off of power and application of brakes.
The first car, No. 1080, was built in 1903, and it, together with cars Nos. 1051 and 1078, both built in 1902,
were included in Group A required by Contract No. 4
to be retired prior to January 1, 1924, but permitted by
the Commissioners to continue in operation. Car 845,
built as a steam coach in 1887, Car. No. 47 likewise built
as a steam coach in 1884, and Car. No. 904 built in 1898,
were likewise of wood, old, obsolete, dangerous and unsafe. Cars Nos. 1051 and 904 were the subject of the
aforementioned investigation by the Joint Committee
and by the Committee on Transportation Facilities, following the aforementioned disaster of June 25, 1923.
That at the time of said accident, the brake handle, controlling the brakes of the first Car. No. 1080, failed to
function, and the brakes were not applied, and that said
accident would not have happened had said car the
modern "dead man's button."
That said wreck was due solely and only to the
culpable negligence of the executives and officials of the
Brooklyn-Manhattan Transit Corporation, and the


174




operating companies which it controls, in maintaining,
and the culpable negligence of the Transit Commissioners in permitting the use, continuance and operation
of, and failing to abate and remove, the aforementioned
wooden, dangerous and unsafe cars, and in failing to
require the installation of the modern automatic "dead
man's button."
Second Charge.-That among other things, the
Transit Commissioners were by law charged with the
duty of effecting a radical and permanent readjustment
of the entire transit system in the City of New York,
with a view to its enlargement, extension and improvement, and for the purpose of providing the public with
adequate, safe and convenient transportation. That in
the year 1919 and prior to the appointment of said Commissioners, the lines of the Brooklyn Rapid Transit
System and of the New York Railways Company were
in receivership by reason of general insolvency and so
continued until 1923. It was generally regarded and
understood that said receiverships and the failure of
the Railroad Companies to operate successfully, from
a financial viewpoint, and to furnish safe, adequate and
convenient transportation to the public, was due to
waste, mismanagement and in a large measure to overcapitalization of the operating Railroad Companies,
and it was the duty of the Commissioners to approve
only a reorganization of the Railroad Companies in
receivership at the time of their appointment, as would
proceed upon an economic basis and would effect an
elimination from the new capitalization of what was
generally regarded as "water" and the product of corporation stock manipulation, and presented no real
investment, and to require that said reorganization be
upon a sound financial basis, and that the activities


175




and operations of the reorganized companies, both
financial and transit, be conducted solely for the purpose
of promoting the interests of said companies and the
traveling public, and not for the purpose of stock promotion or manipulation, or with a view to influencing
the action of the securities and stocks of said reorganized
companies upon any stock exchange. It was also
the duty of said Commissioners to require and insist
that the management and control of said reorganized
companies be vested in directors, officers and managers
primarily and solely, interested in the welfare of said
companies and the efficient operation and enlargement
of their lines, and the safety, security and convenience
of the traveling public, and not in persons interested
solely in the manipulation upon any stock exchange of
the corporate stock or securities of!any holding or
operating companies. That it was the duty of said
Transit Commission to require and insist that adequate
financial provision be made in said reorganization, for
the immediate remedying and removing of the dangerous and defective condition that had been found to
exist in the cars, structure and equipment of the rapid
transit lines in the City of New York and failing which,
to require and insist that the net income and surplus
be applied to said purposes. That said Transit Commissioners failed, refused and neglected to carry out
and discharge any of the aforementioned duties, but
on the contrary, the said Commissioners permitted the
New York Railways Company to be reorganized along
the lines of its predecessor organization and upon the
basis of an inflated capitalization, dividends and returns
on which capitalization, in a large measure not represented by any real investment, can and will come only
by the imposition of unwarranted and illegal burdens


176




upon the public. That said Commissioners have likewise permitted the Brooklyn Rapid Transit Company
to be reorganized into the Brooklyn-Manhattan Transit
Corporation, a holding company for principally the
New York Rapid Transit Corporation (the successors
upon reorganization of the New York Municipal Railway Corporation), and other subsidiaries, and permitted
the over-capitalization of its predecessor, the Brooklyn
Rapid Transit Company, to be continued and concealed
by the issuance of both common and preferred stock,
without fixing a par value therefor, and by permitting
said Brooklyn-Manhattan Transit Corporation to issue
of said authorized stock, 249,468 shares of Preferred
Stock, and 769,911 shares of Common Stock, and by
permitting said Brooklyn-Manhattan Transit Corporation immediately after said reorganization, to set up
said Preferred stock on its books as of the value of
$100 per share, and its Common Stock as of the value
of about $54 per share, thereby laying a foundation
for prospective dividend distributions upon said stock
upon the basis of said alleged fictitious values, and the
diversion of the earnings of said corporation, from its
legitimate purposes, of making safe, adequate and convenient the operation of its transit lines.
That in truth and in fact said stocks are of a value equal
to but a small fraction of said amounts so set up as their
value upon the books of said corporation; that in truth
and in fact, within one year prior to the date hereof, said
Common Stock sold as low as $9.25 per share, and Preferred Stock under $35 per share, upon the New York
Stock Exchange where said stock is listed for trading;
that the difference between the value of said outstanding capital stock as the same has been entered upon the
books of said Brooklyn-Manhattan Transit Corporation,


177




and their value based on sales thereof as aforementioned
in the open market, is about $50,000,000, representing
water and fictitious investment, which the said Commissioners have tolerated and permitted to be carried upon
the books of the Brooklyn-Manhattan Transit Corporation, to the injury of the public of the City of New York,
and as a basis for a false cry that has been raised that
the rapid transit lines cannot be operated successfully
in the City of New York on the existing five-cent fare,
and for the purpose of accelerating a movement for the
raising of such fares; that in truth and in fact, upon the
elimination of its watered capitalization, the said Brooklyn-Manhattan Transit Corporation can successfully
operate its lines and remedy and remove the defects in
its structure and equipment, and afford a fair and reasonable return upon its real investment upon the basis
of a five-cent fare; that in fact the Brooklyn-Manhattan
Transit Corporation is governed by a directorate and
officers some of whom are serving in dual, antagonistic
and incompatible capacities; that certain of said parties
are primarily and principally interested in the actions,
manipulations and courses of prices and sales of the
stocks and bonds of said corporations, and that said
Brooklyn-Manhattan Transit Corporation is being managed and controlled largely with a view to the favorable
action of the stock market on the stocks and securities of
the said Company, and not in the interest of said Company or the traveling public.
That the Transit Commissioners have permitted the
said officials, directors and mangers, some of whom are
engaged in stock brokerage, jobbing and manipulation
business, to make public, facts and figures with respect
to income, expense and surplus of the Brooklyn-Manhattan Transit Corporation since its reorganization, for


178




the purpose of enticing an innocent and unsuspecting
public into the purchase of the stocks and bonds of said
corporation, at prices largely in excess of their real
value, by said means, and by means of unwarranted distributions to stockholders of moneys properly applicable
to the operation, improvement and development of its
lines. That it was the duty of said Transit Commissioners, with knowledge that said Railroad Company represented and claimed the existence of said income and
surplus to require and insist, that the same be applied
towards remedying and removing the defective conditions in the cars, structure and equipment, which had
been found to exist, thereby preventing the wrongful
diversion of said funds, and that the Transit Commissioners failed, refused and neglected to direct and require such application of said alleged income or surplus.
That it has been reported that for the year ending
June 30, 1924, the Brooklyn-Manhattan Transit Corporation earned a net surplus, after payment of all operating expenses, interest, rent, sinking fund accruals and
amortization, of $4,922,065. Notwithstanding the matters and things hereinbefore set forth, and the dangerous
and defective condition of the car, structure and equipment of said Brooklyn-Manhattan Transit Corporation,
and its failure to comply with the provisions of Contract
No. 4, the directors of said corporation, among other
things for the purposes of influencing thereby the action
of prices of its securities on the stock exchange, commencing May 1, 1924, and ever since, have paid divi,
dends at the rate of $6 per annum on each share of
Preferred Stock, an aggregate of about $1,500,000 per
annum, or at the rate of 18 per cent. per annum, upon
the basis of the low price at which said stock sold within
one year prior to the date hereof. That the Transit


179




Commissioners have permitted said dividend to be paid
and to continue, and the funds of the corporation and its
operating companies to be thus improperly diverted
from the legitimate uses and purposes of the coroporation and its controlled companies, to wit, for the purposes of removing its dangerous and defective cars,
structure and equipment. That said Commissioners
have permittted the said officers of the corporation to
represent to innocent and prospective purchasers of
stock of the Brooklyn-Manhattan Transit Corporation,
that after deducting the amount paid as dividend on the
Preferred Stock, that there was earned during the year
ending June 30, 1924, about $3.50 per share, on the
Common Stock, or at the rate of about 40 per cent. per
annum, on the low price at which said Common Stock
sold during the period of one year prior to the date
hereof.
That contrary to law and in violation of the letter
and spirit of the Rapid Transit Contract No. 4, the
Transit Commissioners have permitted the officers and
directors of the New York Rapid Transit Corporation
to divert, unlawfully use and employ its moneys and
funds and to charge the same as an operating expense
under Contract No. 4, for purposes of the advertisement
and acceleration of its aforementioned movement to impose upon the public an increased fare, and have tolerated and permitted the use of its cars by the said corporation for the display of posters and advertisements
calculated by misrepresentation and deceit to advance
and further said movement for an increased fare, and to
wrongfully arouse an unwarranted public indignation
against the administration of the City of New York,
and to wrongfully shift the responsibility for the present
intolerable traction conditions in said City, from the


180




Brooklyn-Manhattan Transit Corporation and operating companies to the City of New York.
Third Charge-That the Transit Commissioners have
failed and neglected, and are still failing and neglecting,
to direct and require that sufficient railroad cars, and
adequate, efficient and proper train crews and other
equipment, be furnished by the railroad companies under Contracts Nos. 3 and 4, as a result of which the traveling public, especially during the so-called rush hours,
receives inadequate and insufficient accommodation upon
the cars, and are crowded, packed and jammed beyond
the capacity thereof, into the cars of the railroad companies and into more or less solid masses, to the detriment
of the morals, health, decency and comfort of the traveling public, and in violation of the provisions of the
Public Service Commissions Law, the Rapid Transit
Act, and contrary to the provisions of Contracts Nos. 3
and 4. That said Commissioners have likewise tolerated
and permitted said condition of jamming, crushing and
packing of the public to prevail as well as during the socalled non-rush hours, without even pretense at an excuse from said railroad companies, and under conditions
which border on indecency and danger to health and
morals. That said Commissioners have tolerated said
railroad companies to deliberately embarrass, maltreat
and inconvenience the traveling public by wilfully and
without reason or cause, decreasing the number of trains
and cars operated after the passing of the so-called
peak-hour, with the result that the aforementioned conditions of crowding, jamming, packing and crushing
continue throughout the davy and into the late hours of
the niight.
Fourth Charge-That said Commissioners have failed
to properly administer and secure compliance with the


181




terms, obligations and duties placed upon the rapid
transit railroad companies under Contracts Nos. 3 and
4, and have failed to protect the rights and interests of
the City of New York in said contracts.
In Chapter 2, Article XLIX, paragraph 5, of Contracts Nos. 3 and 4, it is specifically provided as follows:
"Within thirty (30) days after the 30th day of
June following the beginning of such temporary
operation and annually thereafter the Commission
and the Lessee shall determine the classification and
amount of depreciation, and excess maintenance
not covered by the amount set aside under paragraph 4 of this article, during the preceding fiscal
year, and the deduction for such year shall thereupon be adjusted to conform with such determination."
It was the purpose of said contracts to set aside systematically at the close of each year the amount of depreciation applicable to the properties operated under
said contracts during the preceding fiscal year, and to
accumulate such depreciation funds for the retirement
and renewals of all units of properties. Said provisions
were inserted specifically for the purpose of preventing
the gradual disintegration of the properties of the railroad companies, such as had taken place during prior
operation on the various street railway properties in the
City of New York through the neglect of adequate provision for depreciation and proper renewals and maintenance of property.
That the Commissioners permitted the operating companies and particularly the Interborough Rapid Transit
Company operating under Contract No. 3, to continue
charging such inadequate sums for depreciation, that


182




they are practically negligible for the purposes set forth
in said contracts. That as a result, the financial integrity of said rapid transit properties has not been adequately safeguarded, insufficient funds for renewal and
replacements have been provided, and the properties
permitted to deteriorate, with a resultant deterioration
in service and a consequence that in the event of recapture by the City of New York, said properties will be
in an impaired condition requiring large expenditures
of money for repairs.
Fifth Charge-That the Transit Construction Commissioner, the predecessor of the Transit Commissioners,
had taken active steps to secure compliance by the operating companies with the provisions in Contracts Nos.
3 and 4 for depreciation allowance. Upon failure to
agree with the Interborough Rapid Transit Company
as to the amount of depreciation to be provided annually
under said Contract No. 3, said Transit Construction
Commissioner, under the provisions of Contract No. 3, demanded that the question be arbitrated, and named as his
arbitrator the Hon. Milo R. Maltbie on March 16, 1921.
In April 1921, the Interborough Rapid transit Company designated as its arbitrator Mr. Charles F. Uebelacker, and the two arbitrators then selected ex-Judge
Luke D. Stapleton. Said arbitration commenced, but
no steps have been taken to consummate said arbitration
since the abolition of the office of the Transit Construction Commissioner and the appointment of the Transit
Commissioners. That said Transit Commissioners have
failed, refused and neglected to proceed with said arbitration, and thereby to secure adequate allowance for
depreciation under the provisions of Contract No. 3.
Sixth Charge.-That said Transit Commissioners
are responsible for the administration in the City of
183




New York of the rental provisions contained in Contracts Nos. 3 and 4.   Under said contracts each
Company is required to pool all revenues directly or
indirectly derived from the operation of the properties,
and then to pay out of the amount so pooled all necessary operating charges as fixed in the paragraphs in
said contracts defining.the cost of operation.
That said Transit Commissioners have failed and refused to secure observance by said railroad companies
of said last mentioned provisions contained particularly
in Contract No. 4. That said entire revenues derived
from the operation of the properties have not been
pooled. That said Commissioners have permitted the
said operating companies to exclude and retain from
said revenues large sums received as rentals from cars
temporarily leased to other corporations, as well as
the proper share of joint revenues with other companies,
and the amount received as interest upon bank balances
on current cash used in operation, the aggregate amount
of moneys so improperly excluded being approximately
$1,000,000.
Seventh Charge.-That said Commissioners have,
contrary to and in violation of the provisions of the
said Contract No. 4, permitted the railroad companies
to include large, exorbitant and unwarranted charges
for the maintenance of the receivership in the cost of
operation. That said Commissioners have permitted
unjust, unwarranted and unlawful methods of apportionment of joint operating costs incurred in operation
with outside properties. That the Commissioners have
failed and refused to provide an adequate examination
of the operating accounts of the lessees under Contracts
Nos. 3 and 4, and have failed and refused to exclude
from the cost of operation of the railroad properties,
184




all items of expense which should not be properly
charged against operation under said Contracts Nos.
3 and 4.
Eighth Charge.-That the Transit Construction
Commissioner, the predecessor of the Transit Commissioners, had made objections to the inclusion of a number of substantial and important items in the Twelfth
and Nineteenth Quarterly Determination of Cost by
the Engineers under Contract No. 4. Upon failure
to reach an agreement with the railroad company and
in pursuance of the provisions of Contract No. 4, said
Transit Construction Commissioner resorted to the
arbitration provision contained in said contract and
appointed Hon. Charles S. Hervey, a previous Public
Service Commissioner, as the City's representative on
the Board of Arbitration, and that the Railroad Company likewise appointed as its representative, Benjamin
G. Paskus, but upon the abolition of the office of said
Transit Construction Commissioner, and the appointment of the Transit Commissioners, said Transit Commissioners failed and neglected to proceed with said
arbitration, to the detriment of the City's rights and
interests under said contract.
That prior to the abolition of the office of Transit
Construction Commissioner, said Commissioner objected and excepted to a number of important and
substantial charges which the railroad companies had
included among the operating expenses under Contracts
Nos. 3 and 4, but that his successors, the Transit Commissioners, have failed to urge such objections and
exceptions, and have done nothing to cause the removal
of said unjust and unwarranted charges against the
rights and interests of the City of New York under
Contracts Nos. 3 and 4.


185




Ninth Charge.-That the Transit Commissioners
have violated their duties to the public by creating and
maintaining expensive and useless positions in the
appointment of officers who by previous training and
experience were unfitted for the duties and responsibilities of their positions.
That said Transit Commissioners in creating useless
positions filled the same with appointees who secured
their office solely because they were favorites of the
Commissioners.
Notwithstanding that valuation reports have long
since been completed and hearings of the Commission
on such valuations have been discontinued, the large
organization which said Transit Commissioners created
has been continued without the accomplishment of any
object in the public interest. The said Transit Commissioners have, in connection with said organization,
employed and continued to retain useless and highpriced employees, as well as a large clerical force, at
the expense of the City of New York.
That the total cost to the City for salaries and expenses of the Commission has been about $7,500,000;
that said sum is almost entirely a waste of the City's
funds, and that the Transit Commissioners have failed
and neglected to accomplish anything of a constructive
character to relieve the emergency, and the danger and
inconvenience in the transportation facilities of the City
of New York.
Tenth Charge.-That the Transit Commissioners
have failed and neglected to discharge the duty
resting upon said Commissioners under the Public Service Commissions Law of restoring unified service which
had been temporarily split up during the period of receivership of the Railroad Companies in New York and


186




Brooklyn, and of reinstating a universal five-cent fare
as it existed prior to these reciverships. The Legislature, in the Transit Law of 1921, which created the
Transit Commission, had specifically, in connection with
the proposed plan for the relief of the emergency then
existing in the transit situation, made provision looking
to a unification and betterment of the street railway
lines with a view, as far as possible, for the maintenance
of the five-cent fare.
That contrary to the spirit and intent of said Law and
against the insistence of the Corporation Counsel of the
City of New York, that the Brooklyn City Railroad
Company be included in the newly organized B.-M. T.
system, so that all of the surface lines in the Borough of
Brooklyn could be operated as a unified system for the
service of the public, the Transit Commissioners permitted the Brooklyn Rapid Transit Company to be reorganized into the Brooklyn-Manhattan Transit Corporation without the inclusion of the properties of the Brooklyn City Railroad Company, thereby continuing the
splitting up of the lines caused by the receivership, on an
arbitrary basis and a duplication of fares, and other interference with reasonable service, to the injury of the
public.
That the Transit Commissioners, against the insistence of the Corporation Counsel of the City of New
York, refused to direct and require, in connection with
the reorganization of the Brooklyn and New York Companies, that provision be made for the restoration of
transfers on all points of intersection as thev had existed
prior to the dissolution, following the receiverships.
That the Transit Commissioners have failed and neglected to require the Brooklvn City Railroad Company
to furnish proper service, nothwithstanding that the said


187




corporation is conducting its operations on a profitable
basis since the receivership, to wit, for the fiscal year
ending June 30, 1923, it reported a net return of 18%
upon its $12,000,000 capital stock outstanding, and that
the said Commissioners have likewise failed and refused
to direct said Railroad Company to restore the transfers in effect prior to the receivership.
Eleventh Charge.-That the Transit Commissioners
have permitted the officers and managers of the Brooklyn-Manhattan Transit Corporation, to nullify, avoid
and evade the provisions of Contract No. 4. That in
and by said Contract No. 4 specific provision was made
for the retirement from service, prior to January 1,
1924, of 118 wooden, obsolete and dangerous cars; that
said Transit Commissioners wrongfully and contrary
to the provisions of said Contract, permitted said cars
to remain in operation in the servce of the Railroad
Companies after January 1, 1924, and to the date
hereof; and contrary to the express provisions of said
Contract No. 4 and its clear purpose and intent that ultimately the Brooklyn public should be transported in
steel cars only, and to that end, that from time to time
as fixed in said contract, the wooden cars be retired, the
said Transit Commissioners, for the purpose of perpetuating and continuing in operation said wooden cars,
have agreed with the Brooklyn-Manhattan Transit
Corporation and its operating company, the New York
Transit Corporation upon a policy of alleged reconstruction of about one-half of the present wooden equipment of said Railroad Company into 150 three-car
units, each consisting of two motor cars with a trailer
car between, permanently connected together and operated as a single three-part "articulated unit." That
the continuance in use of said wooden cars so recon

188




structed, is contrary to the provisions of Contract No.
4. That the Transit Commission, on June 10, 1924,
approved the reconstruction of 50 of such wooden cars
contrary to and in violation of the provisions of Contract
No. 4, thereby perpetuating to the people of the City of
New York the danger from said wooden cars.
Dated, New York, October 24, 1924.


189




EXHIBIT B


LETTER-GORDON TO SHERMAN
January 6, 1925.
In re management and affairs of the Transit Commission before the Hon. John V. McAvoy.
Mr. Henry L. Sherman,
42 West 44th Street,
New York City.
Dear Sir:
I imagine that the investigation into the affairs and
management of the Transit Commission is nearing its
close.
In view of Commissioner McAvoy's ruling at the outset of the hearing, that the representatives of The City
of New York would not be permitted to introduce
evidence, examine or cross-examine witnesses, Mr.
Steuer and I, who were retained to make such proof and
conduct such examination, withdrew from participation
on the second day of the hearings and I have refrained
from attempting, in any way, to interfere with the course
of the investigation so determined by Commissioner
McAvoy. The charges which the Board of Estimate
and Apportionment made to Governor Smith against
the Transit Commission remain unheard. I assume that
at the appropriate time the Board of Estimate and
Apportionment will be afforded the opportunity of proving them.
190




I have read the testimony thus far adduced before
Commissioner McAvoy. Although I have only been
studying the Transit situation less than three months it
is clear to me that at least ninety per cent of the evidence
thus far presented is but a repetition of matters many
times previously stated and restated, and now to be
found in public records.
Apparently it was not your purpose to attempt, in
this proceeding, proof of the Board of Estimate's
charges against the Transit Commission. Notwithstanding, however, many of the allegations of neglect
and failure to perform duty, charged against the
Transit Commission, have been sustained in the investigation before Commissioner McAvoy, principally
through the admissions of the Transit Commissioners,
their associates and representatives.
It hardly needs extended argument that many of the
essential allegations of the first charge are already
proved. By your questioning you showed from the
mouth of McAneny that although an emergency existed
in the Transit situation in 1921 when the law was passed
which created the Transit Commission, and athough the
Transit Commission was ostensibly created for the purpose of remedying these conditions, and although the
Transit Commissioners came into office in April, 1921,
they took no steps to even conduct any public inquiry
into the service of both the IL R. T and B. R. T. until
March 15, 1922, and that no order affecting that service
was made by the Transit Commission until May, 1922,
as to the I. R. T., and July, 1922, as to the B. R. T.
It is needless to refer to the report of the Joint Committee of Engineers made in January 1924; the result
of the investigation made into the cause of the Flatbush


191




and Fifth Avenue wreck of June, 25, 1923. Mr McAneny testified that that report had the approval of
the Transit Commission. In it attention was called to
the imperative necessity of immediately replacing 19000
ties, 2590 outer guard timbers, 15000 joints and 77000
inner guard timbers, and of installing the modern "dead
man's button", and to the necessity of painting over the
corrosions which prevailed in the elevated structure of
the B. M. T., and to the fact that notwithstanding the
Transit Commission has never made an order requiring the remedying of these defects with the resultant accident at Ocean Parkway station on August 5,
1924, which might have been avoided and human life
might have been saved if the modern "dead man's button" had been installed.
I direct your attention to the fact that Mr. IMcAneny
testified that no order was even made requiring the
B. M. T. to paint its corroded structures, because, to
use his own language, the company had no money with
which to buy paint, and yet, that during that very month
of April, 1924, the B. M. T. declared a dividend at the
rate of 6 per cent per annum on its preferred stock, an
outlay of about $1,200,000 per annum,-only nine
months after the reorganization of the B. M. T. which
occurred in June, 1923; although in the certificate of incorporation of the B. M. T., it is provided that the preferred stock shall not be cumulative as to dividends until July 1, 1926. Besides for the year ending June 30,
1924, the B. M. T. reported a net earning from subway
and elevated operation of $2,492,982.42, or at the rate
of about 30 per cent. of the price at which the common
stock of the B. M. T. sold within nine months prior to
the date of that report.


192




I note from the testimony of Mr. Harkness that he
claims that some water was squeezed out of the capitalization of the B. R. T. upon the reorganization when "R"
was changed into an "M." He states the capitalization of
$164,000,000 as follows: $139,000,000 bonds and $25,000,000 preferred stock. IHe places no value upon the
common stock because he says that it has "no par value".
It is singular that he should fix "no value" on the
B. M. T. common stock and at the same time fix $100, as
the value of the preferred stock which is also of "no par
value". He forgot to state that in the balance sheet
which the B. M. T. issued immediately after the reorganization the common stock was valued at $40,000,000
which added to the amount of capitalization which
Harkness figured makes a total of $204,000,000.  I
confidently feel that at least $100,000,000 of that is unadulterated water, and of the remaining $104,000,000
a substantial part is represented by obsolete and about
to be scrapped property.
You will remember that I directed your attention,
over the telephone, to the fact that in the plan of reorganization of the B. R. T. on pages 6 and 7, it is recited
that "power plants, repair shops, car barns common to
the use of both surface lines and the subway and elevated lines were operated by the Brooklyn Rapid Transit Company itself, and the power plants are also owned
by the Brooklyn Rapid Transit Company" and to the
fact that under Section 2, of Subdivision 8, Article I,
of the Public Service Commissions Law, it is provided,
that a railroad corporation includes "every corporation
* * * owning, operating or managing any railroad or
other equipment used thereon or in connection therewith." Surely power plants, car barns, repair shops are
equipment, and yet the Transit Commission permitted
193




the organization of the B.-M. T. as a business corporation, not subject to control or supervision by the Transit Commission.
You will remember that I called your attention to the
fact that it is provided in Section 55 of the Public Service Commission Law, that the capital of a consolidated
or merged corporation shall not exceed the capital of
the corporations consolidated at par value thereof and
any additional sum actually paid in in cash, that necessarily this section contemplated that a reorganized company could only be incorporated with "par value"' stock,
because otherwise, it would be impossible to apply this
section, and that apparently the Transit Commission approved a reorganization of the B. R. T. with "no l)par
value" stock, both common and preferred, that so section 55 could not be applied. How well the B.-M. 1'T.
succeeded, in creating a situation where for the purposes
of the Transit Commission the capitalization would be
one amount, and for the purposes of stock manipulation
another amount, may be inferred from a comparison
between Mr. Harkness' testimony before Commissioner
McAvoy, where he fixes the capitalization at $164,000,000, and the records in Wall street which show the capital at $204,000,000, not taking into account earnings
and surpluses since reorganization.
The third charge needs but brief reference, namely:
the charge of intolerable service and undue crowding
and jamming in our subways. No better proof in support of this charge need be offered than the testimony
of Mr. McAneny as to the inactivity of his commission
for one year after its appointment, and the character of
the service given today by the traction companies. Besides there might be taken into account the testimony
of the Transit Commissioners and the traction com

194




panies, that under Contracts 1 and 2 involving a joint
expenditure by the City and the I. R. T. of $100,000,000, 1,140 cars were bought and used in the operation
of the subways, whereas under Contract No. 3 which involved twice the expenditure, namely, $200,000,000,
only 795 cars were bought until July, 1923, and since,
only 100 additional in 1923 and another 100 cars within
recent months, and, that the total equipment for subway
operation under Contracts 2 and 3 to date, is only 2,135
cars, when, on the basis of 1140, as necessary under Contracts 1 and 2, there should be at least 3,500 cars today.
Charges 4 and 5 need not be commented upon. No
depreciation reserve has been up under Contract 3.
Commissioner Delaney attempted to secure such reserve, the Company failing to comply, he resorted to
arbitration. The Transit Commission has conceded
that it has abandoned that arbitration. It claims that
that reserve amounts to about 1$12,000,000. Please
bear in mind that that would be the City's money on
recapture. Commissioner Harkness says that the reason the arbitration was abandoned was that every body
was good to the poor old I. R. T.; it needed financial
assistance; that the Manhattan Railway Company
agreed to reduce the rent it was charging; that the bondholders agreed to defer payment of sinking fund requirements, and it was for the City to make a gift to
the I. R. T. of this $12,000,000, at least temporarily.
Of course it needs no argument that it was not within
the power of the Transit Commission to do charity with
the City's money, but in any event the amount was
not $12,000,000, but nearly $30,000,000, payment of
which, these charitable gentlemen have waived.
The sixth charge namely, that the Company has not
accounted fully for its receipts from operation is like

195




wise substantially admitted. The alibi of the Transit
Commission is that the contract with the City does not
provide that objections may be made against such withholding of income by the railroad companies, until there
is in effect, a final accounting between the City and the
Railroad Companies. I am not, and surely you are
not in agreement with this interpretation of the law.
Surely the rights of the City to participate in this income could be determined upon an interlocutory
accounting. I am not ready to believe that the City
is without remedy.
The charges that the Transit Commission failed to
prosecute objections, which Commissioner Delaney had
urged, to improper and unwarranted expenses of the
railroad companies and to the inclusion in the determination of costs of improper items, are answered by the
Transit Commission, by the omnibus statement that an
adjustment has been made of all the matters which were
the subject of the objections. I am rather surprised
that the inquiry was not pursued for the purpose of
determining what the objections were and how they
were "adjusted." I think you will find upon inquiry
that in the largest measure the alleged adjustments
consisted of the withdrawing of the objections and
waiver of the City's claims.
Of course I need say nothing about the Brooklyn
City Railroad situation. The unified transfer system
between the Brooklyn Heights and Brooklyn City was
conceded disrupted. The reorganization of the B. R. T.
was approved on that basis. The point is not, as the
Transit Commission would have it, that the Brooklyn
City could not be compelled to lease its lines to the
Brooklyn Heights, but that under the provisions of the
Public Service Commission Law, the Transit Commis

196




sion could have compelled these separate companies to
issue transfers to each other upon appropriate terms.
I have referred to the foregoing matters because I
realize that in the great mass of the detail contained in
the two thousand pages of testimony already taken
within a comparatively brief period of time, the significance of certain of the evidence and its relationship to
the basic questions presented in the inquiry, may have
been lost, and in the hope that by my references suggestions may come to you for further inquiry from witnesses already examined along the lines that I have indicated.
I am writing this letter principally because there has
crept into the record matters emanating from both the
Transit Commission and the Railroad Companies tending to execuse the intolerable service, on our rapid transit lines, because of alleged large deficits from operation, on a five cent fare basis.
Of course from the time when figures first came into
existence, there were always some who were able to distort them, and so it has been in this proceeding. The
fact is that from the very commencement of operation
under Contracts 1, 2, 3 and 4 the subways and elevated
lines operated under those contracts, always brought a
profit to the railroad companies, except during the
years 1920 and 1921 of the receivership of the B.-M. T.,
when besides there was an extraordinary cost of operation, due to strikes.
I am sending you certain data which I have caused
to be prepared to which I shall make references as exhibits. Exhibit A shows that during every year, commencing 1915 and ending 1924, excepting 1920-1921,
the Brooklyn Company operating under Contract No.
4 realized a net profit from operation of its rapid transit


197




lines after paying all expenses of operation, maintenance, interest, rentals and making provision for sinking funds and other contractural deductions.  The
profits in 1924, 1923 and 1922 are respectively as follows:  $2,492,982.43; $1,038,939.65; $1,106,623.12.
The interest deductions include all the interest on all of
the obligations of the Brooklyn Company including its
watered bonds on the old elevated lines.
Exhibit B shows that the I. R. T. during every year
without exception commencing 1912, made a substantial
profit from operation of its lines under Contract No. 3,
after likewise paying all interest, maintenance, operating
expenses, etc., the profits for the last three years being
likewise as follows, respectively: $3,359,259.73; $2,002,854.82; $2,012,587.36. Please bear in mind that
these are the company's figures, that none of the items
of expense or income have been questioned, including the
extravagance and wasteful and unbusinesslike expenditures, which should not be under municipal operation.
They include what brokers and money-lenders exacted
on loans, also charges which belonged to other and less
profitable properties of the companies and not operated
as part of Contracts 1, 2, 3 and 4.
As against the results of these operations I am submitting to you two schedules which I am sure you will
find very illuminating. You will bear in mind that in
the computation made in Schedules A and B no account
was taken of interest on the City's $250,000,000 investment under Contracts Nos. 3 and 4.
If the City, instead of the Company, had operated
the lines under Contract No. 3 and the City paid only
the 4 per cent. interest, which it does, without in any
way disturbing any of the expense items reported in
Schedule A, there would have been earned from the


198




operation of the I. R. T. subway lines during the year
ended June 30, 1924, a sum sufficient to pay the interest on the entire investment of both the City and the
Company and besides a net profit of $4,390,000. If the
computation of interest is made upon the basis of the
investment of City and Company, properly depreciated
as it should be, namely, on $250,000,000, after payment
of all operating and maintenance expenses and interest
there would have been a profit of $5,950,000 during the
same year.
Exhibit D will also disclose to you the true situation
with respect to the B.-M. T. under Contract No. 4.
Upon the basis of the operations of the B.-M. T.'s subsidiary, for the first three months of the current fiscal
year that corporation will earn from rapid transit lines
after payment of interest of 4 per cent. per annum on
the Company's as well as the City's investment, a total
of $240,000,000, a net profit of $1,390,000.
I also in conclusion desire to direct your attention to
another matter. You will remember that there is some
evidence in the record as to what the cost of construction
of new subways will be, in comparison with costs under
Contracts Nos. 3 and 4. I believe there is some testimony to the effect that future construction would cost
about 125 per cent. more than the cost of construction
under Contracts Nos. 3 and 4. There appears to be documentary proof which shows that the cost of construction
will be much lower.
I am sending you Exhibit E. That is a copy of a
valuation report, made by the present Transit Commission, of properties of the Brooklyn Rapid Transit system as of June 30, 1921; showing both the original cost
and the 1921 bases. You will note that the New York
Consolidated Railway Company then had invested un

199




der Contract No. 4 about $75,000,000. Its total investment to date is $82,000,000, so that in 1921, 90 per cent.
of its investment under Contract No. 4 had been made,
and you will note that the 1921 price basis for this investment, was only $106,000,000, in other words, that the
1921 value was about 42 per cent. in excess of the original cost. I understand that costs in 1921 were fully
as high, if not higher, than they are today.
In connection with these figures you should also bear
in mind that the so-called cost of construction set forth
in this schedule represents a mass of items aggregating
a substantial part of the whole, not representing real
cost of construction, namely, losses from delay, duplications, renewals charged as additions, commissions, excess interest, loan brokerage fees; and other extravagant overheads, and that the 1921 values were adjusted
in relationship to these exaggerated costs.
Lastly may I be permitted to again suggest, as I did
on the day Mayor Hylan testified, that the names of
the persons who shared in the $6,484,000, in part incurred as an expense of a reorganization of the B. R. T.,
and the amount which they received should be the subject of inquiry.
Very truly yours.
HARRY A. GORDON,
Special Counsel.


20()0




EXHIBIT C
INTERBOROUGiiRAPID TRANSIT COMPANY
SUBWAY DIVISION
Results of Operation Years Ended June 30, 1912 and 1915
1924         1923        1922         1921         1920         1919


to 1924
1918          1917           1916           1915          1912


Operating revenues:
Passenger.......................................
Other..........................................
Total operating revenues.....................
Operating expenses:
Maintenance of way & structures (actual)..........
Maintenance of way & structures (depreciation).....
Maintenance of equipment (actual)................
Maintenance of equipment (depreciation)...........
Operation  of power plant.........................
Operation of cars.. '.............................
Injuries to persons and property...................
General & miscellaneous (inel. traffic expenses)......
Total operating expenses.....................
T axes   accrued.......................................
Total revenue deductions.....................
Operating   incom e....................................
Non-operating   income................................
G ross   incom e........................................
Deductions from gross income:
Interest........................................
Rentals........................................
Sinking fund and other contractual deductions......
Total deductions............................
N et   incom e.........................................
Total net income 1918 to 1924......... $16,986,740.34
Depreciation adjustment (a)
Depreciation credits (net) included
in operating expenses detailed
above........................................
Net income adjusted according to
actual expenditures.............
Total adjusted net income 1918 to 1924.  162432,229.01


$35,746,659.35
2,645,975.26
$38,392,634.61
2,586,152.82
350,883.73
4,065,310.55
Cr 475,599.22
5,358,138.15
8,489,661.31
718,694.53
863,391.22
$21,956,633.09
595,262.71
$22,551,895.80
15,840,738.81
318,4921.42
$16,159,2.31.23
8,343,197.91
2,637,173.46
1,694,884.64
$12,675,256.01
3,483,975.22


$33,830,663.35
2,513,595.11
$36,344,258.46
2,495,030.09
285,305.68
3,535,870.95
Cr 137,6821.79
5,794,640.30
8,406,687.93
635,780.99
939,505.57
$21,955,138.72
450,976.39
$922,406,115.11
15,938,143.35
492,969.53
$14,431,112..88
8,128,522.55
2,611,273.96
1,688,461.55
$12,428,258.06
2,002,854. 82


$32.,248,773.70 $31,969,2.89.00 $29,299,777.05 $23,043,791.27 $20,898,226.47 $20,689,282.42.$189550,564.65 $179256,315.31 $15,1929,818.60
2.,394,067.17  2,858,125.85  2,323,195.99  1,588,416.69  942,221.43  765,610.33    806,687.99   587,479.58    564,089.31
$34.642,840.87 $34,827,414.85 $31,622,973.04 $24,6321,207.96 $21.,840,447.90 $21,454,892.75 $19.357.252. 64 $17.,843.,794.89 $15,693~,907.91


2,446,130.28
Cr 90,416.98
2,714,368.52
819, 201. 28
5,006,603.34
8,2.05,235.69
417,900.45
845,401.61
$920,364,424.03
-447,260.15
$920,811,684.18
13,831,156.69
581,677.85


2,378,855.53
Cr 10,591.32
2,686,592.44
865,803.84
5,148,486.61
9,488,772.33
432,886.77
838,497.49
$21,829,303.69
435,403.59
$22,264,707.28
12,562,707.57
579,451.49


1,974,783.59
175,578.57
2,463,654.07
761,889.18
3,754,419.16
7,758,184.33
502,236.80
770,741.65
$18,1611,487.35
436,765.37
$18,598,2.52.72
13,024,720.32
534,845.81


1,645,634.53
Cr 146,548.36
2,556,166.69
Cr 9238,5927.90
3,457,097.13
6,070,658.07
446,917.96
586,500.87
$14,377,898.99
882,175.29
$15,260,074.28
9,372,133.68
494,944.16


1,0121,147.82
Cr 923,325.64
1,396,756.80
Cr 21,393.94
1,986,508.54
3,939,386.87
390,482.51
478,619.292
$9,159,182..18
1,649,411.54
$10,808,593.72.
11,031,854.18
495,424.54


881,809.19
57,907.00
1,118,472.74
239,540.96
1,595,778.56
3,277000. 29
475,177.95
471,915.59
$8,117,602.2e8
801,511.50
$8,919,113.78
12,535,778.97
483,486.84


807,377.56
89,846.03
1,042,654.52
301,894.84
1,354,955.13
2,491,394.66
4.8.,604.26
358.,464.71
$6,875,191.71
503,629.70
$7,378,821.41
11,978,431.23
467,450.25


8489435.42
Cr 922,999. 07
977.,137.03
2.94,4721.32
1,190,411.25
2,2948,870.89
309,971.50
356,770.78
$6,2.03,070.12
442,371.86
$6,645,441.98
11.,198,352.91
484,504.49


766,505.71
10,804.65
1.685,0218.38
632,919.94
1,199,940.592
21,132,9691.2.4
250 947.87
408,029.76
$6,517,868.07
3639802.92
$6,881,670.99
8,812,236.92
1,253,430.54


$14,412,834.54 $13,142,159.06 $13,559,566.13  $9,867,077.84 $11,527,278.72 $13.0191,265.81 $12.445.881.48 $112682,857.40 $10,065,667.46


8,2928,001.39
2,501,085.29
1,671,160.50
$12,400,247.18
2,012.,587.36


7,939,445.83
2,435,793.09
1,637,372.10
$12,012,611.02
1,129,548.04


7,050,485.50
2,,429,987.52
1,448,139.36
$10,928,612.38
2,630.953.75


5,931,802.86
2,424,237.70
1,218,685.80
$9.574,726.36
9292,351.48
385.076.26


3,829,524.64
2,396,957.57
366,326.84
$6,092,809.05
5,434,469.67


2,872,165.06
2,389,024.80
18,897.36
$5,280,087.22
7,7399178.59


2,744,364.62
2,381,419.76
$5,125,784.38
7,3220,097. 10


2,670.072.97
2.,360,865.95
$5.,030,938.92
6,651.,918.48


2,403,214.28
2,312,943.928
426,779.2.4
$5,142,936.80
4,922.,730.66


1924,715.49..........................
3,359,259.73,002,854.82   2.012.587.36


44,719.58.....................................................


1,129,548.04  92,6309953.75  D 92,724.78  5,389,750.09.............


SOURCES: 1919, to 1921 transcribed from Report of T. C. Bureau of Valuation, dated Feb. 15. 1922; 1922 to 1924 from Company's annual reports to T. C.rue           Ithefr
(a) The actual maintenance expenses in 1918. 1919 and 1924 exceeded the percentage of operating revenues which the Company provided under its depreciationrue.Iteefe
preciation account by the amount of the excess. In restoring the maintenance total to the actual expenses incurred, no depreciation whatever has as yet been providedfoi
income adjusted is therefore still overstated by an amount required as a depreciation charge for the given period.


rexed-ited der. The net




a
I




EXHIBIT D
NEW YORK RAPID TRANSIT 'CORPORATION (a)
Results of Operation Years Ended June 30, 1912 and 1915 t
1924         1923         1922        1921        1920         1919


o 1924
1918          1917           1916          1915          1912


Operating revenues:
Passenger......................................
O ther..........................................
Total operating revenues.....................
Operating expenses:
Maintenance of way & structures (actual).........
Maintenance of way & structures (depreciation).....
Maintenance of equipment (actual)................
Maintenance of equipment (depreciation)..
Operation  of power plant.........................
Operation   of  cars................................
Injuries to persons &  property....................
General & miscellaneous (incl. traffic & paving).....
Total operating expenses............
T axes  accrued......................................
Total revenue deductions.........
Operating   incom e....................................
N on-operating  income...............................
G ross  incom e.......................................
Deductions from gross income:
Interest........................................
R entals........................................
Sinking fund and other contractural deductions......
Total deductions............................
Net corporate  income................................


$26,859,741.47
792,689.52
$27,652,430.99
2,184,408.59
120,000.00
3,443,124.53
180,000.00
4,289,012.77
6,610,944.82
801,176.71
683,323.24
$18,311,990.66
1,414,394.73
$19,726,385.39
7,926,045.60
331,021.33


$24,045,043.51
605,320.27
$24,650,363.78
1,600,722.47
114,666.67
2,667,572.11
172,000.00
5,168,687.45
6,095,976.01
435,160.51
656,876.50
$16,911,661.72
1,344,287.40


$22,237,362.67  $20,250,842.06  $18,842,994.31  $15,255,790.12  $12,685,497.35  $11,100,527.19
750,101.03    744,384.51    676,083.24   411,378.25    344,304.92    247,530.73
$22,987,463.70 $20,995,226.57 $19,519,077.55 $15,667,098.37 $13,029,802.27 $11,348,057.92


1,473,042.15
120,000.00
2,619,606.31
180,000.00
4,372,381.25
6,193,243.64
340,466.30
570,022.72
$15,868,762.37
1,221,153.03
$17,089,915.40
5,897,548.30
722,669.75


1,413,333.82
430,506.22
2,750,461.78
645,759.34
4,444,864.33
7,961,883.85
364,053.53
732,879.78
$18,743,742.65
1,080,773.01
$19,824,515.66
1,170,710.91
451,708.33


1,204,414.05
395,320.46
2,991,202.26
Cr 881,731.67
3,973,837.67
6,245,742.31
407,813.68
740,930.30
$15,077,529.06
972,854.79
$16,050,383.85
3,468,693.70
374,387.18


735,372.82
121,828.69
1,893,703.37
Cr 408,753.71
3,114,094.48
4,219,960.37
492,390.53
438,134.62
$10,606,731.17
864,451.10
$11,471,182.27
4,195,916.10
343,381.02
$4,539,297.12
1,978,701.44
2,373,233.84
17,467.02
$4,369,402.30
169,894.82


528,718.10
252,568.28
1,191,552.25
Cr 18,870.06
2,213,243.16
2,681,640.90
284,434.11
340,221.07
$7,473,507.81
793,054.55
$8,266,562.36
4,763,239.91
287,000.01
$5,050,239.92
1,984,870.80
1,745,606.90
4,511.00
$3,734,988.70
1,315,251.22


558,624.37
122,807.06
1,022,239.33
Cr 914.15
1,744,965.04
2,240,063.62
230,558.41
303,978.04
$6,222,321.72
734,362.03
$6,956,683.75
4,391,374.17
308,474.77
$4,699,848.94
1,981,339.98
1,188,288.31
6,763.30
$3,176,391.59
1,523,457.35


$9,703,384.31
187,115.23
$9,890,499.54
494,863.49
98,026.43
807,681.83
82,463.11
1,553,417.29
1,946,310.29
190,857.49
308,044.04
$5,481,663.97
545,403.98
$6,027,067.95
3,863,431.59
398,702.98
$4,262,134.57
1,998,280.62
746,563.14
4,094.01
$2,749,937.77
1,512,196.80


$8,370,004.24
183,240.98
$8,553,245.22
443,199.14
69,608.89
718,881.44
50,910.60
1,363,326.92
1,623,902.33
150,382.67
259,708.15
$4,679,920.14
541,007.61
$5,220,927.75
3,332,317.47
392,632.98
$3,724,950.45
1,976,531.04
184,933.71
3,838.75
$2,165,303.50
1,559,646.95


$7,998,641.88
382,049.49
$8,380,691.30
405,659.64
9,407.39
585,238.89
39,427.90
1,304,787.85
1,528,055.14
105,845.38
244,534.51
$4,222,956.70
616,678.77
$4,839,635.47
3,541,055.83
172,676.23
$3,713,732 06
1,665,252.18
447,743.49
$2,112,995.67
1,600,736.39


$18,255,949.12
6,394,414.66
993,183.98


$ 8,257,066.93 $ 7,387,598.64 $ 6,620,218.05


$1,692,419.24  $3,843,080.88


5,460,262.01
292,930.50
10,892.00
$5,764,084.51
2,492,982.42


$2,075,331.21
4,262,499.78
10,828.00
$6,348,658.99
1,038,939.65


$1,238,684.23
4,263,852.66
11,058.04
$5,513,594.93
1,106,6923.12


2,072,481.27
4,200,918.08
16,757.00
$6,290,156.35
D 4,667.737.11


1,958,908.48
2,954,836.24
6,046.50
$4,919,791.22
D 1,076,710.34


SOURCES: 1912 to 1991 transcribed from report of T. C. Bureau of Valuation, dated Feb. 15, 199.; the other figures transcribed from annual reports to the Commission.
(a) The New York Rapid Transit Corporation became the latter part of 1923 the successor to the New York Consolidated. The latter was organized in 1912.








EXHIBIT E


B.-M. T.-NEW YORK RAPID TRANSIT COMPANY (SUBSIDIARY) RESULTS OF OPERATIONS FOR 1924 AND
1925-ELIMINATING TAXES
Return-Assuming complete municipal ownership and
not questioning operating expenses as
reported by the company
The first annual report of the Brooklyn-Manhattan
Transit Corporation contains (page 6) the following
summary statement showing the results of its operations under Contract No. 4 for the year ending June
30, 1924.
Year Ended
June 30, 1924
1. Revenue........................$27,707,951.76
2. Operating deductions and company's
first Preferential............... 23,463,470.97
3. Balance available for return on new
money invested under contract..... 4,244,480.79
4. Company's Second Preferential representing interest and sinking fund
on Company's contribution to construction and equipment under contract..........................  5,316,510.00
5. Deficit representing amount by which
revenue failed to equal interest and
sinking fund on company's contribution to construction and equipment under contract............ 1,072,029.21


205




Year Ended
June 30, 1924
6. City's Preferential representing interest and sinking fund on city's contribution to construction under contract, unearned and unpaid...... 4,076,918.9.5
7. Deficit representing amount by which.
revenues failed to e(qual company's
and City's interest and sinking fund
on contributions to construction and
equipment.....................  5,148,948.06
RESTATED TO REFLECT MUNICIPAL, OWNERSHIP AND
OPERATION
The above statement shows that during 1924, net
revenue failed by $5,148,948.06 to meet the amount
necessary for annual interest and sinking fund requirements under the contract. If the lines operated under
Contract No. 4 had been constructed exclusively and
entirely with the aid of city credit and were operated
during 1924 by the city so as to exempt them from taxation and other public charges, what would have been the
result?
Item 3 in the table above shows as a balance
available for return on new money invested under the contract..............$$4,244,480
To this should be added, the company's first
preferential, which had been deducted in
reaching said Item 3, namely............ 3,500,000
Making a total earned by the company during  1924  of........................... $7,744,480
This amount however reflects the deduction
of taxes (local, state and federal), amounting to $1,414,394 (see report of New York
206




Rapid Transit Co. for 1924 to Transit
Commission). No taxes would have been
levied against the rapid transit properties
or earnings therefrom had they been operated by the city. Hence, to determine
earnings under the assumption of municipal operation, there should be restored to
incom e..............................  1,414,394
Making a total available for interest on City
bonds and other purposes..............$9,158,874
The determined cost and cost of property in operation, as of June 30, 1923, were as follows:


City's contribution......
Company's contribution.
Original elevated lines*..


Determined
Costs
$149,494,970
82,829,150
28,534,060


Cost in
Operation
$125,095,798
81,570,287
28,534,060


Total............ $260,858,180 $235,200,145


Included in the company's contribution
tract No. 4 are the following items of cost:
Debt discount and expense............
Taxes.............................
Interest............................


under Con

$2,310,000
405,014
11,058,025


Total.........................    $13,773,039
If the city had financed the complete project, debt discount and taxes would have been saved and interest cost
would probably have been reduced by about one-third.
So on the hypothesis of complete city construction, there
may be eliminated from cost:
* Original cost as of December 31, 1922, as estimated by Transit Commission's engineer.
207




Debt discount and taxes..............  $2,715,014
Interest...........................  3,686,008
Total..........................  $6,401,022
So from the cost of property in operation,
as of June 30, 1923................. $235,200,195
there may be deducted..............  6,401,022
Making a total assumed investment on
which interest should be earned....... $228,799,173
Assuming a rate of 4%c to meet the interest on city bonds, earnings for 1921
should  have  been....................  $9,151,967
The amount available, as recomputed
above was.........................   9,158,874
Leaving an excess of.................    $7,107
This excess leaves no margin for sinking fund payments or for more generous payments to depreciation
funds.
RESTATED TO REFLECT INCREASED REVENUE FOR 1925
Taking due recognition of operating rentals and restoring "taxes" to revenue, we find that for the first
three months of the fiscal year 1925, there was a net
revenue of $2,517,300 as compared with a revenue of
$2,024,765 for the corresponding three months of 1924
-an increase of $492,535 or over 24 per cent. Assuming, however, that the annual increase will be only 20
per cent., revenue for 1925 should exceed that for 1924
by $1,831,775, making a total of $10,990,649. This
would provide a return of 4 per cent on about $275,

208




000,000 of investment. But it is not likely that the
average amount in operation during 1925 will exceed
$240,000,000.
Accordingly.
With assumed earnings of.............. $10,990,649
and interest requirements of 4 per cent
on  $240,000,000....................  9,600,000
There will be an excess for sinking fund or
for increased depreciation contribution or
for increased service.................. $1,390,649


209




EXHIBIT F


I. R. T.-ADJUSTMENTS FOR DEPRECIATION-INTEREST
COMPUTED AT 4 PER CENT.
EARNING POWER OF SUBWAYS OPERATED UNDER CONTRACT
NO. 3 BY THE INTERBOROUGH RAPID TRANSIT COMPANY
For the year ended June 30, 1924, the Interborough
Rapid Transit Company reported an operating income
for the Subway Division amounting to $15,840,738.81.
This consists of the gross revenues derived from subway
operation, aggregating $38,392,634.61, less operating
expenses and taxes incurred in subway operation, aggregating $22,551,895.80. These expenses include high
salaries of I. R. T. officers as well as royalties paid to
Hedley and Doyle and other items which would be saved
by municipal operation.
To the operating income thus reported there should
be added something over $100,000 for interest on bank
allowances and miscellaneous rentals derived from the
various operating properties. This is classed as nonoperating income. If it is added to the operating income, we have, in round numbers, a net income of $15,950,000 available as interest or return on the entire
subway investment, both city and company, under the
three contracts.
For the operating period in question, the Company's investment under Contracts Nos. 1 and 2 was
$36,011,000 and under Contract No. 3, $103,401,000,
total under the three contracts $139,412,000, while the
city's investment under Contracts 1 and 2 was


210




$62,676,000, and under Contract No. 3, $86,900,000
total under the three contracts $149,576,000. These
figures represent the cost of property in operation, excluding cost of property not yet placed in operation.
They represent actual cost, except for the company's
investment under Contracts 1 and 2, which is placed at
the net valuation recommended by the Transit Commission valuation report of February 15, 1922. The entire
investment, company and city, was $288,988,000.
ESTIMATED ACTUAL INTEREST ON INVESTMENT
To represent approximately actual conditions of the
several groups of investments, we should allow 5 per
cent. return on the company's investment under contracts 1 and 2, and 6 per cent. on the company's
investment under Contract No. 3.  The difference
of one per cent. in the rate represents the amortization
of the company's investment under Contract No. 3
during the life of the contract, while the property under
Contracts 1 and 2 belongs to the company at the termination of the contract. On this basis the total interest
on the company's investment in operation for the year
1923 amounts to $7,805,000.
The city's investment was made, naturally, at varying
rates of interest. But if we allow 4 per cent. on the total
investment of $149,576,000 we have a total interest
charge of $5,983,000. Adding this to the company
interest, we have a total interest burden against the
entire investment, aggregating
Company interest....................$ 7,805,000.
City interest.........................  5,983,000.
Total company and city............ $13,788,000.


211




For the sake of round figures, we may thus place the
total interest against the entire subway investment in
operation in 1924, at $13,800,000.  Deducting this
amount from the operating income of $15,950,000, we
have a surplus of $2,150,000.
This surplus represents, on the basis of the company's
own report, a return above interest on the entire investment operated under Contracts Nos. 1, 2 and 3,
City and Company. This result shows the error of the
claim, commonly made, that the subways are not paying
their own expenses and fixed charges. This, it must
be understood, includes full interest, not only on the
Company's, but also on the City's investment made
under the three contracts.
PROVISIONS FOR DEPRECIATION
It should be stated, however, that the net operating
income of $15,950,000 did not make any provision for
currently accrued depreciation. Instead of a charge in
operating expenses for depreciation, there was a credit
of $124,715.49, so that the expenses as stated were less
than actually incurred without providing anything for
depreciation.  If, then, adequate depreciation were
made, the surplus of $2,150,000 would be consumed
almost altogether for depreciation.
INTEREST COMPUTED AT 4 PER CENT.
It is to be noted that the interest on company investment was figured at 5 per cent. on $36,011,000 and 6
per cent. on $103,401,000, with a total interest charge
of $7,805,000 on company investment. But if the entire
property had been constructed and equipped by the
city, at the interest rate available to the city, the rate


212




would not have been 5 or 6 per cent., but on the average,
probably less than 4 per cent. If, then, on the basis
of the entire city investment and operation we were to
allow 4 per cent. on the entire investment, we would
have, in round figures, a total interest burden of only
$11,560,000 on property in operation for this fiscal year
ended June 30, 1924. If we deduct this amount from
the net operating income of $15,950,000, we have a surplus of $4,390,000. This, then, would be available not
only for the accumulation of an adequate depreciation
reserve, but also for the establishment of a real surplus
and for the improvement of service.
PAST ACCRUED DEPRECIATION
The investment figures used, for Company and City,
under the three contracts, aggregate $288,988,000.
This, as already explained, represents the actual cost of
property in operation for the fiscal year in question,
with the exception of Company investment under Contracts Nos. 1 and 2, where the recommended valuation
of the Transit Bureau was used. As to this latter figure,
both the original cost as used by the Bureau valuation
of the Transit Commission was excessive and the deduction for depreciation was inadequate. Otherwise,
it includes all of the properties provided under Contract
No. 3, Company and City, at full original cost without
deduction for depreciation. Moreover, the cost in the
case of the company investment under Contract No. 3,
was excessive as to various items, particularly for interest, discount and superintendence during construction.
If, then, we were to make an adjustment for the
actual net investment, including actual reasonable cost
of the properties, less depreciation for past wear and


218




tear and obsolescence, we should have a total of about
$250,000,000 for the property in operation during the
fiscal year in question. If, on this amount, the interest
is computed at 4 per cent. on the basis of the city credit,
we would have a total interest charge of $10,000,000.
If this is deducted from the operating income of
$15,950,000, we have a surplus of $5,950,000.
The last computation is unquestionably the proper
one to show the profitableness of the subway operation
under Contract No. 3 on the basis of the city credit
and municipal operation. There would thus be nearly
$6,000,000 available for accumulation of adequate depreciation reserve, as well as for surplus and improved
earnings. These figures show, without any doubt, that
the five cent fare on the subways operated under Contract No. 3 has been sufficient.
The so-called deficits were due to the excessive fixed
charges imposed on the subways by the extravagant
financial methods of the Company.  But even under
the actual conditions, the company has shown a substantial surplus above fixed charges for every year of operation.
The deficits as to the company preferentials under
the contract are due entirely to the unreasonable returns
allowed to the company prior to any return to the city
on investment under Contract No. 3.  The remedy is
not to increase the fare, but an equitable revision of the
contract.
Incidentally, it should be stated that while the subways have furnished a surplus to the Interborough
every year during the operation under Contract No. 3,
the elevated lines, with which the city has nothing to do,
have been operated at a large deficit. For the fiscal
year ended June 30, 1924, the subway surplus of


214




$3,483,975.22, as reported to the Transit Commission,
was balanced by a reported elevated deficit of $2,412,798.39.
For the period of 1918 to 1924, inclusive, the subways operated under Contract No. 3, as reported,
showed a surplus above all fixed charges amounting to
$16,986,741,34; but against this subway surplus there
was an aggregate elevated deficit, as reported, amounting to $24,662,419.17.
Here is the real difficulty of the Interborough, that
profitable subway property is hopelessly burdened with
the unprofitable elevated lines. As conditions are now,
the prospect is that for the future there will be an annual elevated deficit of about $2,500,000 to eat up the
subway surplus, and will thus prevent the accumulation
of adequate reserves and the rendering of proper service, as required under Contract No. 3, with the city.


215




Earnings of Subways Operated Under Contract No. 3 by the Interborough Rapid Transit,
Calculated on Four Different Bases, Year Ended June 30, 1924
Fixed     Interest Com- Interest Com- Interest Comcharges    puted at 5%   puted at 4%   puted at 4%
as reported   and 6% for    on entire   on depreciated
by the     Company and   investment  investment of
Company      4% for City  Company and   $250,000,000
investment      City
(1)           (2)          (3)           (4)
Gross earnings............................. $38,392,634.61 $38,392,634.61 $38,392,634.61 $38,392,634.61
Operating expenses and taxes................. 22,551,895.80 22,551,895.80 22,551,895.80 22,551,895.80
Operating incomeas reported by Company................ $15,840,738.81 $15,840,738.81 $15,840,738.81 $15,840,738.81
adding $110,000 interest on bank balances
and rentals (round figures)............. 15,950,000.00  15,950,000.00 15,950,000.00 15,950,000.00
Interest on investment (or fixed charges)....... 12,675,000.00 13,788,000.00 11,560,000.00 10,000,000.00
Surplus above interest (or fixed charges)....... $3,275,000.00 $2,162,000.00 $4,390,000.00 $5,950,000.00




EXPLANATIONS: The gross earnings, operating expenses and taxes are taken from the Company's 1924 report to the Transit Commission. The adjustment of $110,000 to operating income is to include interest on bank balances and rentals received
from operating property, so that in round numbers the net income available as return on subway investment is
$15,950,000.
In column (1) the interest deductions include the fixed charges as reported by the Company; rentals to City under
Contracts Nos. 1 and 2, plus interest and sinking fund charges on Company's bonds and other obligations issued
for subway purposes. The charges do not include interest on City investment under Contract No. 3; nor are
they based on the Company's preferentials under the contract.
In column (2) the interest is computed for Company investment at 5% on $36,011,000 under Contracts Nos. 1 and 2,
and 6% on $103,401,000 under Contract No. 3; for City investment at 4% on $149,576,000 under all three
contracts.
In column (3) the interest is computed at 4% on entire investment, Company and City, aggregating $288,988,000
under all three contracts.
In column (4) the interest is again computed at 4%, but is based on total depreciated investment estimated at
$250,000,000, City and Company, under all three contracts. In columns (2) and (3) the investment is taken
at full original cost, without deduction for past depreciation; except that Company's investment under Contracts
Nos. 1 and 2 is taken from recommended valuation of the 1921 Transit Commission valuations, and these represented original cost, less depreciation, but the recommended value of $36,011,000 is excessive by about $10,000,000.
The entire net present investment, original cost of the properties less all past depreciation, does not exceed
$250,000,000.
All the investment figures relate to property in operation during 1924. For Contract No. 3 they were taken from
the 41st quarterly determination.
The operating expenses made no provisions for depreciation, but on the contrary had a credit of $124,715.49 instead
of a charge; thus the indicated surplus would be reduced by proper depreciation charges.




EXHIBIT G


B. M. T.-NEW YORK RAPID TRANSIT Co.,
SUBSIDIARY OPERATIONS FOR 1924
Return, adjusting operating expenses and taxes assuming complete municipal ownership and operation
In an earlier memorandum, it was shown, assuming
City ownership and operation of the B.-M. T. subway
and elevated lines, that earnings for 1924 would be increased to $9,158,874, merely by eliminating taxes. On
a 4 per cent. basis, this would provide for year ending
June 30, 1924, a small excess ($7,107) on about $228,000,000, the estimated cost of the entire system, assuming the use of City credit throughout. Taking into account the increase reflected by operations for the first
quarter of the current fiscal year, it was estimated that
operations for 1925 will pay 4 per cent. on an average
investment of $240,000,000 and provide an excess of
about $1,400,000, available for depreciation, sinking
fund or improved service. This-without questioning
operating expenses, as reported by the Company.
In the following, reported operating expenses will be
scrutinized with a view to pointing out abnormalities and
suggesting amounts that may reasonably be substituted
therefor-continuing the assumption of municipal
ownership and operation of the existing system, with the
added supposition that the City has constructed and operates a new power plant.


218




OPERATING STATISTICS AND EXPENSES —1922, 1923 AND
1924
Below is a table giving significant reported figures of
operation for a three year period:


STATISTICS           19924       190~3        19922
Fare passengers.....537,194,8929 480,900,870 444,747,9229
Passenger car hours...   5,341,538   4,801,634   4,9~67,8192
Revenue car miles-number.........         75,001,92592  66,973,5592  58,909,9210
annual increase......  8,0927,700  8,064,3492  3,534,583
%-increase......         192%        14%           7%
Cents per ear mile:
Operating revenue..        36.87       36.81        39.092
Operating expenses...     24.492       25.925      926.94
Operating ratio.....      66.9292%    68.61%       69.03%
ExPENSES             19924       19923        199292
Maintenance expended.    $5,6927,533  $4,9254,961  $4,093,054
Operation of power plant  4,9289,013  5,168,687   4,3792,399
Operation of cars...      6,610,945   6,095,976   6,193,9244
Injuries and damages.       801,176     435,161     340,466
General expenses....      683,3923     656,877     570,1292
Total (excl.
depreciation)..  $18,011,990  $16,611,6692 $15,569,9285


The five main groups of operating expense will be
discussed in the order listed in this table.


219




MAINTENANCE EXPENDED
Maintenance expenditures during 1924 may be classified as follows:


Superintendence................................  $250,470
Ties, rails, roadway and track labor, etc...........  74,563
T unnels.......................................  94,066
Elevated structures, bridges, crossings, etc.........  292,769
Signal, telegraph and distribution system..........  506,841
B uildings......................................  355,305
Cars and car equipment.........................  2,819,585
Shop expenses and machinery repairs.............  557,257
Cleaning track, etc.............................  26,677
Total.................................  $5,627,533
The amount expended during 1924 exceeds that spent
on maintenance during 1923 by $1,372,572-an increase of over 32 per cent. Revenue car mileage increased in that period by only 12 per cent. During the
four years prior to 1924, maintenance expenditures were
slightly over $4,000,000 per annum. During 1919, it
it was $2,628,000 and during 1918, $1,720,270.
However viewed, maintenance expenditures for 1924
are abnormal and burden 1924 operations so as to bar
the use of the reported income figure as representative
for present purposes. A normal figure for maintenance
may be reached by any of the following methods:
(1) Averaging last five years (including 1924)
this gives $4,467,000.
(2) Taking preceding year (1923) as normal
and adding a percentage increase, equal to the increase of car mileage, during current year over
preceding year; this is 12 per cent. and gives a
resultant of $4,765,000.


220




(3) By eliminating from the reported figure
some amount, identifiable as "deferred" maintenance.
The Transit Commission valuation as of June 30,
1921, recognized "deferred" maintenance of $2,357,117
on the old elevated properties. Its system of valuation did not call for a similar figure with respect to construction under Contract No. 4; but it is fair to assume
that there was some, let us say such an amount as to
make the total on the entire system, $3,000,000. Assuming further, that the company's program called for the
making good of "deferred" maintenance within three
years, $1,000,000 may be eliminated from the 1924
maintenance figures.
Of the three suggested methods, that based on increased mileage gives the highest figures, namely,
$4,765,000 and that will be used in the revised income
figures.
Another possibility not considered in the preceding
is that wholesale changes in the equipment (such as the
installation of the "dead man's button") were in process
during 1924 and charged to "maintenance" instead of
in whole or in part to capital account.
POWER
The NewYork Rapid Transit Co., purchases most
of its power from the Williamsburgh Power Plant Co.,
an affiliated company. Total cost of generating power
plus percentages for profit and interest on power plant
investment, are prorated among the B. M. T. subsidiaries. It is suspected that the rapid transit lines are burdened with more than their due share. The 1924 figures


221




show that the rapid transit company paid 5.72c. per car
mile (both subway and elevated operation) as compared
with 3.45c. for the Interborough Company. (subway
and elevated operation averaged.)
The point is frequently made that the Interborough
and Manhattan power plants are not of the most modern
and efficient type; but notwithstanding, it will be assumed for present purposes that the hypothetical plant
that the City is operating will not produce power at less
than 3.45 cents per car mile, a total for 1924 of
$2,587,543.
Although the Williamsburg plant is not of the most
modern type and supplies most of the power necessary
to run the rapid transit and all the Brooklyn surface
lines, including those of the Brooklyn City R. R. Co.,
it will be assumed that the City would in effect have
to reproduce that plant for its exclusive use in operating
these rapid transit lines.
On a 1921 price basis, it would cost as follows:
L and.........................................  $463,000
Power Plant Buildings
Total owned by B. R. T. Co.......  $5,930,900
Deduct for central Power Plant included-est. 25%).............    1,475,225  4,455,675
Power Plant Equipment.........................  8,968,319
Total physical...........................  $13,886,994
Add for interest, engineering, etc., (company's figures
for interest reduced one-third and brokerage fees
eliminated- 8Y2% )...........................  1,080,000
T otal..................................  $14,996,994
Add for material and coal, etc.................  1,000,000
T otal...................................  $15,996,994
R ound..................................  $16,000,000
222




Recognition of this additional investment will be
given at another point, in its appropriate place.
OPERATION OF CARS
This covers salaries of motormen, guards, station and
car house employees and operators of the signal systems.
These employees are presumably paid on an hourly
basis. The rate per passenger car hour is $1.24 as compared with Interborough (elevated and subway) of
$1.37, but per car mile it cost the N. Y. Rapid Transit
8.81 cents as compared with the Interborough cost of
8.04 cents. This is due to the fact that the latter gets
more mileage per car per hour.
No suggestion can be made on present data for reducing this class of expenses.
INJURIES AND DAMAGES
During 1924, the total outlays made in this connection were $801,176, made up as follows:
Claim  dept. and medical expense...................  $88,367
Injuries to  employees.............................  125,100
Other injuries and  damages........................  494,809
Law expenses in connection with damages...........  9,900
T otal.......................................  $801,176
This amount is the largest in the history of these
rapid transit lines and is more than double' the average
in the last many years. It certainly is not typical and
probably can be reduced by at least one-half-to
$400,000.


223




GENERAL EXPENSES


This includes items for law expenses, insurance and
general officers which under municipal operation can be
reduced-it will be assumed, to $600,000.
OPERATING EXPENSES REVISED
The following table compares operating expenses, as
reported, with revised figures and indicates the reduction:
As Reported   Revised    Reduction
Maintenance..............  $5,627,533  $4,675,000  $952,533
Power...............    4,289,013  2,587,543   1,701,470
Car Operation.........   6,610,945  6,610,945..........
Injuries and damages..  801,176    400,000     401,176
General expenses.......  683,323     600,000     83,323
Total............ $18,011,990 $14,873,488  $3,138,502


RETURNl FOR 1924 REVISED


The company reported a return of................  $7,744,480
To which was restored in previous memorandumfor taxes not payable by a municipality........ 1,414,394
T otal...................................  $9,158,874
To which may be added for reduced expenses, as per
preceding  discussion..........................  3,138,502


Making total available for interest on investment,
etc..........................................  $12,297,376
Deduct interest-4% on $244,000,000 ($228,000,000
as per previous memorandum plus $16,000,000 for
power  plant).................................  9,760,000
Leaving for additional depreciation, sinking fund and
improved  service............................ $2,537,376
224




EXHIBIT H
TRANSIT COlkrMISSION'S VALUATION-COST ON 1921
BASIS
BROOKLYN RAPID TRANSIT SYSTEM
Summary Statement Showing by Companies the Valuation of the
Property in Operation as of June 30, 1921
Original Cost  192Z1 Price
Basis         Basis
Original Cost Estimated Cost


Brooklyn Rapid Transit System
Brooklyn Rapid Transit Surfac(
Lines
(a) Brooklyn Heights Railroad Company......
Brooklyn, Queens County &
Suburban R. R. Co.;-..
Coney Island & Brooklyin
Railroad Co. (Owned &
Leased).........
Nassau Electric Railroad
Company.........
Total Receivership Surface Companies....
Coney Island & Gravesend
Railway Co........
South Brooklyn Railway Co,
(Owned & Leased).....


$791,076   $1,474,469


4,420,881
4,870,186


9,858,646
9,989,712~


10,183,007   29~.)476,116
$20,9265,150  $43,798,945
456,670     1,001,058
5,965,9274   9,411,074


Total B. R. T. Surface
Lines........


$9.61687,094


$54,~2112075




225




Original Cost    1921 Price
Basis          Basis
Original Cost Estimated Cost


Brooklyn Rapid Transit Elevated
& Subway Lines
New York Consolidated RailRoad Co.-Original Property...........
(b) Contract 4. Construction &
Equipment........
Reconstruction of Existing
Railroads.........
Additional Tracks......
Elevated Extensions.....
Undistributed Costs.....


28,534,060    49,79Z5,3392
41,6792,294   59,758,985


19,302,187
8,194,7926
5,161,568
691,12~8


9.6,885,801
11,403,191
7,933,7692
589,588




Total Elevated & Subway
Lines.........


$103,555,963


$156,2~96,659




Brooklyn Rapid Transit
Company.......


923,411,944  38,419,518




GRAND TOTAL, BROOKLYN
RAPID TRANSIT SYSTEM.


$153,655,001


$9249,9927,92592




NOTES-(a) Includes Bridge Operating Company.
(b) Includes Company Investment Only.
STATE OF NEW YORK-TRANSIT COMMISSION
BUREAU OF VALUATION
April-199.3


226




EXHIBIT I
ADJUSTMENT TO MUNICIPAL OPERATION-INVESTMENT
ASSUMED AT 125% ABOVE COST
I. R. T. SUBWAY
Operating Results for 1924 Adjusted


Adjusted to
As reported   municipal
by       ownership &
company      operation
(round figures)
(1)          (2)


Operating revenue:
Passenger..................
Other......................


$35,746,659.35 $44,683,000. 00
2,645,975.26  3,969,000.00


Total................. $38,392,634.61  $48,652,000.00


Operating expenses:
Maintenance of W. & S. (actual)
Maintenance of equipment (actual)......................
Operation of power plant......
Operation of cars.............
Injuries to persons & property..
General (incl. traffic expense)..


2,586,152.82
4,065,310.55
5,358,138.15
8,489,661.31
718,694.53
863,391.22


2,586,000.00
3,233,000.00
4,500,000.00
8,490,000.00
500,000.00
500,000.00


Total operating expenses $22,081,348.58 $19,809,000.00
Taxes accrued................  595,212.71............
Total revenue deductions $22,676,561.29 $19,809,000.00


227




Adjusted to
As reported   municipal
by       ownership &
company      operation
(round figures)
(I)          (2)
Operating income.............. 15,716,073.32 28,843,000.00
Add $110,000 for bank balances &
similar items not included by
co. in op. revenue (round figures) 15,826,000.00  28,953,000.00
Deduct return on investment, @
4% on $250,000,000 in col. (1)
and $565,000,000. in col. (2)... 10,000,000.00 22,600,000.00
Net available for depreciation,
amortization and improvements  5,826,000.00  6,353,000.00


EXPLANATION: Figures in col. (1) transcribed from I. R. T. annual report to
the Transit Commission. The operating conditions assumed in col. (2) are:
A subway system of the same extent of modern build, owned and operated
by the City. Under such conditions, passenger revenues were calculated
at a 25% increase, and other operating revenues at a 50% increase. The
actual maintenance of Way and Structures were left unchanged although
up to date operating conditions are assumed, because we assume 25% increase
in passenger traffic. Maintenance of Equipment, according to years 1914
to 1918 average about 25% above 1924. Power costs were based on 3c. per
car mile, with the car mileage assumed to have increased 25%. Operation
of cars were left unchanged. Each of the items Injuries and Damages and
General Expenses was rounded out to $500,000, because of the assumption
that many law expenses, salaries of general officers, office expenses, and
various bonuses would be eliminated. Interest was assumed in both cases
at 4%, but the investment to date was adopted as being the remaining undepreciated cost of the properties, believed to be in round figures $250,000,000,
for the modern system an increase of 125% of this remaining cost was taken
as the basis.


228




OPERATION OF THE NEW CITY SUBWAYS AT A FIVE CENT
FARE
The question has been raised at the transit hearings
before Judge McAvoy whether the new city subway
system, at present construction costs, can be operated
at a five-cent fare, so that the revenues will be adequate
to pay all operating costs as well as interest on the investment in construction and equipment.
There are so many hypothetical factors involved in the
answer to this question, that the best course is to consider
the present subways operated under the existing contracts with the City, and figure the return from operation on the basis of municipal credit and present day
cost of construction and equipment.
I. R. T. SUBWAYS ON BASIS OF PRESENT CONSTRUCTION
COSTS
Let us assume the present lines operated by the Interborough Rapid Transit Company, constructed under
Contracts Nos. 1, 2 and 3 and operated under Contract No. 3. Could these lines be operated now by the
City at a five-cent fare if the investment throughout for
construction and equipment were made at present day
prices?
This question assumes investment at present day
prices and operation at present day range of operating
expenses. Consequently the answer must assume also
present day or modern facilities which would be provided
if the properties were installed under present conditions.
MODERNIZING THE INTERBOROUGH FACILITIES
The existing investment in the properties operated
under Contract No. 3 amounts to about $300,000,000,
including company and city money under all three contracts. This represents the official cost determinations
229




under Contract No. 3 and the costs as reported by the
Transit Commission in the 1921 valuations for investment under Contracts Nos. 1 and 2. Not all of these
properties are in operation, but for our purpose we assume that the entire investment is in operation.
In hearings before Judge MeAvoy John H. Delaney,
Chairman of the Board of Transportation, stated that
the present construction costs are about 125 per cent.
higher than the general range of actual installation
cost under the existing contracts. This 125 per cent.
increase was roughly assumed by Mr. Delaney, and
presumably did not represent a carefully established
figure of how the present day costs throughout would
compare with actual costs under the existing contracts.
For our purpose, however, we shall assume a rough
125 per cent. increase in investment compared with the
actual figures under Contracts Nos. 1, 2 and 3. As
already stated the original cost of all the properties
under Contracts Nos. 1, 2 and 3 may be stated at
$300,000,000. This is without any deduction for depreciation and present physical condition of the various
facilities. The property under Contract No. 1 goes back
mostly to 1905 and is about 20 years old and is therefore
subject to heavy depreciation. This is especially true
as to equipment but applies also to construction. Even
the properties installed under Contract No. 3 are subject to considerable depreciation. Roughly, we may
assume therefore that the net investment, original cost
less depreciation for past wear and obsolescence, is
$250,000,000. If this amount is increased by 125 per
cent. to represent present range of investment requirements, we have an equivalent present investment of
$565,000,000.


230




But if we figure the present equivalent investment
cost and adopt $565,000,000 as the present day capital
equivalent, we must realize at the same time that the
existing lines and the equipment would not be laid out
at the present time as they actually exist. For example,
the Broadway subway above 96th Street would now be
constructed as a four track line to its destination instead
of the three track line which makes express service beyond 96th Street impossible. But the additional cost of
putting in a four track subway instead of a three track
would be negligible, while the additional service, the
carrying capacity and the earning capacity would be
tremendously increased.
Likewise instead of putting in the existing short platforms for the local trains which makes 10-car trains
impracticable, we could install the longer platforms
with very little additional expense and provide 10-car
trains which could be used as semi-express during rush
hours. In this way with very little additional cost we
could increase the service, the carrying capacity and the
earnings tremendously. Again, instead of the existing
power house and power plant equipment we would have
modern design throughout, which corresponds to present actual requirements of service. Without any additional cost we could have modern power facilities througout, which would mean a reduction in operating expenses.
As to cars we could design the road throughout so
that we could use the most economical and modern 1925
design, instead of being committed to the relatively
heavy car with small carrying capacity and high operating costs. With no additional investment we could have
modernized equpiment throughout, which would permit
the most economical operation and much better service.


231




This would mean greater carrying capacity, greater
earnings and lower operating expenses.
1924 OPERATING RESULTS ADJUSTED TO PRESENT INVESTMENT AND MODERNIZED PROPERTIES
For the purpose of our problem, therefore, let us
take the 1924 actual operating results as reported by
the Interborough Rapid Transit Company under Contract No. 3. Let us see what actual return there was
on the $250,000,000 net investment as compared with
the required 4 per cent. under present city credit and
consequently let us consider what would have been the
corresponding result of operation of modernized plant
and equipment as to the same routes but at an investment cost of 4 per cent. on the basis of present day cost
of construction and equipment.
The total gross revenues for the fiscal year ended
June 30, 1924, were reported at $38,392,634.61. The
actual operating expenses, without any provision for
depreciation, amounted to $22,081,348.58. The taxes
were $595,212.71.
Deducting the sum of the operating expenses and
taxes from the gross revenues we have a net operating
income of $15,716,073.32.  To this figure, however,
should be added about $110,000, for interest on bank
balances and miscellaneous rentals.  This would bring
the net operating income, in round figures, to $15,826,000. This would be the sum available for interest on
investment, without, however, any allowance for depreciation.
The actual net investment as stated at $250,000,000
and interest requirement at 4 per cent. is therefore $10,000,000 a year. Deducting this from the net operating
income of $15,826,000 we have a net surplus of $5,826,232




000 above operating expenses, taxes and interest on the
actual entire net investment. This sum would be available for depreciation, amortization and improvements.
ADJUSTING THE 1924 FIGURES TO MODERNIZED PROPERTIES
We now assume that the same lines have been operated in 1924 at an investment of $565,000,000 but with
thoroughly modernized properties as already indicated.
With this assumption we believe that the passenger
revenues would have been at least 25 per cent. greater
than those reported and that the miscellaneous other operating revenue would have been at least 50 per cent.
greater. On this basis we should have in round figures
gross operating revenues amounting to $48,652,000 instead of the actual reported $38,392,634.61.  The increase would have resulted from the express tracks on
Broadway, the longer stations permitting longer local
trains an(l semi-express service, as well as cars with
greater carrying capacity and better service.
Let us emphasize that we believe the present investment of $565,000,000 would have provided a plant and
equipment which would meet presenit requirements and
would furnish proper service. On this basis the 25 per
cent. increase in passenger revenues is obviously an un(lerstatement of the receipts that would have been
realized under such conditions.
OPERATING EXPENSES
With the modernized plant and equipment, properly proportioned throughout, there would have been an
economy in operating expenses throughout especially
with municipal operation. The comparative computation of revenues and operating expenses and charges is
233




given in the statement attached hereto. This statement
shows that as to the maintenance of way and structures,
we have left the amount the same under adjusted operation as under the actual, assuming that it would cost no
more to maintain a modernized structure than the existing lines, but that otherwise no particular economy
would be realized,
MAINTENANCE OF EQUIPMENT
As to maintenance of equipment we believe that under existing conditions the expenses are far too high
because of inadequate cars as well as insufficient inspection and shop facilities. The company has been enormously handicapped throughout in the equipment maintenance, which is reflected in the high range of expenses
for maintenance of equipment. This is due, hovever,
even more to inadequate number of cars, leaving an insufficient margin above the necessary service requirements for regular inspection and systematic overhauling. Under modernized conditions we assume that there
are enough cars and enough shop facilities to provide for
regular inspection and repairs under modern favorable
circumstances. Under such conditions, with larger and
modern cars, the expense in proportion to traffic, would
be less, which would be a further factor in addition to
the uneconomical present layout.
For our purpose to determine the proper charge for
equipment we have taken the five-year period prior to
1917 when presumably a reasonable proportion between
service cars and shops existed. We found that during
that period the average annual cost for maintenance of
equipment was 25 per cent. greater than for the maintenance of way and structure. For our purpose, there

234




fore, we assume that normally, under proper proportion of service cars and shops, the cost of maintenace of
equipment would be 25 per cent. greater than the maintenance of way and structure.
POWER COSTS
The actual power costs were reported at $5,358,138.15. We believe these are excessive, due partly to the
lack of thoroughly modern power facilities and partly to
excessive charges to the subways as compared with the
elevated lines. The Interborough's 1924 report shows
that on the average the power charge per car mile on
the elevated lines was 1.9c. while for the subway it was
4.5c.  While unquestionably the power consumption
per car on the subway is greater than on the elevated,
there can be no such disproportion as is indicated by
these figures.
For the purpose of our problem we have assumed a
modern power plant and modern operation, with larger
cars, greater amount of express service, and
consequently a better distribution of traffic. Under these conditions we believe that 3c. per car
mile for power would be adequate and probably
the lower cost would be realized. We therefore have
computed the power costs at 3c. per car mile and have
increased the assumed mileage by 25 per cent. The
reason for this increased assumed mileage is to provide
relief from the existing congestion, so that the 25 per
cent. additional car mileage with the larger cars would
give proper relief for reasonable service.
OTHER OPERATING EXPENSES
As to other operating expenses we have assumed
that there would be a considerable saving in injuries
235




to persons and property and general expenses. We
have eliminated excessive salaries, legal expenses and
various overheads that would be avoided under City
operation. There would of course be a complete saving
as to taxes.
The total operating costs under the assumed modern
conditions are stated at $19,809,000. Deducting this
amount from the $46,652,000 operating revenues and
adding $110,000 for bank balance and miscellaneous,
we have a net operating income of $28,953,000.
This sum would be available for interest on the
$565,000,000 investment. At 4 per cent. the interest
charge would be $22,600,000. Deducting this from the
operating income we have a surplus above operating
expenses and interest amounting to $6,353,000. This
amount would be available for depreciation, amortization and improvements. These figures represent conservative estimates as to results of a modernized plant
operated under present range of operating expenses
and present investment costs. There is no doubt that
the operation could be profitably conducted at a 5c
fare, giving reasonable service, paying all operating expenses, as well as interest on the investment, and
leaving a sufficient surplus for depreciation, amortization and improvements.
EQUIVALENT PRESENT INVESTMENT
For the purpose of this problem we have increased
the net actual investment of $250,000,000 by 125 per
cent. to an assumed present equivalent of $565,000,000,
to take into account the higher present cost of construction and equipment.
In reality, however, the 125 per cent. adjustment to
present day costs is excessive, even if we assume a thor236




oughly modernized layout. In the first place, costs of
construction and equipment have not increased on the
average 125 per cent. above the actual costs incurred under Contracts 1, 2 and 3. At the present time materials
entering into construction are about 108 per cent. higher
than in 1913 and 1914; but this is not 125 per cent.
Further, not even all the construction contracts were
let at the pre-war prices, so that the average construction cost under Contract No. 3 was probably less than
100 per cent. above 1914 prices. But, as to equipment,
most of the installation was at a much higher level than
in 1914, and much of it at a much higher range than
prevails today. Altogether, it is doubtful whether today the construction and equipment costs would be
more than 75 per cent. higher than the average actual
costs under Contracts Nos. 1, 2 and 3. This relates
merely to the matter of price changes.
A second point should be considered in taking $565,000,000 as the equivalent present investment in modernized properties provided under the three contracts.
While the basic prices of materials are much higher than
the average actual costs under the contracts, in many
respects, especially as to equipment, the net installation
per unit in terms of capacity has increased much less
and in some important matters not at all. Thus, in the
case of power plant and power plant equipment, the net
investment cost per k. w. capacity is not greater today
than prior to 1914; probably less. The cost per car is
much greater, but the modern car is larger and more convenient of operation, so that the net investment per passenger mile capacity today is probably not over 25 per
cent. greater than before the war. The same principle
applies to other equipment and construction.


237




EXTRAVAGANT OVERHEADS
A third point establishing present equivalent investment, relates to the huge overheads which were incurred
under the existing contracts, but which would be avoided
if the City were to build the same lines now as a modern
system.
Under construction, Contract No. 3, the various overheads, including interest, superintendence, discount,
etc., averaged over 33 per cent. on top of the cost of
labor and materials. This represents the costs of delay,
duplications and extravagance. There is no reason why
these overheads should exceed 15 per cent. if the City
is given full power to proceed with construction and
installation of equipment. This would provide 8 per
cent. for interest on the basis of two full years for the
average investment prior to operation, and 7 per cent.
for engineering and other superintendence.
RETURN ON $400,000,000 INVESTMENT
If the City were given full power to proceed, there
is no doubt that at present costs and with present knowledge and experience, it could build and equip a modern
subway system in place of the actual subways operated
under Contracts Nos. 1, 2 and 3, for probably less than
$400,000,0CO, instead of the $565,000,000 assumed in
our computation. On this basis the annual interest
at 4 per cent. would be only $16,000,000 instead of
$22,600,000 in our computation. And accordingly the
surplus above operating expenses and interest would
be $12,953,000 instead of the stated $6,353,000; or about
double. This is the proper basis of judging city operation at present day costs of construction and equipment,
compared with the Interborough operation under its
contracts with the City. This is more accurately the
amount that would be available for depreciation, amortization and improvements.
238




EXHIBIT J.


LINES WHERE SERVICE SHOULD BE INCREASED-DEC.
9, 1924.-MAYOR HYLAN
"Lexington-Fourth avenue subway. Increase in the
express service during the non-rush hours, with a corresponding increase in the local service during these
periods of time past Grand Central station. Midday
express service from Woodlawn extended beyond its
present termination point at South Ferry to Brooklyn.
Extension of all service on this line now terminating at
Atlantic Avenue, Brooklyn, to Utica Avenue, as express service.
"Extension of the local service now terminating at
Hunts Point Road, on the Pelham Bay branch of the
above line, through to Pelham Bay Parkway during all
hours, at an interval not greater than operated by the
shuttle service now in operation between these points
and the abolishment of the shuttle service.
"The extension of the service during the rush hours
on the East 180th Street branch of the Lexington Avenue subway, through to 241st Street, on at least the
same interval as now operated during these hours by the
shuttle service, and the abolishment of the shuttle service
during these hours.
"The extension of the present midnight service now
terminating at Bronx Park, West 180th Street, through
to 241st Street, and the elimination of the shuttle service during these hours between 177th street and 241st
Street. This will necessitate the establishment of one
car shuttle service between Bronx Park, West 180th


239




Street and the 177th Street station. This should prove
a comfort and convenience to the patrons of this line.
"Ninth Avenue 'L'. Part of the present rush hour
service on this line terminates at Fordham Road. Alternative service should be extended through to Woodlawn, to which point this service was operated prior to
December 1, 1924.
"Third Avenue 'L'. On the Webster Avenue extension of the above line, the present through service
(luring the rush hours is operated to 241st Streetshould be augmented by additional service to enable the
abolishment of shuttle service between Fordham Road
and 241st Street during these hours. Extension of the
shuttle service now operated during the non-rush hours
beween Fordham Road and 219th Street, north to 241st
Street.
"B. M. T. Corporation-Lexington Avenue 'L' line.
The extension of the Park Row branch of this service
during the A. M. and P. M. rush hours to lith Street
and Jamaica, the service to divide equally to and from
each point.
"Myrtle Avenue 'L'.    Operate all trains to and
from Park Row during all hours of the day. Extend
the present service originating at Wyckoff Avenue durin the morning rush hour, so as to go into service from
Fresh Pond Road, reconstruction of the Metropolitan
Avenue station. Through service during the P. M. rush
from both Chambers Street and Park Row.
"Fifth avenue 'L'. Bay Ridge extension of the service now terminating at Sand Street, through to Park
Row at all hours. The extension of this service should
have a beneficial effect in relieving traffic on the Fourth
Avenue subway during rush hours.


240




"Broadway-Manhattan subway. Service on above
line now operated during midday hours should be resumed about 7.30 p. m. and continued in operation until about 12.30 a. m. This service should be short line
from Whitehall Street during these hours, in order to
take the place of the Brighton Line which is operated
over the Manhattan Bridge, and on the express rails in
Manhattan during the above period of time, during the
hours, a suggested operation of but one local service.
The Fourth Avenue local is operated north of Whitehall
Street, while three branches of the express service are in
operation between Canal Street and Times Square.
"West End line. The extension of service beyond
Bay Parkway station to Coney Island during rush
hours, and the abolishment of shuttle service between
these points.
"Sea Beach line. Inauguration of a short line service
say from Kings Highway to Chambers street, during
rush hours, via the south roadway of the Manhattan
Bridge, while on the lines of the B.-M. T. Corporation,
it may be well to call attention to the fact that on a number of lines of this company, one car trains are in operation during midnight hours. This method of operation
has proved a serious complaint on many occasions, as
usually one car trains have been heavily loaded at times,
and if there is any time of day where adequate service
can be supplied, it is surely at these hours.
"Following is a short description of the time during
which one car trains are scheduled:
"Sea Beach line, from 3:14 a. m. to 5: 14 a. m.
"Brighton Line, 2:32 a. m. to 5:23 a. m.
"West End Line, from 1:47 a. m. to 5:24 a. m.,
leaving Times Square Station.


241




"Fourth avenue local, from 12:58 a. m. to 4:47 a. m.,
leaving Queens Plaza.
"Culver line, from 12:55 a. m. to 5:23 a. m., leaving
Park Row.
"Bay Ridge, from 12:55 a. m. to 5:23 a. m., leaving
Park Row.
"Broadway-Jamaica, from 1:39 a. m. to 4:51 a. m.
"14th street-Eastern line, from 12:50 a. m. to 6:01
a. m., leaving Broadway.
"Astoria-Queens-Corona line, from 2:10 a. m. to 4:07
a. m., leaving Queens Plaza.
"It may be interesting to note that two car trains
were operated during the midnight hours above quoted
on the Sea Beach, West End, Culver, Bay Ridge,
Brighton and Broadway lines, 22 years ago.
"Lines where service can be increased. I. R. T. Company. On all lines of the above company during the
non-rush hours on both local and express service.
"White Plains Avenue extension, rush hour service
can be increased to meet the traffic demands for same.
"Ninth Avenue L rush hour service can be alternated
from Fordham Road and Woodlawn.
"Third Avenue 'L' service can be increased on Webster Avenue extension during rush hours and shuttle
service can be extended from 219th Street to 241st
Street during the non-rush hours. The extension of
service suggested in different branches of the above companies' lines beyond their present terminating point can
be made at the present time.
"B.-M. T. Corporation. All the service increases
mentioned and answered in No. 1 can be made and
cars should and can be added to one-car trains during
the midnight hours.


242




"The Transit Commission and the operating companies claim maximum operation on East and West
side subway trunks passing Grand Central and Times
Square respectively has been reached during the traffic
rush hours.
"Third Avenue L. Maximum operation is in effect
between 129th Street and Chatham Square during a. m.
and p. m. traffic rush hours.
"Sixth Avenue L, maximum operation has been
reached during a. m. and p. m. traffic rush hours south
of 9th Avenue and 53rd Street.
"Eastern Parkway extension, operation over local
trunks between Atlantic Avenue and Franklin Avenue
reaches maximum point from 8 a. m. to 9 a. m. and 5
p. m. to 6 p. m.
"B.-M. T. Corporation. Maximum operation has
been reached during the peak of the rush hours on the
Broadway-Canarsie, Broadway-Jamaica, BroadwayMIyrtle Avenue and Broadway-Short line, owing to the
fact that the Williamsburg Bridge, the point of control
in this operation, reaches the limits of its track capacity
between 7.30 a. m. and 9 a. m. past Marcy Avenue Station."


243




EXHIBI' K


BROOKLYN RAPID TRANSIT SYSTEM
ESTIMATED COST OF ACQUIRING PROPERTY BY SECURITY
PURCHASE AND DEBT SETTLEMENT,
ABOUT JUNE 7TH, 1923
On June 7, 1923, the United States District Court
approved the sale of the properties of the B. R. T. System. The accompanying schedule ("A") shows that on
or about that date, the securities of that system owned
by the public had a total valuation (at then prices) of
$112,113,507. As explained by foot-notes, the prices
used in that statement were derived, wherever possible,
from the Financial and Commercial Chronicle and the
Standard Bond Book. Where no quotations as of June
7, 1923, or thereabouts could be found, the highest figure
in the 1923 price range was always taken. And where
not derived from the sources above mentioned the par
value of the security was used or the equivalent of
market value (maximum in 1923) of the B.-M. T. securities given in exchange for said security upon reorganization was adopted.
To become the free and clear owner of all the assets of
the various companies as of June 7, 1923, besides purchasing the outstanding securities, it would have been
necessary to pay for or assume the debt not represented
by these securities (such as trade and tort claims, unpaid
taxes and interest, receivership expenses, etc., etc).


244




Whereas in the reorganization, cognizance was taken of
and settlement made for unpaid interest on bonds and
bank loan of over $27,000,000 (Schedule "B") the purchase of the defaulted bonds in the market would have
rendered unnecessary the payment of any back interest
on such bonds. In the absence of default, bonds are
quoted in the market at a price plus interest; but where
there has been default, they are quoted flat. Thus in
acquisition no sum would need have been added for accrued or past due interest. On underlying bonds, however (which had not been disturbed by the receivership)
and receiver's certificates, interest accrued up to June
30, 1923 and payable by bond purchaser, totalled $872,164 (see Schedule "C."). In reorganization, settlement
was also made with banks, general and tort creditors, by
payment of cash and B. M. T. securities, which had a
combined maximum market value in 1923 of $7,057,265 (see Schedule "D").
As of the date of this assumed purchase, most of the
companies in the system were in receivership and, to discharge the same, additional outlays would have been
unavoidable. The reorganization plan (page 10) provided for disbursements of $6,484,119 on account of receivership expense, foreclosures, past due taxes, reorganization expenses, syndicate commission, etc., etc. By
avoiding the reorganization and refinancing that was
effected by the plan, a large portion of this could no
doubt have been saved. For present purposes, it will
be assumed that $3,000,000 at the extreme outside would
have been necessary.
Thus-to acquire the complete ownership of the
B. R. T. system, including its current assets and to discharge liabilities of every nature the following investment would have been necessary.


245




To purchase securities in open market.. $112,113,507
Plus interest on underlying bonds, etc.,
accrued to date of purchase..........   872,164
To pay general and tort creditors......  7,057,265
To discharge receivership.............  3,000,000
$123,042,936
In approving the B. R. T. reorganization plan, the
Transit Commission had before it the following values
for physical properties, reached by the Engineers of the
Transit Commission.
Estimated original cost, less cost of recollditioning as of Dec. 31, 1922........ $164,992,589
Cost to reproduce at 1921 prices, less
accrued straight line depreciation, as of
June 30, 1921....................  184.116,678
The Commission's opinion (p. 11) refers also to $34,235,293 of current assets, but includes in its computations only $11,989,033 without deciding, however, that
the remainder was worthless. This figure for current
assets is probably as of March 31, 1923. By June 30,
1923, it should have increased, because of earnings before interest by about $2,800,000 (see Company's 1922
figures-plan p. 41). On June 30, current assets
would, therefore be somewhere between $18,000,000 and
$37,000,000. It will be assumed for present purposes
that they aggregated $25,000,000.
Without considering physical property, additions
from June 30, 1921, or December 31, 1922 (the dates
as of which the Transit Commission valuations were
made), we find that assets (physical and current) which
could have been acquired, by the purchase of securities
and a settlement with creditors, for about $123,000,000
had been valued by experts of the Transit Commission
246




at about $190,000,000 net on an original cost basis
and about $210,000,000 net on a 1921 price basis. These
values are in excess of the above calculated aggregate
market value of securities and other debt of the B. R. T.
system as of June, 1923, by $67,000,000 and $87,000,000 respectively.


247




EXHIBIT K-Schedule A
B. R. T. SYSTEM     SECURITIES IHELD BY PUBLIC, ABOUT JUNE 7, 1923
Approximate Total Market Valuation
Quotation    Price
on or about  Range      Price       Total
Security                           Amount    June 7,    1923**     used      Market
_44~                                        1923*   Low   High   herein      Value
Receivers' certificates and car lease warrants
(Total System)............................. $12,397,044  $........     100      $12,397,044
BROOKLYN RAPID TRANSIT Co.
First gold 5s-1895-1945......................  6,963,000 764-78....      78        5,431,140
First refunding gold 4s-1902-2002.............  3,433,000 6312-65...      65        2,231,450
Three year secured gold notes-7s-1918-1921... 57,253,700  9312...      9312     53,532,210
Six year secured!gold notes 5s-1912-1918.......  465,000......        74 (a)     344,100
Common stock.............................. 74,422,959  2-2-12..       2        1,860,574
BROOKLYN HEIGHTS R.R. Co.
First mortgage bonds 6s-1891-1941............  250,000........      50 (b)     125,000
BRIDGE OPERATING CO.
Common stock (owned by N. Y. Ry. Co.).......    50000.........     100 (c)      50,000
BROOKLYN QUEENS CO. & SUBURBAN R.R. Co.
First mortgage bonds-5s-1894-1941...........  1,497,000  8012....      801       1,205,090
First Consol. bonds-5s-1894-1941............  2,803,000  66....     66        1,849,980
Jamaica and Brooklyn R.R. Co. 5s-1889-1930...  231,000....    68    68      68         157,080




Quotation    Price
on or about  Range      Price      Total
Security                         Amount    June 7,   1923**     used      Market
1923*   Low   High   herein     Value


CONEY ISLAND AND BROOKLYN R.R. Co.
Real estate mortgages........................
First Consol. gold 4s-1898-1948...............
Consolidated gold 4s-1904-1955...............
Bklyn. City & Newtown 1st gold 5s-1889-1939..
Common  stock...............................
NASSAU ELECTRIC R.R. Co.
t  First consol. gold 4s-1898-1951...............
C  First consol. gold 5s-1894-1944...............
Atlantic Av. gen. con. gold 5s-1891-1931.......
Atlantic Av. impr. gold 5s-1894-1934..........
Bklyn. Bath & West End 5s-1893-1933........
Preferred  stock...............................
BROOKLYN & NORTH RIVER R.R. Co.
Common stock (owned by N. Y. Rys. & 3d Av.
R.R.  C o.).................................
NEW YORK CONSOLIDATED R.R. Co.
Brooklyn Union 1st mort. 5s-1899-1950........
Kings County El. 1st mort. 4s-1899-1949.......
Preferred  stock...............................
Common  stock...............................


931,200
1,986,000
1,500,000
1,988,000
297,400
10,337,000
660,000
2,241,000
215,000
118,000
105,225


100 (c)
50   60      60
47 (d)
66   70      70
100 (e)


60...................


60
85 (e)
72    86     86
72    80     80
75    90     90
100 (c)


231,200
1,191,600
705,000
1,391,600
297,400
6,202,200
561,000
1,927,260
172,000
106,200
105,225
50,000
13,163,700
4,955,800
68,485
136,059


50,000


100 (c)


15,956,000
6,980,000
214,015
469,169


81Y2-82Y2
70.7-71....


82'2. 71. 32 (f)
29 (g)




Quotation    Price
on or about  Range      Price      Total
Security                         Amount    June 7,    1923**     used       Market
1923*   Low   High   herein      Value
NEW YORK MUNICIPAL Ry. Co.
First mortgage 5s-1912-1966..................  1,997,000  83....      83        1,657,510
PROSPECT PARK AND CONEY ISLAND R.R. Co.
Income bond 6s-1880-1920...................     7,600........    100 (c)       7,600
T otal......................................................................  $112,113,507


to
0


(a) Value based on exchange in reorganization for B.-M. T. 6% bonds, (Price Range 1923'2 65-74).
(b) Value based on exchange in reorganization for B.-M. T. preferred stock (Price range, 1923:34 -49/).
(c) No quotations or other basis for valuation found; placed at par notwithstanding the fact that, in view of condition of companies,
stock was worth considerably less.
(d) No quotation found; price based on $13 margin between 1898-1948 issue and 1904-1955 issue existent on Sept 1, 1922, as per
Transit Commission Valuation Report, p. 340.
(e) No quotation found; price based on $25 margin between 1898-1951 issue and 1894-1944 issue, existent on September 1, 1922,
as per Transit Commission valuation report, p. 340.
(f) Value based on exchange in reorganization of one share of N. Y. Consolidated preferred stock for $50 of preferred stock and 12
share of common stock of B.-M. T. Co.:
Low       High      Low       High
$50 Pfd...............  3412     477       171       25
2 share..............   91       1412       434       7




22
(g) Value based on exchange in reorganization of one share of New York Consolidated
shares of Common of B.-M. T. Co.:
Low       High      Low
$40 Preferred..........  341     4978      14
6/10 shares Common...    914      142   51     2
1912
*From Financial and Commercial Chronicle, June 9, 1923.
**Standard Bond Book.


321
Common stock for $40 of preferred and 6/10
High
20
8.7
28.7




EXHIBIT K-Schedule B
B.-M. T. REORGANIZATION
Arrears in Interest-Reduced to Market Value Equivalent


Settlement With Creditors and


SETTLED BY
Amount
of debt       Cash       Preferred     Bonds      Common
Stock                    Stock
INTEREST IN ARREARS                                                                                 Shares
B. R. T. 3-yr. 7% notes.................. $20,038,795    $4,007,759  $10,305,666   $5,725,370.....
B. R. T. 6-yr. 5% notes..................      116,250       23,250       46,500       46,500.....
B. R. T. 50-yr. 5% bonds................     1,653,712      348,150      174,062.......     11,315
B. R. T. 1st refunding 4% bonds..........       617,940      137,320..............      4,806
N. Y. Municipal 5% bond................        499,250       99,850      199,700      199,700.....
Bk. Hts. 5%   bonds.....................     53,125.......       53,1 5............
B. R. T. bank  loans.....................      937,166      937,166..................
Bklyn. Bath Beach & West End-5%.....            23,600        3,600.................
Atlantic  Av. Impr. 5%...................      43,000       43,000...................
Nassau  Elec. 1st mort. 5%...............     132,000      132,000..................
Nassau  Elec. 4%........................    1,860,660      413,480    1,447,180............
Coney  Is. &  Bklyn. 4%..................     270,000      270,000...................




SETTLED BY
Amount
of debt      Cash      Preferred    Bonds     Common
Stock                  Stock
INTEREST IN ARREARS                                                                        Shares
Bklyn. Queens Co. & Sub. First 5%.......   336,825     336,825..................
Bklyn. Queens Co. & Sub. First Con. 5%...   560,600     140,150    420,450...........
Total interest....................... $27,142,923  $6,912,552 $12,646,693  $5,971,670  16,121
Bank  loans.............................  3,300,000  1,054,302     254,230   1,991,468.....
General creditors (5/1/24-$1,411,245).....  1,600,000  898,689     732,613............
Total creditors......................  2,200,000  2,200,000...................
Total..............................  $34,242,923  $11,065,543  $13,633,526  $7,963,038  16,121
SUMMARY
AMOUNT HIGHEST PRICE    MARKET VALUE
1923


Cash.............................
Preferred stock....................
Bonds...........................
Common stock....................


$13,633,526
7,963,038
16,121


@ 50
C 74
@ 1412


$11,065,543
6,816,763
5,892,646
233,754
$24,008,706


Total........................................




EXHIBIT K-Schedule C
B. R. T. SYSTEM
Interest Accrued on Underlying Bonds, June 30, 1923
Interest
Interest    Outstanding accrued
Dates                   June 30
Kings Co. Elev. 4% bonds............ Feb. & Aug. 1    $6,980,000  $116,333
Brooklyn Union Elev................. Feb. & Aug. 1    15,956,000   332,417
Atlantic Ave. 5% bonds.............. Apr. & Oct. 1     2,241,000    28,013
Coney Island & Brooklyn 4% Bonds... Jan. & July 1    1,500,000    30,000
Brooklyn City & Newtown 5% Bonds.. Jan. & July 1       1,988,000    49,700
Jamaica & Brooklyn 5% Bonds........ Jan. & July 1        231,000     5,775
T otal..............................................  $562,238
Receivers' certificates 6%............. Feb. & Aug. 1  $12,397,044  309,926
Total Interest accrued....................           $872,164




EXHIBIT K-Schedule D
B. R. T. SYSTEMI BANK LOANS AND OTHER DEBT
(EXCLUDING BOND DEBT)
Settlement in Reorganization-Market Value Equivalent
New 6%          6% Pfd.         Cash
Bonds           Stock


Bank   loans.....................
Plus unpaid interest.............
CA
t General creditors...............
(May 1, 1994-$1,411,245)
Tort Creditors....................$3,300,000
937,166
$4,237,166


$1,991,468


$254,230


$1,991,468


1,600,000


732,613


898,689


2,200,000


Total in settlement........


$1,991,468


$986,843


2,200,000
$5,090,157


Bonds.........................
Preferred  stock.................
C ash..........................
Total...................


MARKET VALUE EQUIVALENT.........          $1,991,468.........             986,843.........           5,090,157.........          $8,068,468


$74
50


$1,473,686
493,422
5,090,157
$7,057,265






EXHIBIT K-Schedule E
B. R. T. REORGANIZATION
Values Considered by Transit Commission


Original
Cost
December 31,
1922*


1921 Price
Basis
June 30,
1921


Property under Contract No. 4....
Other property...................
Total property.............
Less-Straight line depreciation (Contract No. 4) 1,330,536
Less-reconditioning costother property........ 2,729,398
Less-Straight line depreciation.....


$82,600,000
86,452,523
$169,052,523


$9.49,927,252


4,059,934


Net valuation................
Current assets (as per books$34,235,923.) Included only.....
New Capital-to be paid in..................   65,810,574
$164,992,589 $184,116,678
11,989,033  11,989,033
5,000,000   5,000,000


Total.....................


$181,981,622


$201,105,711


Property additions to June 30, 1923 not included.


In their valuation report, the Commissioners' engineers concluded "That a
fair valuation for the existing properties of companies other than that included
under Contracts 1, 2, 3 and 4 and their related certificates would consist in allowing the original cost less the expenditures necessary to put the property in first
class operating condition. Valuation of the property paid for by........The
New York Municipal Railway Corporation under Contract 4 and........certificate for extensions........ should be based on the determination of costs by the
Chief Engineer of the Commission as provided in such contracts with the deduction
therefrom of the accrued depreciation also therein provided for."
255




EXHIBIT L


DISBURSEMENTS ON B. R. T. REORGANIZATION
B. R. T. REORGANIZATION
Cash payments made to date by Reorganization Committee to Consummate Reorganization and terminate
Receivership lasting approximately five years
Paid to Trustee under First and Refunding
Mortgage of N. Y. R. T. Corporation as Improvement Fund to be drawn down from time
to time to pay for additional cars and equipment................................ $5,000,350,000
Paid to holders of Receiver's Certificates..... 11,845,000.00
Paid to B. M. T. Corporation as working capi

tal.................
Paid to N. Y. R. T. Corporation as working
capital..............................
Paid in settlement of tort claims for personal
injuries..............................
Paid in adjustment of general contract claims
Paid to syndicate consisting of over 170 banks,
financial institutions and individuals the
51/2% commission provided in Plan for underwriting provision of $26,048,015 of new
m oney...............................
Paid to holders of $3,000,000 B. R. T. Bank
Loans, on account of adjustment of claims
as  provided  in  Plan...................
Paid to holders of $250,000 B. R. T. Bank
Loans, secured by special collateral in adjustment of claims including interest......
Paid to holders B. R. T. 7% Notes on account
of adjustment of claims as provided in Plan
in respect of $57,253,700 face amount of
notes with $20,038,795 of interest in arrears
256


1,00000,00.0
1,000,000.00
1,759,000.00
836,000.00
1,432,640.82
1,977,815.57
281,165.59
4,007,759. 00




Paid to holders of B. R. T. 5% Notes on account of adjustment of claims as provided in
Plan in respect of $465,000 face amount of
notes with $116,250 of interest in arrears..
Paid to holders of N. Y. Mun. Ry. Corporation 5% Bonds on account of adjustment of
claims as provided in Plan in respect of $1,997,000 face amount of Bonds with $499,250  of interest in  arrears...............
Paid to holders of B. R. T. 5% Bonds on account of adjustment of claims as provided
in Plan in respect of $6,963,000 face amount
of Bonds with $1,653,712.50 of interest in
arrears..............................
Paid to holders of B. R. T. 4% Bonds on account of adjustment as provided in Plan in
respect of $3,433,000 face amount of Bonds,
with $617,940 of interest in arrears........
Paid to holders of B. B. & W. End R. R. Co.
5% Bonds in adjustment of $23,600 of interest in arrears on $118,000 face amount of
bonds................................
Paid to holders of Atlantic Avenue R. R. Co.
5%  Bonds Improvement Bonds in adjustment of $43,000 of interest in arrears on
$215,000 face amount of Bonds...........
Paid to holders of Nassau Electric Railroad
Co. First Mortgage 5%  Bonds in adjustment of $132,000 of interest in arreas on
$660,000 face amount of bonds...........
Paid to holders of Nassau Electric Railroad
Consolidated Mortgage 4%  bonds on account of adjustment as provided in Plan in
respect of $10,337,000 face amount of
Bonds with $1,860,660 of interest in arrears
Paid to holders of B. Q. & S. Co. First Mortgage 5% Bonds in adjustment of $336,825
of interest in arrears on $1,497,000 face
amount of Bonds......................


23,250.00
99,850.00
348,150.00
137,320.00
23,600.00
43,000. 00
132,000.00
413,480.00
336,825.00


257




Paid to holders of B. Q. Co. & S. R. R. Co.,
Consolidated Mortgage 5%  Bonds on account of adjustment as provided in Plan in
respect of $2,803,000 face amount of Bonds,
with $560,600 of interest in arrears......
Paid to defray cost of foreclosure proceedings
extending over five-year-period of receivership, including expenses, and compensation of
trustees and counsel and bondholders' committees and counsel, in connection with defaulted bond issues (with defaulted interest)
as enumerated below:


140,150.00


Bonds and
Interest          Issue                    Cost


$8,616,712.50
4,050,940.00
14,237,166.00
29,000,000.00
581,250.00
77,292,495.00
2,496,250.00
303,125.00
141,600.00
12,197,660.00
1,833,825.00
3,363,600.00


B. R. T. 5% Bonds.......
B. R. T. 4% Bonds.......1
Loans secured by B. R. T.
4% Bonds............J
B. R. T. Consolidated Bonds,
(all pledged)..........
B. R. T. 5% Notes.......
B. R. T. 7%o Bonds*......
N. Y. M. R. Co. 5% Bonds.
Brooklyn Heights R. R. Co.
5% Bonds.............
B. B. & W. End R. Co. 5%
Bonds................
Nassau Electric R. R. Co.
Cons. 4% Bonds.......
B. Q. Co. & S. R. Co. 1st
Mtge. 5% Bonds.......
B. Q. Co. & S. R. Co. Cons.
Mtge. 5% Bonds.......


$138,794.06
142,011.90
39,015.43
10,000.00
652,654.54
80,000.00
9,306.74
12,289.43
69,203.66
36,964.26
38,973.02


*Includes representation of B. R. T. 5%  Notes
Municipal 5% Bonds by Note holders' Committee.


and New   York


258




Paid to defray cost of representation of stock and general
claims during five years of receivership, including expenses
and compensation of committees and counsel:
$74,422,959.00  B. R. T. Stock...........  $242,008.33
2,200,000.00  Tort claims for personal in(Est.)   juries against N. R. Consolidated R. R. Co., B. R.
T. Co. and surface companies................  155,000.00
1,600,000.00 General  Contract  Claims
against B. R. T. V. Co., N.
Y. Mun. Ry. Co., and surface companies.........   43,500.00
Paid to defray cost of depositing old securities
and distributing new, including expenses and
compensation of Depositaries and Registrars
in respect of the issues enumerated below:
Amount               Issue                 Cost
$6,963,000 B. R. T. 5% Bonds..........     1,035.85
Depositary Charges still unad-.justed)
i 3,433,000 B. R. T. 4% Bonds........
3,300,000  Bank Loans secured by B. R. T.  8,078.77
4%  Bonds...........J
465,000  B. R. T. 5% Notes..........      465.00
57,253,700  B. R. T. 7% Notes..........   45,431.95
1,997,000  N. Y. Mun. Ry. Co. 5% o Bonds   1,997.00
250,000  Brooklyn Heights R. R. Co. 5%o
Bonds...................     1,782.80
118,000  B. B. & W. End. R. R. Co. 5%
Bonds...................      560.00
10,337,000  Nassau Elec. R. R. Co. Cons. 5%7o
Bonds...................    12,445.15
1,497,000  Brooklyn Q. Co. & S. First
Mtge. 5% Bonds..........      2,000.00
2,803,000  Brooklyn Q. Co. & S. Cons.
Mtge. 5% Bonds...........      2,803.00
74,422,955  B. R. T. Stock..............  33,646.34
Paid to defray organization and mortgage recording taxes, documentary stamps and filing fees in connection with organization of
new companies and issuance of securities....  784,013.73
259




Paid to defray cost of printing and stationery   51,793.84
Paid to defray cost of publication of official
notices...............................        50,875.17
Paid to defray cost of printing and executing
new securities issued under Plan...........   18,920.29
Paid to defray cost of engineering and accounting services.......................      51,500.00
Paid to defray cost of receivership proceedings of B. R. T. and all subsidiary companies, including expenses and compensation
of Receiver and his solicitor, Special Master
and record parties in creditor's marshaling
suit..................................      254,500.00
Paid to defray cost of stenographic services,
minutes of hearings, clerical help, incorporation incidental expenses and other miscellaneous expenses........................        15,060.94
Paid to defray Reorganization Committee's
compensation, including subcommittees, secretary and counsel, as follows:
Committee............................      40,000.00
Sub-Committee in charge of details of reorganition.................................         85,000.00
Purchasing Committee....................        45,000.00
Counsel................................       225,000.00
Secretary..............................          5,000.00
Paid to defray cost of expenses incident to
securing deposit of securities under Plan and
distribution of new securities, including expenses and compensation of Reorganization
Committee's depositaries................      92,885.21
Total cash payments by Reorganization
Committee to December 15, 1924...... $34,336,642.39
NOTE.-The cost of the foreclosure proceedings listed above related to
bond issues, incluling defaulted interest, aggregating $144,114,623, and
the total cost of such foreclosure proceedings averaged approximately
8/lOths of 1% of such issues.
The cost of representation of stock, tort claims and general contract
claims listed above related to stock and claims of an agregate face
amount of $78,222,!95., and such cost averaged approximately 5/lOths
of 1% of such face amount.
The cost of depositing the old securities and distributing the new.
as listed above, related to $162,839,655 aggregate face amount of
securities, and such cost averaged approximately 7/lOOths of 1% of
the face amount of such issues.
260




EXHIBIT M


LETTER-MAYOR HYLAN TO BOARD OF ESTIMATE
CCITY OF NEW YORK, OFFICE OF THE MAYOR
March 21, 1924.
To the Honorable the Board of Estmiate and Apportionment.
Gentlemen:
In accordance with the suggestion made at the meeting of the Committee of the Whole on Monday, March
17, 1924, I present the following communication.
The Brooklyn Crosstown Subway, as now proposed,
will connect with the Queensborough (60th Street)
Tunnel operated by the Brooklyn-M\anhattan Transit
Company through Queens Plaza and Jackson avenue
in Long Island City, through Manhattan avenue and
Roebling street in Greenpoint and through Bedford
avenue in Williamsburg, with a connection from Bedford avenue to the Fourth Avenue Subway in Flatbush
avenue now operated by the Brooklyn-Manhattan
Transit Company.
A connection of this kind will tie up a $44,000,000
subway proposition with the Brooklyn-Manhattan
Transit Company (formerly the B. R. T), to be operated by that company. Such a connection and operation
will provide nothing but deficits to be made up by the
taxpayers in the yearly budget, in addition to the
$10,000,000 which the taxpayers are now forced to pro

261




vide in the Budget under the present subway contracts.
A Brooklyn crosstown route, self-sustaining from the
beginning of operation, could be provided by the construction of a line through the large industrial section of
Greenpoint, crossing the East River to connect with the
mercantile sections of Manhattan, for example, from the
vicinity of Huron street, Brooklyn, to the neighborhood
of from 23d to 34th streets, Manhattan.
This independent line would likewise give access to
larger residential areas along the greater portion of the
route than would the proposed route. On the Manhattan end, running crosstown from 23d street and the
East River, it could connect with either of the proposed
6th or 8th avenue Subways in Manhattan for operation
into the Central Park West-Washington Heights
Route. The Brooklyn end need not turn down Fulton
street from Bedford avenue, but could be continued
across Fulton street to Franklin avenue to Flatbush avenue and eventually to Sheepshead Bay and Coney
Island, operating through territory which has no adequate transit facilities at the present time. This route
is possible because the Ashland place connection will
link up the Fulton Street Elevated with the Fourth
Avenue subway in Flatbush Avenue Extension for
direct operation into Manhattan and thus provide a subway connection to Manhattan for central Brooklyn.
The Layfayette Avenue Subway should continue
from a connection in downtown Brooklyn easterly in
Lafayette avenue to Broadway, then through the Ridgewood section into Queens Borough. This route would
be a self-sustaining line and provide direct access to
downtown Brooklyn and Manhattan for Ridgewood
and communities of Queens entirely without rapid transit facilities.


262




The Brooklyn crosstown trains should not be operated through the Queensborough (60th Street) Tunnel.
That tunnel should be reserved in its full capacity for
the demands of the Borough of Queens. The next logical rapid transit route for Queens Borough should traverse Queens Boulevard to provide transit facilities for
the people of Jamaica and points beyond, and hasten
the development of a large area of Queens Borough
tributary to the Queens Boulevard. With such a route
connecting into the 60th Street Tunnel no particular
purpose would be served in constructing a subway connection for the Brooklyn Crosstown Line costing
$10,000,000 across Newtown Creek, under the network
of Long Island Railroad tracks, to Queens Plaza and
the 60th Street Tunnel.
It is requested that this communication be referred to
the Transportation Facilities Committee for consideration and report.
Very truly yours,
JOHN F. HYLAN,
Mayor."


263




EXHIBIT N.


LETTER-COMMISSIONER DELANEY TO MAYOR HYLAN
"June 3, 1924.
Hon. JOHN F. HYLAN,
Chairman of the Committee of the Whole,
Board of Estimate and Apportionment
Dear Sir:
Responding to the request of the Committee of the
Whole for an expression of my view in respect to the
pending contract with the Oakdale Contracting Company, Inc., for the construction of a section of the
Brooklyn Crosstown Subway Route which was submitted by the Transit Commission, the situation appears
to be about as follows:
1. Approval of the contract before you would definitely commit your Board to the construction of the
next Brooklyn subway along Bedford Avenue and
Roebling Street. The funds available will permit the
immediate construction of only one Brooklyn line and
therefore I suggest that the Board should consider the
comparative advantages of more than one route before
committing itself to any construction.
2. The action of the Legislature in continuing the
State Transit Commission in control over the existing
City-owned subways with power to increase fares and
postpone recapture for municipal operation seems to
compel us to construct a new system of independent
264




lines. It appears indisputable to me that the route of
any new independent lines should be designed for service of the largest number of people, so that such route
may be made self-sustaining in the shortest possible
time. No subway can ever be self-supporting at a low
rate of fare when the population is all on one side.
The existing crosstown route all the way from the turn
of Bedford Avenue and Wallabout Street to McCarren
Park would have population only on one side, because
there will be no residential development in the three or
four blocks adjoining the river front.
3. The crosstown route can be designed that will give
a subway to the populous central section of Brooklyn
that can be self-sustaining at a five-cent fare, and that
will be a logical part of an independent system passing
through the Boroughs of Brooklyn and Manhattan. It
seems to me that the new Board of Transportation
should be given an opportunity to study the situation
before your Board definitely adopts a policy. Otherwise the new Board will come into office on July 1st
under conditions similar to those which prevented initiative in respect to the route by your recent Conference
Committee. When the appropriating body that has
constitutional control of the streets takes its position in
regard to routes there remains nothing to be settled except details of construction.
4. I believe that before any construction contracts
are authorized the New Board of Transportation and
the Board of Estimate and Apportionment should
adopt a plan to serve at least three of the boroughs. The
cost of such a comprehensive plan should be estimated
and the available funds should be equitably apportioned
to each of the routes. The points at which construction
should begin will be a consideration to be decided when


265




it is known what construction is to take place. Every
borough would than have an interest in supporting a
city plan to have subway bonds exempted from the debt
limit by substituting them for water bonds or else all
must face the necessity of providing funds for construction by local assessment.  The alternative is to put all
the available money into the Washington Heights Line
and the Brooklyn Line and let the other boroughs wait.
But I think we should consider the construction on an
equitable basis.
5. I believe that a crosstown route through Central
Brooklyn would be the line of greatest public benefit,
but the Bedford Avenue Line would certainly be the
line of least resistance. If you do not approve this contract you will be assailed with the charge that you are
wilfully obstructing the progress of subway building.
An organized group of property owners working to enhance the value of real estate in the vicinity of Bedford Avenue and Fulton Street at public expense will
fight bitterly to keep the crosstown line on Bedford
Avenue. Some of the loudest haters of this administration are in this group. Unless you build a new subway
so as to pass through Bedford Avenue at Fulton Street
you will not be deemed fit to hold public office. This
group will be energetically supported by all the agitation that the elevated and surface railroads can arouse,
because central Brooklyn is regarded as a private railroad preserve. You may expect hot denunciation from
any quarters if you set up any competition to the Fulton Street or the Broadway elevated lines of the surface
railroads.  So put on your gas mask if you decide to
reject this contract.
6. Your Board is not required by law to either adopt
or reject this contract immediately. The only compel

266




ling feature at all is that the contractor may withdraw
his bid after the expiration of 45 days from the time it
was tendered. As to the technical features the engineers certify that the contractor is responsible and that
the price is reasonable under present conditions.
Respectfully submitted,
JOHN H. DELANEY,
Chairman, Committee of
Transportation Facilities."


267




EXHIBIT 0


OBJECTIONS TO DETERMINATIONS OF COSTS
ITEMS WHICH HAVE BEEN SUBJECT TO REDETERMINATION
After each item is given the several Determinations
as to which the objection to the item was filed.


1. Interest on Amount of Debt Discount:
(a) on $40,000,000 of bonds issued
April 4, 1923...............  1, 13, 14, 15, 16, 17, 18, 19
(b) on $20,000,000 of bonds issued
November 4, 1915.......... 1, 13, 14, 15, 16, 17, 18, 19
2. Excessive rate of Interest, being the
difference between 5%, the rate of
the bonds, and 6%o............. 12, 13, 14, 15, 16, 17, 18, 19
3. Salaries of Executives, being the objection to the salary of T. S.
Williams, President, at $25,000
per annum....................  12, 13, 14, 15, 16, 17, 18, 19
4. Debt Expense, being fee of $3,000
for listing of New York Municipal
bonds on New York Stock Exchange...................... 13
5. Rental for Yards of South Brooklyn
Railway Co.
(a) $14,625, representing quarterly rental for yard bounded
by 37th and 39th Streets, 2nd
and 3rd Avenues, Brooklyn.. 15, 16, 17, 18, 19
(b) $6,250 semi-annual rental of
yard at 38th Street, West of
2nd Avenue, Brooklyn. This
objection is discontinued as
per previous report......... 16
268




6. Accrued Interest Receivable from New
York Consolidated Railroad Co. on
Cost of Railroads in Operation.. 18, 19
7. Cost of Lawrence Street Station, Section 3, Route 33................ 19
The following is a further description of the items
above listed:
1. Interest on Amount of "Debt Discount."
To provide the money required for Contract No. 4
and the Related Certificates, the Brooklyn Rapid
Transit Co. sold its 5 per cent. notes on a 6 per cent.
basis. With the proceeds from the sale of these notes,
the Brooklyn Rapid Transit Co. bought the bonds
of the New York Municipal Railway Corp. at 97 per
cent. of par. The loss through the discount on the sale
of the notes, was billed by the Brooklyn Rapid Transit
Co. to the New York Municipal Railway Corp. on the
theory that it was acting for the latter company, and
this was allowed by the Public Service Commission
by resolution adopted June 30, 1913 and thereafter
included in the Prior Determination, see Page 40 thereof. On this same theory of agency the profit which
the Brooklyn Rapid Transit Co. made by the transaction should be credited to the New York Municipal
Railway Corp. The interest on the amount of the 3
per cent. discount, ($1,200,000 on $40,000,000 bonds
issued April 4, 1913 and $600,000 on $20,000,000
bonds issued November 4, 1915) on the purchase by
the Brooklyn Rapid Transit Co. of the New York
Municipal Railway Corp. bonds, was a profit of this
nature until the maturity of the notes when the amount
of the 3 per cent. discount would be needed for retiring
the notes.


269




This credit has not been made in the Deternminations
nor in the Redeterminations and may be submitted to
arbitration or to the court.
2. Excessive Rate of Interest
The Chief Engineer has included in each of the D)eterminations mentioned, the following item:
"Additional interest accrued at 1 per
cent. on $20,000,000 bonds issued
November 4, 1915 to conform with
intent of Contract 4 and Certificates
that Company's interest charges during construction be figured at 6 per
cent. per annum rather than 5 per
cent. per annum, the rate borne by
the  bonds.........................$50,000.00"
The purpose of this item was to make an allowance
of 6 per cent., assumed to be the actual cost to the New
York Municipal Railway Corp. through the sale
by the Brooklyn Rapid Transit Company of its 5 per
cent. notes on a 6 per cent. basis. This office would not
have made this objection on its own initiative. The
objection has been made acting upon the request of the
Corporation Counsel. The allowance is for the same
purpose as the allowance for prepaid interest on
$40,000,000 of bonds, which item is now before the
Supreme Court in an action by the City of New York
to annul the Prior Determinations on this account.
Acting Corporation Counsel, George P. Nicholson, in
his letter to you of January 31, 1921 requests that,
"written notice be given the Lessee that you require
such Redetermination to be submitted to arbitration
or to the Court as provided by Article XXX of Chapter
VI of said contract."


270




3. Salaries of Executives
The particular objection being to the salary of T. S.
Williams, as President, at the rate of $25,000.00 per
annum.
It has been pointed out in previous reports that the
salary of the President of the New York Municipal
Railway Corp. and the associated companies was
increased by $25,000.00 to $75,000.00 per annum at
about the time Contract No. 4 was executed, and the
increase charged to cost under Contract No. 4 and the
related certificates. This was done without the approval
of the Commission. Subsequent to the period covered
by the determinations under discussion, the Chief Engineer has arranged with the Company for a reduction
of the charge for the President, the difference being
charged to other companies in the B. R. T. system.
4. Debt Expense
Being in particular a three thousand dollar fee for
listing the $60,000,000 of the New York Municipal
Railway Corp. bonds on the New York Stock Exchange. The facts are fully set forth on the Thirteenth
Quarterly Determination, in which the writer called
attention to the item but did not recommend objection.
5. Rental for Yards of South Brooklyn Railway Company.
Of two items, the objection to one has been discontinued, as heretofore reported. The remaining item is
the following:
$14,625.00 quarterly rental paid under lease between
the South Brooklyn Railway Corporation and New
York Municipal Railway Corporation of the premises
bounded by 37th Street and 39th Street, 2nd and 3rd
Avenues, in the Borough of Brooklyn.


271




Two rentals are paid for this property. A quarterly
rental of $14,625.00 is paid by the New York Municipal
Railway Corporation and an annual rental of $20,000.00
by the Transit Development Company, which in turn
recovers this rental from the New York Consolidated
Railroad Company in its maintenance charges. Objection has been made to this rental on the ground that the
condition required an adjustment of one or the other
rental or both. The adjustments have not been made
in the Determination and Redetermination and may be
submitted to arbitration or the Court.
6. Accrued Interest Receivable from the New York
Consolidated Railroad Company on the Cost of
Railroads in Operation.
The basis for this objection is the practice of the New
York Consolidated Railroad Company of making a
deduction from operating revenue for interest on the
difference between the company's expenditures as estimated by them, on account of the cost of construction
and equipment and the cost as given in the latest available Determination but failing to credit the New York
Municipal Railway Corporation with a corresponding
amount in adjusting interest charges between the portions in operation and those not in operation. The failure to credit the New York Municipal Corporation is
detrimental to the interests of the City, in that such
failure affects the amount of bank balances of the New
York Municipal Railway Corporation and consequently
the amount of interest received on such bank balances.
As Contract No. 4 provides that the cost for interest be
reduced by the amount of interest received on bank balances, the effect of the practice now followed is to increase the capital cost of the railroad.


272




This credit has not been allowed in the Determinations
or in the Redetermination and may be submitted to
arbitration or the Court.
7. Cost of Lawrence Street Station, Section 3, of
Route 33.
The Chief Engineer has excluded fromn the Determinations the cost of constructing the Lawrence Street
Station, Section 3, of Route 33. The reason for excluding these costs is given in foot notes in the Determinations, which read as follows:
"The Cost of constructing the Lawrence Street
Station under an agreement modifying the contract is not included pending the consummation of
an agreement modifying Contract No. 4, so as to
provide for the construction of this station."
The fact that the station when completed will be an
integral part of the railroad was the basis for objecting
to the failure to include its cost in the Determinations.
The cost has been excluded from the Determination and
the Redetermination and may be submitted to arbitration or to the Court.
Objections to the 20th Quarterly Determination
Interest on Company Money.
Objections should be filed as in the case of previous
Determinations, to the following details of Interest on
Company Money:
(1) $15,000.00 interest for the quarter year at 5 per
cent. per annum on the 3 per cent. discount on
$40,000,000 bonds issued April 4, 1913.
(2) $9,000.00 interest for the quarter year at 6 per
cent. per annum on the 3 per cent. discount on
$20,000,000.00 bonds issued November 4, 1915.
(3) $50,000.00 interest for the quarter year at 1 per


273




cent. per annum on $20,000,000.00 bonds issued November 4, 1915.
The reason for these objections has been set forth in
reports on prevoius Determinations. The item of
$50,000.00 is the one to which Mr. George P. Nicholson,
Acting Corporation Counsel, in his letter to you of
January 31, 1921, requests you to file objections on behalf of the City. The amounts objected to are included
in the following items of the Determination among
others:
Page 79-Interest on moneys provided by Company.
Interest accured during the months of
January, February and March, 1918,
on $40,000,000.00-5 per cent. bonds
issued April 4, 1913............... $500,000.00
Interest accured during the months of
January, February and March, 1918,
$20,000,000.00-5 per cent. bonds
issued November 4, 1915........... 250,000.00
Additional interest accrued during the
months of January, February and
March, 1918, at 1 per cent. on
$20,000,000.00 bonds issued November
4, 1915, to conform with intent of Contract 4 and Certificates that Company's Interest Charges during Construction be figured at 6 per cent. per
annum rather than 5 per cent. per
annum, the rate borne by the bonds..  50,000.00
$800,000.00
Also on page 4, Summary for Quarter Year Ended
March 31, 1918, Undistributed Cost, $225,282.97; page
4, Summary of Total at March 31, 1918, Undistributed
274




Cost, $11,162,889.74; page 9, Summary of Expenditures by City and Company, Interest during construction, $229,945.07; pages 10 and 11, Summary of Expenditures by the Company Quarter Year Ended
March 31, 1918, Interest during construction, $229,945.07.
Salaries of Executives.
Objection has been made in several of the previous
Determinations to the allowance of $6,250 for the
Quarterly salary of T. S. Williams, President of the
Company. The amount of this charge for the 20th
Quarter (ended March 31, 1918) is $1,250.00, or at the
rate of $5,000.00 per annum. This is a reduction of
$20,000.00 per annum from the rate previously charged.
In the schedule to become effective on January 1, 1920,
given in a letter from Mr. Turner to you dated March
30, 1920, no charge is to be included for the services of
the President. The variation in this charge has been as
follows:
To December 31, 1917........ $25,000.00 per annum.
January 1, 1918 to September 30, 1918............. 5,000.00 per annum.
October 1, 1918 to December
31, 1919................ 4,000.00 per annum.
Subsequent to January 1,1920.  0.00
The Charge for the 20th quarter at the rate of
$5,000.00 per annum does not seem to be unreasonable.
Objections were made to this item in the 12th to 19th
Quarterly Determinations inclusive.
Rental of South Brooklyn Railway Yards.
A quarterly rental of $1.4,625.00 is paid by the New
York Municipal Railway Corporation, and an annual
rental of $20,000.00 by the Transit Development Company for the premises bounded by 37th and 38th Streets,
275




2nd and 3rd Avenues, in the Borough of Brooklyn. The
rental paid by the Transit Development Company is
recovered by that Company in its maintenance charges
to the New York Consolidated Railroad Company,
operating assignee of the New York Municipal Railways Corporation. This situation seems to require the
adjustment of one of the other rental or both; I recommend, therefore, that objection be filed to the item of
$14,625.00 quarterly rental included in the 20th quarteerly determination. This item is included but not identified in the Summary on Page 4, Item Cost of Equipment of the Railroad for Initial Operation, $412,726.49,
and in the summary Pages 10-11 Item Cost of Equipment, Broadway-Fourth Avenue Line Labor and Materials $316,185.41.
Accrued Interest on Interest Chargeable to Operation.
It is recommended that objection be made to the failure to include a credit, in an amount undetermined, or
accrued interest receivable on the cumulative amount
of interest chargeable to operations on the cost of the
parts of the railroads in operation. This credit should
have been allowed in connection with Interest on moneys
provided by the Company as shown on page 79 of the
Determination. The basis of this objection is the practice of the New York Consolidated Railroad Company
of making a deduction from operating revenue for interest on the difference between the company's expenditures as estimated by them, on account of the cost of
construction and equipment and the cost as given in the
latest available determination, but failing to credit the
New York Municipal Railway Corporation with a corresponding amount in the Journal Entries adjusting interest charges between the portions of the railroad in
operation and those not in operation. The failure to
credit the New York Municipal Corporation, is detri

276




mental to the interests of the City in that such failure
will affect the amount of the bank balances of the New
York Municipal Railway Corporation and consequently
the amount of interest received on such bank balances.
As Contract No. 4 provides that the cost for interest be
reduced by the amount of interest received on bank balances the effect of the practice now followed is to increase the capital cost of the railroad. This is one of
the objections made to the 18th and 19th Quarterly
Determinations as to which the Chief Engineer in his
Redetermination states, "Upon a careful examination
of the above objections the engineer is unable to find any
grounds for altering his original conclusions."
Cost of Lawrence Street Station.
The following amounts paid on account of work done
in constructing the Lawrence Street Station has been
excluded from the amounts included in the statements
on page 56 of the Determination Details of City's Cost
for Labor and Materials, Quarter Year Ended March
31, 1918.
Route 33, Section 3:
Regular Estimate No. 34, January, 1918.$3,474.90
Regular Estimate No. 35, February, 1918. 1,239.30
Regular Estimate No. 36, March, 1918... 5,143.50
The reason for excluding these amounts is given in a
foot note reading "The Cost of constructing the Lawrence Street Station under an agreement modifying the
contract is not included pending the consummation of
an agreement modifying Contract No. 4, so as to provide for the construction of this station." This station
when completed will be an integral part of the railroad
and objection should be made to the failure to include
its cost in the City's Cost for Labor and Materials. This
objection was also made in the 19th Quarterly Determination.
277




I




INDEX
References are to pages.
PAGES
Accidents
5th and Flatbush avenues.................42, 43, 191
Ocean  parkway.................................49
Sunnyside  yards.............................47, 48
Additions and extensions......................139,140
B. R. T.-B.-M. T................................72
I.R. T..........................................72
Arbitration
Adjustment.......................121,122,125,196
Contract No. 3 (Interborough)
Cost  of  operation......................... 125,196
Depreciation............................ 116,195
Contract No. 4 (B.-M. T. and B. R. T.)
Cost of operation................. 120,124,125,196
Determination of cost.............120,123,196, 268
Names of arbitrators....................116,120, 125
Provisions  of contract...........................115
Transit Commission's policy.........117, 119, 125, 195
Transit Construction Commissioner's policy...115, 117,
120, 124, 195
Ashland Place Connection (B.-M. T.)...150, 151, 152, 262
Balance sheets
B.-M. T.................................86, 90, 193
I.  R.  T.........................................107
Board of Estimate and Apportionment............15, 25
A ccidents.......................................42
Appropriations...........................66, 68, 76
Board of Transportation plans................... 155
Brooklyn Crosstown line................144, 146, 261
Committees appointed by.....................42,144
279




PAGES
Board of Estimate and Apportionment (Continued)
Conference Committee, 1923..................41,144
Corona-  Flushing  line...........................2
Fare  increase......................25
Fort  Hamilton  extension......................... 72
Fourteenth Street-Eastern line................   59, 60
Governor-appeal to............................. 5
Joint Commission of Engineers....................45
Nassau-Broad  Street line...................... 61, 62
Platforms, lengthening........................... 42
Queensboro  line.................................71
Shops and yards
B rooklyn.....................................66
Interborough............................, 68, 869
Transit Commission
Charges  against........................6, 9, 50, 78
Plans  of........................ 1, 144, 146, 147
R equisitions....................................71
Uncompleted subway contracts....................57
Washington Heights liine........... 14, 147, 148, 149
Board of Rapid Transit Railroad Commissioners......   11
Board  of Transportation........................ 60,138
14th Street-Eastern line.........................60
Law   creating.............................. 146,153
M em bers..................................   153
Municipal operation
Estimated  results....................... 153
Powers.................................., 140,  153
Routes, plan  of Dec. 9, 1924...................... 154
W ashington  Heights  line.......................154
B ore........................................ 117, 156
Broadway-4th Ave. Line. (B.-M. T.)
Ashland place connection.................... 151,152
Joint operation with I. r:. T.......................16
Recapture................................. 21
Route................................... 16


280




PAGES
Brooklyn City Railroad Company
Capitalization...................................98
Earnings......................................102
H istory........................................98
Lease to Brooklyn Heiglits Railroad Company,
80, 81, 98, 99
Lines..........................................80
O rganization....................................98
Reorganization of B. R. T.-see
Through routes and joint fares.............81, 99, 196
Transfers.................................81, 98, 196
Brooklyn Crosstown Line
Board  of Estiiate......................... 144, 146
Conference  Committee..........................144
D elaney.......................................145
Hylan's plan..........................141,143, 262
Transit Commission's plan....... 141,146,150,261,264
Brooklyn Heights R. R................ 80, 81, 98, 99, 196
Brooklyn Manhattan Transit Company
Accidents (See):
Arbitration...........................120, 123, 126
Ashland Place Connection...................151,152
Balance  sheets...............................86,90
Brooklyn Crosstown line....................141, 146
Capital stock-market values, etc........32, 78, 85, 86,
89, 91, 93, 97, 193, 244 et seq.
Cars....................................38,39,195
Centre  Street  loop............................. 16,50
Charges against Transit (ommll ission.... 50 78,126, 127
Contract No. 4, see
Congestion.............................41, 141, 152
Corona-Flusliing Addition................. 14, 141
Deficits under Contract No. 4.................. 19, 146
Determination of costs................22, 84,120,268
Depreciation................................92,113
I)ividends........................... 2, 78, 89, 161, 192
281




PAGES
Brooklyn Manhattan Transit Company (Continued)
Dual contracts..................................12
Earnings...27, 4(-, 89, 128, 198, 203, 205, 218 et seq.
Equipm ent.................................80, 222
Expenses...............................84, 203, 224
Fares........................................ 161
Fort Hamilton  Addition...................... 72,141
Flushing  Addition...............................72
Fourteenth-Eastern line..........................59
Grand  jury investigation.........................47
Injuries and damages-outlays for............219, 223
Investment
Contract No. 4...17, 22, 30, 80, 133, 200, 207, 225, 255
Elevated lines.................. 17, 28,80, 207, 225
Interstate Commerce Commission investigation......48
Joint Commission of Engineer's report.............43
Lines
Elevated..................................11, 80
Subw ay......................................80
Surface......................................80
Operating  statistics.............................219
Organization as business corporation......2, 78, 86,193
Platform-lengthening........................41, 42
Pooling revenues...........................128,196
Propaganda................................78, 111
Recapture............................ 20, 21, 22
Reorganization
Capitalization............78, 84, 89, 193, 244 et seq.
Com m ittee....................................96
Depreciation..................................92
Expenses......................9, 84, 94, 256 et seq.
Power plants..........................80, 87,193
Repair  shops.........................80, 87,193


282




PAGES
Brooklyn Manhattan Transit Company (Continued)
Service
H earings................................ 39,191
Improvement of, proposals for..............42, 239
Orders.............................. 39, 82, 191
Stock-common...............32, 78, 85, 88, 91, 193
Stock-preferred................78, 85, 88, 91, 92,193
Subsidiaries...................11, 80, 225, 248 et seq.
Suit  vs.  City................................ 61,66
Transportation Facilities Committee............ 42, 45
Valuations... 18, 22, 28, 30, 81, 85, 133, 139, 193, 225, 244
et seq.
W ooden  cars.............................42,49, 50
Yards.......................................65,66
W ashington  Heights............................141
Brooklyn Rapid Transit Company
(See Brooklyn Manhattan Transit Corp.)
Capitalization...............27, 32, 84, 89, 244 et seq.
Earnings............................. 27, 46, 203
Lines
Elevated........................11,17, 28,80,209
Subway...................................17,80
Surface.................................... 80
Organization....................................80
Receivership.............................42, 81, 98
Reorganization...........9, 46, 78, 193, 244 et seq. 256
Rolling  stock...................................38
Subsidiaries....................11, 80, 225, 248 et seq.
Values....................18, 22, 28, 30, 81, 133, 139,
193,207, 225, 244, 246, 255
B uses.........................................2,158
Capitalization
Brooklyn  City  R. R. Co..........................98
Brooklyn Rapid Transit Co.........32, 85, 89,193, 248
Brooklyn-Manhattan Transit Corp. 32, 78, 79, 85, 89, 91,
133, 193
283




PAGES
Capitalization (Continued)
Interborough Rapid Transit Co.......32, 103,106,133
Manhattan  Ry. Co...........................31,105
New York Railways Co.................108,109,133
Cars.............................................37
B.-M. T.-B. R. T.
Record   of............................... 38, 195
Transit Commission's orlers................39, 191
I. R.T.
Record  of......................... 38, 67, 195
Transit Commission's orders...............38,191
Service orders-see "Service"
Central  Park.....................................148
Centre  Street Loop  (B.-M. T.).......................16
Service.....................................53, 62
W ooden  cars.................................50, 53
Charges against Transit Commission
Board of Estimate action..........................6
Charges
1.  Accidents.............................50, 163
2. B.-M. T. reorganization.................78, 17
3.  Crowding.............................38, 181
4.  Depreciation.........................119, 181
5. Depreciation arbitration............... 119, 183
6. Pooling  revenues......................124,183
7. Expenses of operation........ 84, 124,126, 184
8. Determination of costs.........84, 120, 124, 185
9. Transit Comm. expenses...................186
10. Through routes and transfers............99, 186
11. Articulated  units.......................56,188
Counsel,  special................................1,6
Dates  prepared, filed, etc..........................6
Moreland Investigation (see)
City of New York
(See Dual Contracts)
Appropriations................................ 76
28-4




PAGES
City of New York (Continued)
Benefits of subways to  City.......................24
Deficits under contracts......................18, 157
Investment in subway......... 11, 18, 22,70, 207, 230
Return under Contracts Nos. 1 and 2............15, 18
Subway  interest in budget.........................18
Suit by   B.-M. T............................61, 63, 66
Transit Comm. Readjustment Plan.......130,131,139
Y ards..........................................66
Committees
Conference 1923.................41, 14, 147, 148, 151
Joint Commission of Engineers.............43 et seq.
Transportation Facilities.................42, 45, 263
Constitutional Amendment..............22, 23, 137, 162
Contracts
Dual.........................11, 34, 57, 124, 127, 142
Subway Contract No. 1................... 11, 12, 41
Subway Contract No. 2................... 11, 12, 41
Subway Contract No. 3................ 11 et seq., 20
Subway Contract No. 4.... 11, 16 et seq., 20, 50,61,151
Corona-Flushing line (I. R. T.)......... 14,16, 72,141
Corporation Counsel
Appearances-Moreland Investigation..............7
Board of Estimate request for opinion on charges.... 6
Objections to determination of cost......121, 122, 126
Objections to B. R. T. reorganization......... 86, 87
Objections to Brooklyn City exclusion............100
Court of Appeals..................................70
Craig,  Charles  L.................................8, 26
'Constitutional amendment....................... 137
Cost  of  operation..............................158
Debt limit..................................23, 137
Extensions  to  existing  lines.....................140
Municipal operation of independent lines.......... 140
Nassau-Broad   st.  line...........................61
Subway operation benefit to City.................24
285




PAGES
Craig, Charles L. (Continued)
Uncompleted construction......................13, 57
Water bonds....................................138
Crowding
(See "Service")
Culver line (B.-M. T.).............................16
Recapture......................................21
Dead  Man's  Button......................43, 44, 49,192
Debt Limit
Constitutional amendment.................. 22,137
Increases of assessed valuations................... 23
Plan  of readjustment............................138
Defective Structure and Equipment..................37
Committee Transportation Facilities........... 42
Flatbush  Ave. accident.......................42,191
Joint Commission of Engineers................ 43, 45
Ocean Parkway accident......................49, 192
Power  plants, obsolete....................139, 231
Sunnyside  Yard  accident.........................47
Ties, joints and guard rails..........42, 43, 46, 85, 192
Transit  Commission.............................. see
Wooden cars................................42, 43
Deficits
Contract No. 3, under
City's..................................... 18, 28
Com pany's.................................. 19
Interest on cumulative deficits..................... 18
Contract No. 4, under
City's....................................  19, 28
Com pany's...................................19
Deficit included in cost........................19
Estim ated..................................... 156
Increase  of...................................146
Taxes  offset  to.................................. 24
286




PAGES
Delaney, John H.
Arbitrations...........................116, 195,268
Ashland  Place connection....................... 151
Brooklyn Crosstown line................ 145,146,264
Committee on Transportation Facilities............43
Conference Conmmittee 1923......................144
Cost of new construction.................... 155, 230
Depreciation...........................113,114, 195
Extensions to existing lines..................140, 145
Fourteenth street-Eastern line................... 59
Hylan-  letters  to..........................146, 264
Member of Board of Transportation.......146, 153, 154
Nassau- Broad  street line........................61
Shops  and  Yards.............................66, 68
Transit Construction Commissioner........3, 59,140
Washington  Heights  line........................150
Depreciation
Accrued...........................107, 139,213,230
Contract provisions.................52,111,112,115
Contract No. 3 (Interborough).................. 112
Arbitration..............................116,195
Delaney depreciation memorandum.. 113, 114,115, 117
Quackenbush memorandum...................113
Transit Commission policy............118,119, 195
Contract  No. 4  (Brooklyn)..................... 112
Annual  charges..............................113
Proposed  increase...........................113
Reorganization.......................... 92
Recapture-status on.................. 11, 119, 195
Determinations  of Costs...........................119
Arbitrations...................................120
Contract No. 3, under..........................  122
Contract No. 4, under................22, 84, 120, 268
Excessive overhead included..............22, 200,238
287




PAGES
Determination of Costs (Continued)
Objections by Corporation Counsel..........121, 122
Objections by Transit Construction Commission... 120,
123, 125, 196, 268 et seq.
Receivership explens(l...................84, 120, 123
Transit Commission's policy................ 121, 122
Dividends........................................26
B. R. T.-B.-M. T..............32, 46, 78, 89, 91,161,192
Brooklyn   City.................................. 9
I. R. T................................ 32,103
Dual contracts
(See Contracts 3 and 4)
Earnings Statements
B.-M. T. (N. Y. Rapid Transit Co.)..27, 46, 89, 128, 192,
198, 203, 205, 218 et seq.
I. R. T. (Subway division)...............26,198, 201,
210 et seq., 227 et seq.
Municipal operation-assuming.......28, 29,157,199,
207, 209, 210 et seq., 216, 227 et seq.
Eastern Parkway Branch (I. R. T.).................. 14
R ecapture.....................................21
Elevated Lines.................................. 11
Brooklyn
Changes for steel car  eation.............54, 1
Investment in third trlacking, etc..........17, 80, 90
Valuations.................   8, 9   133  07  225
Manhattan  and  Bronx..........................  104
Investment in third tracking, etc........ 15,104, 106
Valuations...........................107, 133, 139
Plan of readjustment................... 132, 134, 139
Related  certificates.......................12,13,151
Exhibits
A.  Charges...................................163
B. Letter, Gordon to Sherman.............    190
C. Interborough R. T. Co.-Operating results,
1912-1924................................201


288




PAGES
Exhibits (Continued)
D. N. Y. Rapid Transit Co. (B. M. T.)-Operating  results, 1912-1924.....................203
E. N. Y. Rapid Transit Co. (B. M. T.)-Operating results, 1924 and 1925 adjusted........205
F.   Interborough-Earning power of subways....210
G. N. Y. Rapid Transit Co. (B. M. T.)-Operating results, 1924 adjusted.................218
H. B. R. T. System-Transit Comm. valuation....225
I.  Interborough-Municipal operation with investment cost increased 125 %..............227
J.  Improvement to service-Hylan.............239
K. B. R. T. System-Value of securities 1923......244
L. B. R. T. reorganization disbursements.........256
M. Letter, Hylan to Board of Estimate...........261
N. Letter, Delaney to Hylan....................264
O. Objections to determination of costs..........268
Fares
Board of Transportation program
Provisions of law.............................153
Prospective results of operation............154, 156
Contract, fixed by.........................19, 23, 104
Eight-cent fare...........................24, 26,134
Hylan opposition to increase......................25
Municipal policy................................24
Municipal operation.................... 153,157, 228
Plan of readjustment-Transit Commission........26,
70, 131, 133
Propaganda by railroad companies....24, 40, 79, 89, 197
Transit Commission's policy................25, 26, 70
Financing subway construction..... 22, 28, 29, 30, 138, 155
Flatbush Avenue accident
(See "Accidents")
Fort Hamilton extension (B. M. T.).............72,141
Fourteenth Street-Eastern District Line (B. M. T.)
Board of Estimate, action by......................57
289




PAGES
Fourteenth Street-Eastern District Line (B. M. T.)
(Continued)
Board of Transportation, action by................60
Change from "L" to subway....................... 59
Recapture...................................... 21
R oute..........................................17
Future construction
Board of Transportation plans.... 30,138,153,155,157
Constitutional amendment, effect of............22,138
Cost of........................29, 30, 199, 229 et seq
Funds available.......................22, 23, 28, 138
Mayor Hylan's plans....3, 70, 76,138,140,142,143,144
See "Brooklyn Crosstown line"
See "Washington Heights line"
Transit Commission's plans..............140, 141, 143
See "Brooklyn Crosstown line"
See "Washington Heights line"
Gordon, H. A.
Charges......................................... 6
Moreland investigation...................7, 190, 200
Sherman, letter  to.........................9, 95, 190
Governor, State of New York
A ppeal  to....................................... 5
Charges against Transit Commission.............6, 7
Message  of 1924.............................149, 160
Moreland  Commissioner.......................... 1
Grand jury presentment............................47
Harkness, Leroy  T.................................. 8
Adjustments-arbitrations..........121, 123, 126, 195
Brooklyn City R. R. Co......................100,102
B.-M.-T.  dividends..............................93
B. R. T. reorganization...........81, 85, 86, 90, 92, 193
B. R. T. reorganization expense....................94
D eficits........................................156
Depreciation-Contract No. 3 (I. R. T.),
117, 118,119,195
290




PAGES
Harkness, Leroy T. (Continued)
Depreciation-Contract No. 4 (B.-M. T.)......92,113
Determination of costs......................121,123
Fare-Current...............................25, 26
Fare  increase..............................25,26
I. R. T. reorganization..................103,118,195
Personal record.....................4, 15, 19, 53, 129
Pooled  Revenues...............................129
Shops  and  yards..............................66, 67
Transfers and through routes................101, 102
Wooden cars..........................52, 53, 54
Hedley, Frank.............................8, 113,210
I. R. T.-Finances..........................41, 161
Platform-lengthening...................... 41, 161
Hulbert, Murray
Conference Committee..........................144
Washington  Heights  line........................149
Hylan,  John   F.....................................8
Brooklyn Crosstown line........141, 143, 144, 146, 261
Buses......................................  158
Centre  St.  loop..................................50
Constitutional amendment......................137
Crowding.................................... 40, 64
Extensions to existing lines...............70, 140, 142
Fare  increase  opposed.........................25, 26
Fourteenth St.-Eastern District line...............59
Future construction.................. 3, 138, 143, 144
Manhattan Railway Company rental..............105
Municipal operation....................137, 140, 144
Nassau-Broad Street line....................... 63
Plan of readjustment-Transit Commission...... 134,
137, 139
Recapture  of subways...........................137
Reorganization expense, B. R. T................... 95
Service improvement......................5, 42, 239
Shops  and  Yards................................64


291




PAGES
Hylan, John F. (Continued)
Staten  Island  Tunnel............................72
Transit Commission's plans.................141, 146
Washington Heights line........................143
W ooden  cars.................................   50
Inspections
Railroad  Companies.............................47
Transit Commission.........................47, 82
Interest
Amount in 1924 Budget....................18,23,24
City bonds.........28, 137, 211, 218 et seq., 227 et seq.
Company borrowings..........22, 27, 85, 157, 198, 211
Plan  of  readjustment.......................134, 137
D eficits.......................1........... 18
Interborough Rapid Transit Co.
Arbitration
Depreciation.............................116,195
Cost  of  operation............................125
Balance  sheets...............................  107
Capital stock
Amount..................................32, 103
M arket  value.................................32
Capitalization......................32,106,107, 133
Cars............................38, 67,191,195, 231
Congestion.....................................38
Contracts-Dual (See Contracts 1, 2 and 3).......11
Corona-Flushing Addition......................14
Deficits  under  contract..........................18
Depreciation.........................113 et seq., 195
Determination  of cost....................... 122, 238
Dividends................................ 32, 103
Earnings under Contract No. 3.........26, 27, 198, 201
Elevated lines, earnings diverted to.... 31, 104, 214, 215
Equipment..............................12, 14,231


292




PAGES
Interborough Rapid Transit Co. —(Continued)
Investment
Subways................... 12, 15, 31, 106, 210, 228
Elevated.......................15, 104, 106, 107
Manhattan lease............. 11, 31, 104, 105, 107, 195
Platforms, lengthening.......................41, 231
Queensboro  line.................................14
Recapture............................20, 21, 22, 107
Reorganization......................4, 39, 103, 195
Sanitary  conditions..............................33
Service
Hearings..................................37, 38
Improvements to..........................42, 239
Orders....................................37, 38
Reorganization...............................39
Shops  and  yards...........................37, 64
Shops  and  yards.............................65,66
Company requests postponement.............37, 68
Relation  to  service..........................37, 65
Valuations..............................   107, 133
Interstate Commerce Commission................... 48
Investment in Transit Lines
B.-M. T.
Elevated lines............17, 28, 30, 80, 90, 200, 225
Subways............17, 30, 80, 90, 200, 207, 225, 255
Surface lines..............................90, 225
City of New York
Subways........1, 12, 15, 17, 70, 207, 210, 227 et seq.
Interborough
Elevated  lines........................15, 104, 106
Subways.......12, 15, 28, 106, 210 et seq., 227 et seq.
Surface  lines...................................139
Joint Commission of Engineers
Appointm ent....................................43
Personnel.....................................  43
Report................................43, 46,49,92
293




PAGES
Laws
Constitution- State............................131.
Moreland Act.................................. 7
Laws of 1884  and  1891..........................100
Public Service Commission Law. 7, 33, 35, 36, 82, 87, 88,
99, 194
Rapid  Transit Act..............................82
Transit Act, 1921.............................2, 130
Transit Act, 1924...................... 145, 146, 153
Legislature........................................33
Appeal to, by City administration................3, 5
Constitutional amendment......................137
Transit Act, 1921.................................
Transit Act, 1924...............................153
McAneny, George................5,8, 19,22,24, 26,39
Accidents...............................43, 45, 191
B.-M. T. finances...............................94
Board  of Estimate..............................45
Defective structures......................45, 46,191
Dual contracts.................................  15
Extension of existing lines..................140,156
Future  construction..................... 140
Joint Commission of Engineers' report......43, 45
Service  hearings................................39
Washington Heights line.................... 148, 149
Wooden cars, retirement of................... 52, 53
Manhattan Railway Co.
Capitalization...................................31
F are..........................................104
Improvements under certificates...........11, 14, 104
Interborough R. T. Co. (see)
Lease  to  I. R. T..........................11, 31, 104
Losses from operation........................31, 104
Reorganization, I. R. T.........................  104
Rental  reduction............................105, 195
Valuation.................................133, 139
294




PAGES
Menden,  W illiam   S.................................8
Fourteenth  st.-Eastern  line.......................60
Shops  and  yards.................................65
Moreland  investigation............................1, 7
Charges against Transit Commission........9, 79, 190
E xhibits......................................   8
Hearings.................................8, 160, 190
M cAvoy,  J.  V.................................7,10
Sherman,  H.  L................................8, 10
Testimony 8, 9, 13, 23, 24, 26, 29, 45, 57, 63, 64, 65, 68, 76,
79, 83, 88, 91, 95, 96, 101, 130, 137, 141, 158, 191, 228
W itnesses....................................... 8
Municipal  Operation..............................19
Board of Transportation plan................138, 265
B uses....................................... 159
C raig........................................ 140
Existing lines, estimated results on 28, 29, 31, 198,199,
207, 209, 214, 216, 224, 227 et seq.
Five  cent  fare..............................157, 228
H ylan....................................137, 140
Interest and expenses under......27, 28, 157, 227 et seq.
Taxes..................................28, 206,236
Nassau-Broad Street Line (B.-M. T. ).............16, 60
Ashland  Place connection........................151
Bids  and  estimates.............................. 61
Board  of  Estimate............................61, 62
City's  obligation................................63
C raig........................................ 61
Delaney......................................  61
H ylan.........................................63
Suit  against  City................................61
Turner........................................ 61
"New Money"-B.-M. T.......................46, 256
Preferred  stock.................................91
Bonds.........................................91
295




PAGES
"New Money"-B.-M. T. (Continued)
Company  statement.............................93
Transit Commission's statements...............93, 94
Dividends and interest on.........................94
New York Consolidated Co. (B. R. T.)........30, 80, 226
(Succeeded by New York Rapid Transit Co.)
New York Municipal Railway Co. (B. R. T. ).........11,
30, 54, 80
(Succeeded by New York Rapid Transit Co.)
New York Railways Co.
Capitalization..............................108, 109
Lines controlled................................ 108
Receivership...................................108
Reorganization...............................4, 109
Valuations............................108,110,139
New York Rapid Transit Co. (B.-M. T.)... 11, 28, 205, 218
(Merger of New York Municipal and New York Consolidated R. R. Co.)
Nicholson, Geo. P................................7, 43
Objections to determination of cost
Arbitration............................120,123, 125
Contract No. 4..........................120, 123,125
Corporation counsel, by.................. 121,122,126
Transit construction commissioner, by........120, 123,
125,268
Ocean Parkway accident
(See "Accidents")
O'Ryan, John  F..............................8, 24, 93
Fares................................... 26, 156
Fourteenth Street-Eastern Line...................59
I. R. T. reorganization........................4,103
New York Railways reorganization............. 4, 108
Plan of readjustment..................4, 131, 135, 138
Shops and yards-B.-M. T......................65,66
Shops and yards-I. R. T.......................4, 65
Surface lines under plan of readjustment..........135
Valuations................................ 136,139
296




PAGES
Passengers killed and injured.................42, 47, 49
Plan of Readjustment..........................25, 130
Bonds, purchase money.................. 132, 134, 135
City's  opposition........................... 70, 131
Consolidated  company.......................... 131
Coipanes' valuations....................... 133, 136
D ebt  lim it.....................................138
Dual contracts................................  131
Elevated  lines.............................132,134
Transit Commission values................. 133, 139
Companies' values............................ 133
Extensions to existing lines...................... 139
Fares..................................70, 133, 137
Franchises................................. 132, 135
Hylan................................134, 137, 139
Interest rates..........................132, 134, 137
O'Ryan..............................4, 131, 132, 138
Surface  lines........................... 70, 132, 134
Transit Commisson values.................133,139
Companes' values............................133
Pooling Revenues-Contract No. 4.
B.-M. T.-Revenue excluded.................128, 196
Contract  provisions........................ 124,127
Charges against Transit Commission.............127
Preferentials Under Dual Contracts
C ity...........................................15
Computations.................1............... 16
Contract No. 3..................................15
Contract  No.  4............................... 17  18
Property Owners
Benefit by  Subways..............................23
Taxes  paid................................. 24
Valuation  increase..............................24
Public Service Commission......................... 54
Contracts-dual..............................11,15
Uncompleted construction..................... 57, 61
297




PAGES
Queensboro Line  (I. R. T.)..........................14
Board of Estimate............................... 71
Transit Commission.............................. 71
Uncompleted construction........................ 58
Recapture of subways................... 19, 23,138,162
Companies' financial position upon.........90, 107,119
Contract No. 3-dates and cost
Entire  system.......................... 20, 22,107
Eastern  Parkway  line.......................... 21
Seventh Avenue-Lexington line.................21
Steinway  tunnel............................... 21
W hite Plains road.............................21,Contract No. 4-dates and cost
Broadway-4th Avenue line.....................21
Culver line............................   21
Entire  system...........................20,22,90
14th  Street-Eastern  line.......................21
Depreciation funds..................... 112, 119,195
Diminishing, costs of.............................20
Exchange of legs-Contract No. 3...............21, 22
H ylan....................................... 137
Receiver-B. R. T. and subsidiaries................42, 81
Contract  No. 4..................................123
Cost determinations......................... 84, 120
Expenses............................84, 96,124,126
Harkness  opinion...............................82
Law-duty and power under...................82, 83
Service  order................................39, 82
R elief............................................39
Board of Transportation.......................154
H ylan..................................... 161
Legislature, appeal to....................... 3, 5,160
R em edy.........................................162
298




PAGES
Reorganization-B. R. T............................46
(See "B. R. T." and "B.-M. T.")
Bonds  issued............................... 85, 193
Brooklyn City R. R. Co...............100 et seq., 196
Business Corporation................2, 78, 86, 88,193
Cash requirements..........................91, 256
Charges against Transit Commission...............78
Committee...................................... 96
Corporation Counsel objection.............86, 87,100
Depreciation.................................... 92
Directorate..................................78, 79
Dividends.......................46, 78, 91
Expenses of reorganization.9, 26, 84, 94, 97, 200, 245, 256
et seq.
Gordon's letter to Sherman..................... 9, 200
Harkness opinion.........................  81, 94
New  money........................46, 91, 93, 94, 256
Stock
Manipulation.......................78, 86,89,193
No  par value........................78,85,89,193
Preferred..........................78, 85, 89,193
W atered......................... 78, 85,133, 193
Transfers................................ 100, 196
Valuations................81, 85, 193, 207, 244 et seq.
Reorganization-I. R. T........................40,118
Depreciation Fund and Transit Commission... 118, 195
Harkness..............................104, 118,195
Manhattan rental..................105, 106, 118, 195
Notes issued...........................105, 106, 118
Service,  relation  to..............................39
Sinking Fund postponement..............105, 118, 195
Reorganization-New York Railways Co............108
Richmond
Dual  contracts.................................11
Staten Island Tunnel...................... 72 et seq.
299




PAGES
Ridgway, Robert............................8, 61, 144
Board of Transportation routes.................. 155
Joint Commission of Engineers.................... 43
Shops and yards.................................67
Routes
Board  of Transportation........................154
Conference  Committee..........................145
Contracts No. 1 and No. 2......................11, 12
Dual contracts........................... 14, 16, 21
Hylan  plan............................143, 144, 262
Staten   Island...................................76
Transit Commission plan........141, 145, 147, 148, 261
Service
B. R. T.-B.-M. T...........................34, 39, 82
Cars........................................38,39
Contract  provision.............................. 34
Emergency........................1, 2, 4, 33, 37, 191
Financial ability of companies...............37, 39, 83
Hearings................................37, 39, 191
Hylan...............................40, 42, 64, 239
I.   R.   T......................................34 64
Orders.................................. 37, 38, 39
Rush hours..................................40, 64
Shops  and   yards...........................37, 64, 65
Traffi c......................................23, 24
Transit Commission powers.................33 et seq.
Seventh Avenue-Lexington Avenue Line (I. R. T.)...14
Recapture......................................21
Sheehan, Cornelius M.
Brooklyn City R.R. Co.-discontinuance of transfers. 101
Sherman, Henry L...................8, 9, 10, 79, 95, 190
Shops and yards
Board   of Estimate........................66, 67, 69
B.-M. T.-B. R. T.............................. 12,65
Com pleted...................................67,  68
Coney   Island   shop..............................66
300




PAGES
Shops and Yards (Continued)
Delaney..................................... 66, 68
East  New   York................................55
H arkness...................................66, 67
H ylan........................................ 64
Interborough.............................12, 65, 66
M enden...................................... 65
O'Ryan.............................4, 65
Postponement requested (I. R. T.).............. 37, 68
Ridgway.......................................67
Suit vs. City................................... 66
Transit Commission.....................4, 64, 66, 67
Uncompleted................................58, 63
Staten  Island  tunnel........................72 et. seq.
Stations
Board  of  Estimate..............................42
Board of Transportation plans................30, 156
Lengthening platforms
B.-M. T.-B. R. T...............................41
Interborough..............................41,231
Steinway Tunnel line (I. R. T.)....................14
Recapture......................................21
Steuer,  M ax   D.....................................7
Stock- No  par  value...............................88
B.-M. T...............................78, 85, 91,193
New  York  Railways............................. 108
Stock Outstanding
Brooklyn  City...................................98
B.-M.  T...................................32,85,91
B. R. T............................32, 85, 244  et seq.
I.  R.  T..................................... 32,103
Manhattan  Ry.  Co...............................31
New  York  Ry. Co............................108,109
Sunnyside Yards Accident
(See "Accidents")
301




PAGES
Surface lines
Brooklyn  City...........................80, 98, 139
B.-M. T. Subsidiaries..... 80, 81, 98, 139, 225, 244 et seq.
Bus lines...................................... 158
New York Railways.....................108,110,139
Obsolete...........................4, 70, 81, 134, 139
Plan of readjustment............70, 132, 134, 135, 139
Revenue....................................... 159
Transfers................................81, 99, 196
Valuations...................81, 90, 108, 133, 139, 225
Taxes
Municipal operation........................207, 236
Property  owners................................. 24
Railroad  companies.............................24
Taxicabs........................................159
Traffic
B.-M. T........................................23
B uses........................................... 2
G rowth.....................................2,140
I.R. T.........................................23
Population.....................................23
Subways.................................23, 24,38
Surface  lines..................................  159
Taxicabs.....................................159
Trains
B.-M. T.................................. 38,41
I. R. T..................................38
Length of trains.........................41, 156, 231
Platform  length.........................41,156, 231
Schedule changes..........................36, 38,39
Transfers and through routes
Brooklyn  City........................98 et seq., 196
B.-M. T.............................. 98 et seq., 196
Loss to public from abolition of...............99, 101
Receivership-B.  R. T...........................81
Reorganization (B. R. T.)-see
Transfer  points..............................98, 99
Transit Commission.....................99, 102, 104
302




PAGES
Transit Act of 1921..........................2,  70, 130
Transit Act of 1924.......................145,  146, 153
Transit Commission
Accidents.................42, 47, 49, 50, 192
Arbitration................... 117, 119, 121, 125, 195
Board of Estimate.................. 6, 45, 69, 144, 150
Brooklyn Crosstown line........141, 146, 150, 261, 264
B.-M. T.-tie-up with................140, 141, 145,157
B. R. T. reorganization...............78, 84, 86, 93, 97
Charges.................6, 10, 38, 56, 78, 124, 126, 191
Conference Committee 1923................. 144, 145
Corporation Counsel objections..................121
Defective equipment..........................37, 49
Dead  Man's Button..........................49, 192
Depreciation..........................117,119, 195
Determination of cost.................. 120,121,123
Extension of existing lines..............140, 141, 145
Fourteenth Street-Eastern line................59, 60
Future construction............140, 141, 143, 144, 156
Grand jury-Queens County......................47
Iylan  plan..............................3, 144, 146
Inspections.....................................47
Interborough reorganization.....................39
Joint Commission of Engineers................43, 45
Nassau-Broad  Street line........................ 61
Plan of readjustment-see
Powers.....3, 25, 33, 39, 70, 76, 82, 83, 87, 102, 130, 140,
153, 160, 264
Queensboro  line.................................71
Requisitions on Board of Estimate.................71
Service..........................33, 37, 64, 140,191
B.-M. T.-B. R. T.
Hearings.................................39
Orders...............................39,55,56
I.-R.-T.
Hearings.............................37, 38,39
O rders.....................................3
303




PAGES
Transit Commission (Continued)
Shops  and  Yards.....................4,64,  66,67,68
Transfers...................................99,101
Valuations.18, 30, 80, 81, 90, 108, 110, 133, 139, 207, 225,
229, 246, 255
Washington Heights line............ 141, 17,148, 150
W ooden  cars...............................55, 56
Transit Construction Commissioner...................3
Arbitration........................116,120, 125, 195
Cost  of  operation...............................120
Depreciation...........................113,116, 195
Determination of costs...................... 120,123
Tenure..................................3, 120, 140
Through Routes and Joint Fares..........99 et seq., 196
Turner,  Daniel  L.................................144
Ashland Place Connection....................... 152
Nassau-Broad  street line.........................61
Plan  of July  29, 1920............................140
W ooden  cars.................................   53
Tuttle, Arthur S..................................144
Committee on Transportation Facilities.......... 43
W ashington  Heights  line........................148
Uncompleted construction-Dual contracts........13, 57
Fourteenth Street-Eastern line................57, 58
Nassau-Broad  St.  line........................58, 61
Public  Service  Commission.......................57
Queensboro  line.............................. 58, 71
Shops and yards........................... 13, 58, 66
Valuations
B.-M. T.-B. R. T......18, 22, 30, 78, 80, 85, 90, 133, 139,
225, 246,255
Companies' claim...............................133
Depreciation  accrued............................28
Elevated lines
Brooklyn....................... 18, 80, 90, 207,225
M anhattan...................................139
I.  R.  T......................................28,133


304




PAGES
Valuations (Continued)
New York Railways.....................     10110,139
Power  plants................................   139
Subway lines.......................22, 133, 225, 255
Surface lines
Brooklyn........................30, 80, 81, 90, 225
M anhattan...............................108,110
O ther.....................................  139
Transit Commission
June 30, 1921.................18,30,80, 81, 90,108,
110, 133, 225, 229, 246, 255
December 31, 1922.................28, 207, 246, 255
Washington Heights line
Board of Estimate............................... 144
Board of Transportation.........................154
Conference Committee.......................144, 147
Hylan  plan.................................... 143
Transit Commission.....................141,147,150
White Plains Road line (I. R. T.)
Recapture......................................21
W olfe, S. Herbert.............................. 8, 156
W ooden  cars...........................38,39
Accidents.................................. 42, 49
B.-M. T......................................39
Charges........................................56
Dead  Man's  Button...........................43, 49
Depreciation....................................51
Elevated structures changed.......................54
Harkness.................................       52
Hylan.................................... 50
Joint Commission of Engineers....................43
M cAneny.......................................52
"Public Service Record"..........................54
Reconstruction  of...............................56
Replacement  cost................................53
Retirem ent..................................51, 53
Transit Commission orders.......................55
Turner.........................................53
305




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