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Six-cent Fares or Higher Realty Taxes?
Theodore P. Shonts and Laurence McGuh-e OutUne Serious Condition Which
Confronts Property-Owners in the Metropolis.
BY THEODORE P. SHONTS,
President Interborough Rapid Transit Company and
New York Railways Company.
EVERY owner of real estate in New York, every
rent payer, has a vital interest in the proposition
to charge a six cent fare for the period of the
war on all street railway lines, subway, elevated and
surface.
Either the people who ride on the subway and ele¬
vated must pay the interest on the city's investment
of $250,000,000 in the Dual System or it must be paid
out of taxes.
The Interborough's contract with the city provides
that after operating expenses are paid the company
shall receive its preferential. It is not until this has
been paid in full that the city will receive any return
from fares to meet the interest charges on its invest¬
ment. The other contracts the city has relating to the
Dual System are on the same basis. A five-cent fare
during this period of extraordinary operating costs will
defer any return to the city from the operation of its
lines.
It is estimated that, with a five-cent fare, the city
will for a period of from five to seven years face an
annual deficit of at least $11,250,000 in the operation of
the Dual System. Some people believe that, due to
i war conditions and the uncertainty of the times, this
deficit will reach $20,000,000.
Every $10,000,000 increase in the city's tax budget
i must mean a five per cent, increase in the tax rate. A
$20,000,000 deficit will mean a 10 per cent, increase in
the tax rate.
This deficit of from $11,000,000 to $20,000,000, as vari¬
ously estimated, can be provided for in only one of two
ways; either by putting the burden on the taxpayer in
the one case, or on the fare-payer in the other.
The tax rates in the Borough of Manhattan, Bronx
. and Brooklyn for the ten years 1908 to 1918 are given
below:
Manhattan Bronx Brooklyn
1909..... 1.67804% 1.67804% 1.73780%
1910..... 1.75790 1.75790 1.81499
1911..... 1.72248 1.72248 1.75502
1912..... 1.83 1.83 1.87
1913..... 1.81 1.81 1.85
1914..... 1.78 1.77 1.84
1915..... 1.87 1.94 1.92
1916..... 2.04 2.09 2.08
1917..... 2.02 2.02 2.07
1918..... 2.36 â– 2.40 2.40
We have offered to pool the earnings of the existing
lines with the new lines as opened, simultaneously with
the adoption of a six-cent fare. Our contract does not
require this pooling until the Hnes are ready in the new
East River tunnel. This offer is made to give the city
9t once the benefit of pooling before the new lines are
in complete operation, and to preclude any claim that
the Interborough will gain any financial advantage
from the six-cent fare beyond an immediate instead of
a deferred payment of its preferential.
Frankly, our interest in the measure is to secure the
current payment of this preferential, and to insure suf¬
ficient earnings to keep the surface lines out of bank¬
ruptcy.
BY LAURENCE McGUIRE,
President of the Real Estate Board of New York.
THERE would seem to be no question that there
will be a deficit in the operation of the Dual
Subway System with a five-cent fare. Of this'
we are assured by those best qualified to make an esti¬
mate. Nothing can be gained at this time by criticism
of the contract entered into as between the city and the
operating company. It is, however, fair to state that
the city's initial venture into municipal, or semi-
municipal operation of transit lines, cannot be used as
an argument in behalf of complete municipal ownership
and operation. Facing this deficit as we are should be
sufficient warning to those advocating municipal owner¬
ship. In any event, it should bring forcibly to the minds
of real estate owners the necessity for combating
further attempts at municipal ownership.
What is of importance at the minute is that there
will be a deficit, and that, under the contracts, this
deficit must be met by the city and not the operating
company as it has a preferential on the earnings. Not
only has it a preferential, but its dividends are cumu¬
lative. The amount of the deficit has been variously
estimated. Assuming that it will be $15,000,000, it
must be apparent that if this amount is to be covered
by additional taxes on real estate, there will be added
from this one source approximately 18 points to the
present tax rate.
This means, all other things being equal, that the rate
will increase from 2.36 to 2.54. The intolerable burden
under which real estate is staggering will thus be
greatly increased. It will not be possible for land
owners to pass this increased burden to the rent payers.
Rentals cannot be advanced with the rapidity at which
taxes are mounting. Of one thing we can feel quite
sure and that is the owners of vacant or unproductive
property cannot pass this burden on to others.
It was stated at the time the city entered into the
Dual Subway contracts that the opening of these sub¬
ways would greatly enhance values in outlying districts
and the city, therefore, would enjoy additional revenue
through increased assessed valuation. Unfortunately
the completion of the tubes coincides with the period
of stagnation in building, due to the war. Conditions
were not good before the country entered the war.
Since, however, the National Government has prac¬
tically placed an embargo on building operations not
essential to the conduct of the war. Those who took
on speculative commitments in anticipation of profit
through the operation of the tubes will, of necessity,
have to contribute a large portion of the operating
deficit.
It is a question at this time of the ability of those
owning unproductive property to take on any additional
burden. Recent city tax sales would seem to indicate
that the city itself may become possessed of more
unproductive land than it can comfortably carry.
The foregoing and other cogent reasons make it im¬
perative that the deficit should be met without further
additions to the now exceedingly heavy taxes. It would
seem to me that this might be best done by granting
{Continued on page 377)