Q. Are you sure about that? A. Sure of it.

Q. Is it not a fact that there was $290,000 and some odd made, over and above all expenditures, coming from the subway lines? A. There was a balance of $292,371.48 remaining after meeting the interest and sinking fund on city bonds.

Q. Of the subway? A. Of the subway?

Q. Yes. A. I am speaking strictly subway now: meeting the interest and sinking fund on city bonds, meeting the interest and sinking fund on so many of the Interborough bonds as were related to the subway in operation, and some other minor charges, but

Q. Now, that money was used to help to pay the rentals or the dividends due on the Manhattan elevated? A. Well, all of these earnings went into the general treasury of the company.

Q. I know, but I want you to answer my question. Was not that $290,000 and some odd used to help to pay the deficiency on the leases and the dividends to be paid to the Manhattan Elevated Railroad Company? A. It went into the general treasury and the payments to the Manhattan Railway Company were made from the general treasury of the company.

Q. And that was a part of it? A. It was a part of the general treasury. Now, I would like to clear up just one point, if your honor please. At the present time it looks as though there were a conflict of understanding. The $292,000 which remained from the operations of the subway for the fiscal year ending June 30, 1919, falls $6,100,000 below the preference guarantee to the company under the contracts, and the significance of this is that while

Q. Wait a minute now. A. $292,000 —

Q. Wait one minute. I want that read again, because I did not get that clearly.

Mr. Burr. He said that

The Chairman. - Go ahead and read it.

(Read by stenographer as follows: "At the present time it looks as though there were a conflict of understanding. The

$292,000 which remained from the operations of the subway for the fiscal year ending June 30, 1919, falls $6,100,000 below the preference guaranteed to the company under the contracts, and the significance is that while-")

Q. Now go ahead. A. Well, while $292,000 remains of the gross revenue, all the subway and elevated lines fell very far short of meeting the fair charges against the capitalization and operation of that line.

Q. But it did meet all charges, did it not? A. It met these specific charges.

Q. Yes. Then you had two hundred and ninety odd thousand dollars which was used to pay the deficiency of the elevated system? A. There was that much left in the treasury, and out of the treasury there was made the other payment. We cannot earmark the particular payment of this money.

By Mr. LaGuardia:

Q. What was this preferential guarantee? A. Under Contract No. 3 the Interborough Company is entitled to a preferential of $6,335,000, based upon the earning power of the subway lines which it contributed to Contract No. 3.

Mr. Burr.- Well, there is no guarantee

Q. From the City? From the City? A. To be paid from the future revenues of those lines.

Q. This is the contract between the City and the Company ? A. Between the City and the Company.

Q. No company intervening in between? A. No.

By Mr. Burr:

Q. They have the power; under the contract you are entitled to deduct that preferential? A. From the future earnings. Q. Yes. A. From the future revenues of the line.

Q. There is no guarantee of that preferential? A. Well, per

haps the word "guarantee" is a little too strong.

Mr. Burr. I think it is.

The Witness.- Pardon me, may I say this. It is guaranteed to the extent that if the future revenue permits it, it will be paid.

Mr. Burr.- Certainly.

Mr. Quackenbush. - May I correct an error, a slip of the tongue about figures, before we get away from it?

Mr. Burr.- Yes; all right.

By Mr. Quackenbush :

Q. Talking about the annual report, Mr. Gaynor, in reply to his honor the Mayor you mentioned some six million six. I think that was a slip of your tongue for one million six; I don't want the record in error. A. Yes; I will correct it to this

extent.

Mr. Burr. As to the deficit?

A. (Continued.) The subway lines failed to earn their preferential by $1,600,000 for the year. That is because - let me clear it up - that is because all of the subway lines under Contract No. 3 were not in operation that year.

Mr. Burr.- I wish to clear up some slight misunderstanding that his honor the Mayor referred to.

By Mr. Burr:

Q. As a matter of fact, Mr. Gaynor, there were two dividends declared in the period embraced between August 27, 1918, and November 26, 1918, is that not so? A. 1918?

Q. What? A. 1918?

Q. Yes. A. Do you find anything there for April 1, 1919. Q. I find that for 1915-1917 there was a dividend of 20 per cent.; 1918, 172 per cent.; 1919, 5 per cent.; two dividends of 211⁄2 per cent. each declared August 27, 1918, and November 26, 1918, respectively. A. Yes; so that no dividends were paid for the period subsequent to December 31, 1918.

Mr. LaGuardia. - Does that fall from 17 per cent. to 5 per cent.?

Mr. Burr.- Yes.

Mr. Bruckner. - What year, Mr. Burr?

Mr. Burr.-171/2 per cent. in 1918; 1919 5 per cent. The dividends during the 16-year period totalled 1871/2 per cent. altogether.

Mr. LaGuardia.- Would it be possible, then, to get a list of the stock transfers during the year it fell from 17 per cent. to 5 per cent.?

Mr. Burr.-I suppose Mr. Gaynor could get that could supply that could you?

-

The Witness.- Well, that would come more directly under Mr. Fisher. He has charge of that.

Mr. Quackenbush. - We will supply anything you want about that, Mr. Burr.

The Chairman. - Go right along.

Mr. Quackenbush. - Shall I proceed now?

The Chairman. - Yes.

By Mr. Quackenbush:

Q. Mr. Gaynor, in connection with the question that his honor the Mayor asked you about the surplus, I think that you had not finished tracing it until its final dissipation. Will you proceed? You had got to the point where you had invested a portion of the surplus, which you said aggregated about twenty millions of dollars, a part of it in the elevated extensions, the third tracking. Now, taking it from there will you trace it, describe what became of it? What I mean, Mr. Gaynor, to help you understand me, is that that was subsequently reimbursed into operating account out of the issuance of notes. A. That was reimbursed. Now, another application of the surplus revenue was to meet the deficit of the year 1919, $3,810,000.

Q. And carrying on the operations down to the present time? A. Carrying on the operations at a loss.

Q. Now, to answer a question asked by the President of the Board of Aldermen, will you state for his information the amount of the capital stock of the New York and Queens County Rail-

way Company in the treasury of the Interborough Rapid Transit Company; all but 1 per cent. ?

Mr. LaGuardia. - That is the vicious part of it.

Mr. Quackenbush. - No, it is taking it out of one pocket and putting it in the other. The lines are just as though the Interborough Rapid Transit Company itself owned them, and it was money to keep them at the service of the public.

Mr. LaGuardia. - True, but they didn't own them in the beginning.

Mr. Quackenbush. - That is going away back. I will give you the history of that. The last few years, if the Interborough Rapid Transit Company had not made those advances to those surface lines in the counties of Queens and Nassau they would have had to stop operating, and they own practically all of the stock of the New York and Queens County Railway Company.

The Chairman. And if the Interborough Rapid Transit had conserved some of the large dividends that it has been paying year after year, 187 per cent. in the last about 16 years, you would not be in this financial condition that you are in today?

Mr. Quackenbush. - You are absolutely right, Mr. Mayor, and I haven't any doubt that if the directors had foreseen the European war they would have done that very thing.

Mr. Bruckner. - Mr. Quackenbush, why don't they assess the stockholders?

Mr. Riegelmann. - The stock may be non-assessable, and probably is.

Mr. Bruckner. - Is it, Mr. Quackenbush?

The Chairman. - Mr. Quackenbush, why should not those peo-ple who got the 1871/2 per cent. in these last few years, come forward and help make up the deficiency now, instead of taking it out of the pockets of the people?

Mr. Quackenbush. - Mr. Mayor, I suppose that the people who got those large dividends for the most part are not the people