Univ. of in. Library 51 — — wsssm **lt? i EEPORT Oak Street UNCLASSIFIED OF H. M. THOMPSON, (ACCOUNTANT TO THE BOARD OF RAILROAD COMMISSIONERS, STATE OF NEW YORK,) SPECIAL EXPERT ACCOUNTANT, APPOINTED BY WM. A. BOOTH, ARBITRATOR, UNDER THE CONTRACT BETWEEN THE NEW YORK & SEA BEACH RAILWAY CO. wm. o. Mcdowell, FOR SERVICES. New York: MARTIN B. BROWN, PRINTER AND STATIONER, Nos. 49 and si Park Place. t 88 5 . v . 1 EEPORT OF H. M. THOMPSON, ACCOUNTANT TO THE BOARD OF RAILROAD COMMISSIONERS, STATE OF NEW YORK.) SPECIAL EXPERT ACCOUNTANT, APPOINTED BY WM. A. BOOTH, ARBITRATOR, UNDER THE CONTRACT BETWEEN THE NEW YORK Sl SEA BEACH RAILWAY CO. AND wm. o. Mcdowell, FOR SERVICES. New York: MARTIN B. BROWN, PRINTER AND STATIONER. Nos. 49 and 51 Park Place. 1885. New York, November 14, 1885. Wm. A. Booth, Esq., New York City : Dear Sir — Under your authority, as Arbitrator in the matter of Mr. Wm. O. McDowell vs. New York and Sea Beach Railway Co. for settlement of accounts, you appointed me to make an examination of the affairs of that company for the year ending September 30, 1885, and report the result to you. In pursuance of that appointment I have made the examination and beg to present the following REPORT : October 1, 1884, to September 30, 1885. RECEIPTS. Earnings from freight traffic $1,788 66 " passenger traffic 94,126 81 Earnings from steamboats, as follows : Received from Stephens & Condit for charter of boats $5,891 83 Received from proportion of ticket sales 3,167 61 Received from Manhattan Steamboat Co. for wharfage 150 00 Received from sundry parties for dock rent and wharfage 1,537 50 Received from charter of boats 6,976 66 sundries : 17 85 17,741 45 Received from rents and privileges of terminal prop- erty, as per annexed schedule marked "A". . . $64,252 84 L<0 Less notes taken for part still unpaid . . $28,572 24 L-] Less allowances 572 50 29,144 74 35,108 10 QJ Total cash receipts for the year $148,765 02 4 EXPENSES. Operating railroad, as per annexed Schedule " B " $94,817 22 Operating boats, as follows: Pay-roiis * *'q 13 5 o Board of crews ^ f Repairs, charters, etc 54,795 46 Repairs, expenses, etc., of terminal property, as follows : Sea Beach Palace ; Sea Beach Palace Hotel 2,01d 61 Sea Beach Palace Rink 2,dbb 9d Sea Beach Palace Restaurant and Bar 313 25 Electric light • f 91 84 Miscellaneous 1,d4U 16 154 99 Interest : „ AA AA Bonded debt 00 Mortgages 1/74^ $15,747 97 Interest and discount on notes, loans, etc 5,729 68 2,50a 01 iaxes - 23,982 66 Total expenses for the year _ $189,7 50_33 Total cash receipts for the year as shown $148, 765 02 Total expenses for the year as shown ___ Apparent loss for the year ^40^985JU Charges have been made to construction and equipment as per annexed schedule marked " C." . For additions and betterments to railroad to 'ia* 35 For additions and betterments to steamboats _ $08,137 71 I have examined the vouchers for all charges and founder several cases, distributions made to operating expenses whic ought to have been made to construction, and vice versa, but ou about offset the other, so that I did not consider it necessary t redistribute such items. Thompson, H a Report, . ..under the contract between the K ew York & S e a Beach rails way co. and Wm. 0. BcDowell, for services. New York, Brown, 1885 # *4 5 It will be observed that a portion of the apparent loss, as stated above, consists of the unpaid notes, amounting to $28,572.24. So far as these notes may be paid, the loss would be reduced. I understand that large improvements were made by tenants to the various properties under lease, in the expectation of an increased excursion traffic ; but the withdrawal of the boats from the line, just at the opening of the season, prevented the realiza- tion of a profitable business as anticipated, and thereupon many of the lessees refused to pay, and, in some cases, where certain privi- leges were leased, such as music on boats, etc., the lessees not only refused to pay the notes, but claimed damages against the Com- pany, which, in some instances, were allowed and paid. The value of improvements made by lessees, as referred to, would be claimed as offsets to amounts due the Company by them, inasmuch as the policy of the Company was altered after the leases were made, by which change the lessees claim they suffered damage to their business. In view of this fact, as well as the dissolution of the partnership, all improvements made to property of the Company by others than the Company (which, of course, enhances the value and increases the income to be derived in the future) is fairly a good asset in which both parties to the contract (Mr. McDowell and the Railroad Company) have an interest, and should be taken into account in arriving at the net profits for the year. As appears by the books, the traffic over the boats of the Staten Island Rapid Transit Company (from foot of Whitehall street) from June 1 to September 30, 1885 (during which period the boats of the Sea Beach Railroad Company did not run be- tween New York and Bay Ridge), produced a revenue of $43,528.20 ; this, of course, would have gone to swell the receipts of this Company, had its boats been running, at but a small in- crease of cost beyond what is already charged to "operating steamboats.'' To furnish, as desired by you, comparisons of the year now spread before you, with the doings of former years, I have used the figures as given by the Company in its annual report each year to the State, which, being verified as required by law, will of course be accepted as authentic : 6 October 1, 1881, to September 30, 1882. Gross earnings from passenger traffic $27,462 67 Gross earnings from freight traffic 140 00 Receipts for rents and privileges 2,972 28 Operating expenses. Net earnings from operation. Deduct interest paid Deficit for the year _ Cost of operating was 98.84 per cent, of earnings. October 1, 1882, to September 30, 1883. Gross earnings from passenger traffic $39,187 60 Gross earnings from freight traffic 30 30 Receipts for rents and privileges 16,650 52 $30,574 95 30,222 69 $352 26 1,230 08 $877 82 Operating expenses $55,868 42 38,811 43 Net earnings from operation $17,056 7,225 00 Deduct interest paid Surplus for the year $ 9 > 831 99 Cost of operating was 69.47 per cent, of earnings. 1882. 1883. Increase 1883 over 1882. Operating expenses $30,574 95 30,222 69 352 26 877 82 $55,868 42 38,811 43 17,056 99 $25,293 47 or 82. 72$ 8,588 74 or 28.42$ 16,074 73 or 4,713.77$ 10,709 81 9,831 99 October 1, 1883, to September 30, 1884. Gross earnings from passenger traffic $133,055 52 Gross earnings from freight traffic i^ 59 5 * Receipts for rents and privileges 31,843 91 Operating expenses. Net earnings from operation. Deduct interest paid $166,658 94 90,089 92 $76,569 02 17,105 08 Surplus for the year. $59,463 94 7 Cost of operating was 54.05 per cent, of earnings. 1888. 1884. Increase 1884 over 1883. Gross earnings Net earnings $55,868 42 38,811 43 17,056 99 9,831 99 $166,658 94 90,089 92 76,569 02 59,463 94 $110,790 52 or 198.38^ 51,278 49 or 132.12^ 59,512 03 or 348. 90# 49,631 95 or 504.69^ October 1, 1884, to September 30, 1885. Gross earnings from passenger traffic $94,126 81 Gross earnings from freight traffic 1,788 66 Receipts for rents and privileges 35,108 10 Newark ticket sales $3,167 61 Charter of boats, wharfage, etc 14,573 84 17,741 45 $148,765 02 Operating expenses 168,272 68 Deficit from operation $19,507 66 Add interest paid 21,477 65 $40,985 31 Total deficit for the year Cost of operating was 113.11 per cent, of earnings. 1884. 1885. Operating expenses. . Net earnings $166,658 94 90,089.92 76,509 02 59,463 94 $148,765 02 168,272 68 19,507 66 *40,985 31 Decrease, 1885 under 1884, $17,893 92 or 10.73* Increase, 1885 over 1884, 78,182 86 or 86.78* Decrease, 1885 under 1884, 96,076 68 or 125.48* Decrease, 1885 under 1884, 100,449 25 or 168.92* *Deficit. The foregoing results of the doings of the respective years present the following facts : In 1882 the net earnings from operation were $352.26 ; the operation cost 98.84 per cent. In 1883 the net earnings from operation were $17,056.99 ; the operation cost 69.47 per cent. In 1884 the net earnings from operation were $76,569.02 ; the operation cost 54.05 per cent. In 1885 the deficit from operation was $19,507.66, and the operation cost 113.11 per cent. 8 Jn 1885 the reduction in passenger traffic under 1884 was $35,761.08 ; the net deficit was reduced to $19,507.66 by increased income from rents and privileges, together with receipts from steamboat charters, etc. Thus we see that the management of 1883 and 1884 was very successful, increasing the income from operation from $352.26 to $76,569.02 and reducing the cost of securing such earnings from 98.84 per cent, to 54.05 per cent. In 1885 the policy of the company was changed and the boats were withdrawn, and we find a reversion of the success of 1&83 and 1884, producing a deficit in operation of $19,507.66 and increasing the cost of operating from 54.05 per cent, to 113.11 per cent. This showing, unless caused by uncontrollable circum- stances, would be quite unsatisfactory to railroad managers. Taking therefore the results of 1884 as a basis, with a fair presumption that, if the policy of the management had remained the same in the year 1885 as it was in 1884, the results would have been as follows : The increase of cash receipts from passenger traffic alone in 1884 over 1883, was $93,867.90 or 239.53 percent.; in 1883 over 1882 was $11,724.93 or 42.69 per cent. ; making the increase of 1884 over 1883, 196.84 per cent, larger than that of 1883 over 1882. The increase of 1885 over 1884 might justly be claimed as equal to that of 1884 over 1883, viz. : 239.53 per cent., but, to make a liberal allowance for all ordinary contingencies, the in- crease without doubt would have been as favorable to 1885 over that of 1884 as the enlarged increase of the respective terms shown above, viz. : 196.84 percent. The cash receipts from passenger traffic in 1884 were $133,055 50 Add 196. 84 per cent, of the same for increased business, say . . 261,906 44 And the receipts from passengers would have been $394,961 94 The operating expenses in 1884 were 54.05 per cent, of the earnings and. as a considerable decrease in that item, pro- portionate with the increased earnings, would naturally fol- low, a moderate allowance would place the cost at 50 per cent, of the earnings, which is 197,480 97 Net earnings from passengers alone would have been $197,480 97 9 As stated heretofore in this report amounts due for rents and privileges were left unpaid, owing to the fact that the busi- ness of the lessees was damaged by the withdrawal of the boats. If, therefore, the boats had been operated, and the excursion traffic promoted, the lessees would have been furnished with the means of realizing a profitable business, and as a consequence the rentals would have been paid. It is not unreasonable then to place the income from this source at the amount which was received by the company in note3 and cash, as shown on attached schedule, marked "A," say $64,000 00 Total receipts from all sources would have been $261,480 97 Deduct from this the yearly interest on bonded debt 14,000 00 And the surplus to be divided between the contracting parties would have been $247,480 07 Mr. McDowell, being entitled to i of the net profit, his share of this would be $49,496 19 The claim of Mr. McDowell, for -J- interest in improvements to property made by lessees, which has been charged against rent also received from them, I have referred to heretofore in this report as a fair item of assets to be taken into account as a part of his profit and should be determined by appraisement. The further claim of Mr. McDowell to an interest in the rentals which may accrue to the Company in future years from leases made under his management cannot be considered in any way just or allowable ; some leases do not expire for ten years to come, and one not for more than ninety years yet ; they were made by Mr. McDowell as manager of the Company's operations, and, so long as he remained with the Company under contract, he should receive his proportion of the income ; but, after the expiration of his contract, the Company can establish such a policy or change its method of operations, so as to make it desir- able for the leases to terminate by mutual consent. To sum up the whole matter I show the following : The apparent loss on the business of the Company for year ending September 30, 1885, is $40,985.31. 10 M,. McDowell's *» -^ZTlS £55 basis as shown by me he is entitled to $49,496 19. His claim for salary at $200 per month xs covered by t " i. w i»W hefore you a full statement of the T hplieve I have now laid Dei ore qa i ft«* herein, as requested in your communication to me. Ml of which is respectfully submitted. .... H. M. Thompson, ( Sl g ned > Expert Accountant, 11 •oj9 'predufr st? •jfu'Bduioo 8 8 8 38 § . 8 8 8 OS 00 02 0> O QO oo 'gg § go m office* 8 8 £ O O tH CO § 03 o o o 8 8 lO o So § 00 o 00 ^8 OS 00 oo i = 88 88 oo OS T-l •uorrBJidxg; CO CO Mar. 4 p. > <3 ,£5 t . 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