[Vol. 28] Public Service Commission New York State Railways authorized and permitted a fare of eight cents, and half fare to children, and provided for the issuance of four tickets or tokens for twenty-nine cents. This order became effective April 27, 1921, and the rate fixed by it is the one against which the complaint is filed. We shall refer to this case later in our discussion of the case at bar. OPERATING REVENUES AND EXPENSES The operating revenue of the company for the year ending July 31, 1922, is $2,428,489. About this there is no dispute. The operating expenses for the year ending July thirty-first shown by the statements of the company are $1,922,243. An analysis of these expenses by departments, and operating expenses per car mile, and operating expenses per car hour is as follows: In this table we have used 4,979,427 car miles, the mileage operated for the year ending July 31, 1922. These expenses in our opinion are subject to criticism. The charge to operating expenses for maintenance of way and structures was $214,384 and for maintenance of equipment, $184,597, and for renewals and depreciation, $235,692, aggregating $634,673, which is 8.43 per cent of the value of the depreciable property as we shall later determine that value. It Public Service Commission [Vol. 28] would appear that deferred maintenance occasioned by war conditions has been taken care of within the last few years as well as current maintenance. This has consequently brought about an increase in cost of maintenance. The former Commission in the eight-cent rate case directed the respondent to charge for annual depreciation to operating expenses 3.14 per cent of the depreciable property, which amounted to $235,692. The company followed this direction of the Commission and for the eleven months- May 1, 1921, to April 1, 1922— used for renewals and replacements $66,472, leaving $149,578.89 unexpended and as a reserve for future replacements and renewals. It is always difficult to draw a line of demarkation between maintenance and replacements and renewals. These items of expense are bound to overlap. Under the Commission's uniform system of accounts for electric railroad corporations, depreciation accounts are required to cover depreciation of ways, structures, equipment, buildings and power plants, in order that the losses incident to important retirements may be equalized from year to year. The cost of replacing minor parts is included in the cost of repairs or maintenance as distinguished from the cost of replacement of large units. The cost of repairs is chargeable to current maintenance. In view of the close relationship charges are often made to current maintenance which should go to replacements. The general condition of the property of the respondent was conceded to be good. Maintenance has been met and there is no immediate necessity of replacements and renewals for adequate and safe service. Mr. Tilton, the vice-president of respondent and general manager of its Syracuse and Utica lines, testified that the liability replacement of the company in [Vol. 28] Public Service Commission his judgment was $370,000, the cost of items of property which he detailed, and which would require renewal or replacement within a period of one to five years. When these renewals and replacements were made he stated that in his opinion the property of the company would be as good as new. Professor H. E. Riggs testified that he went over the entire property-tracks, buildings, etc.- of the company and that the property as a whole was one of excellent maintenance; that certain renewals and replacements of property were being made and others would have to be made, but taking the Syracuse property as a whole it was in much better condition and maintenance than in any city in Michigan or northern Ohio; that the property was normally fully maintained and that "it would require the expenditure of $200,000 or $250,000 a year continually to keep it in the same condition." On his cross-examination he testified that an expenditure of $250,000 to $300,000 on the property would take care of replacements and current maintenance of the principal property; that replacements would constitute the major part of it. Dr. E. W. Bemis, expert called by the city, testified: "The question of the balance or division between renewals and depreciation reserve is not a very clear one. They shade into each other and the policy of the company has to be considered as to how much it charges to one and how much to the other. What it does not charge to one account it must charge to the other." From its own inspection, through its engineering department, the Commission is of the opinion that the property is well maintained and in good and safe operating condition. In view of this condition of the property and of the Public Service Commission [Vol. 28] testimony of Mr. Tilton and Professor Riggs, the Commission is of the opinion that the expenses of maintenance can and should be reduced. 66 The item conducting transportation as shown in the table above is $824,666 or at the rate of 16.3 cents per car mile. This item appears high in comparison with the expenses of other electric railroad properties where the companies are comparable. This item of expense appears from the reports to the Commission to vary from 11.92 cents per car mile to 15.75 cents per car mile. The operation of one-man cars on the Syracuse lines, which the Commission by its decision handed down herewith permits, will bring about a further reduction in the item "conducting transportation." The company estimates that the saving in this regard for the year ended March 24, 1922, compared with the previous year is $87,614 and for the entire year 1922 it estimates a saving of $107,000. If the operation of one-man cars is extended to other lines of light traffic, continuing operation, by two men on the lines of heavier traffic, there will be a further reduction. The power item the Commission believes should be revised. During the current year there has been material improvement in surface and alignment of track in the city of Syracuse and as a result thereof and with proper instruction of motormen and operators as to the use and saving of power there should be a reduction in the expense in this department. From comparison of operating expenses with other companies it is determined that the expense per car mile for general and miscellaneous expenses should not exceed four and one-half cents per car mile. This would result in a reduction of expense in that department. The Commission has taken into consideration the [Vol. 28] Public Service Commission reduction of wages which went into effect June first last which will bring about an estimated reduction of $37,900. The Commission has estimated that there should presently be, in view of the items pointed out, a reduction in operating expenses set forth in the following tables: STATEMENT OF ACTUAL AND ESTIMATED OPERATING EXPENSES FOR THE YEAR ENDED JULY 31, 1922 * Renewals and replacements included in first two items. |