The court therefore concludes that this contention of petitioners is without merit.
11. Rate of return:
The petitioners contend that the order omits essential findings as to the bases of the Commission's conclusion that 6 1/4% to 6 1/2% is a fair rate of return.11a
The court holds that the discussion of rate of return, covering six pages of the order, amply discloses a rational basis in the record for the Commission's conclusion as to rate of return, and that the Commission had no duty to make more detailed mathematical findings.
12. Jurisdiction of the Commission to consider through Maryland-District rates:
The petitioners' final point is that the Commission erred in limiting its inquiry to the fixing of intrastate fares for the District of Columbia service and refusing to consider rates for through service to Maryland riders coming into the District, on the ground that interstate rates are outside the jurisdiction of the Commission.
Petitioners argue that a reading of certain language in the Unification Agreement
which resulted in creation of Capital Transit Company, together with Section 8 of the Merger Act, Pub.Res. 47, 72d Congress, approved January 14, 1933, indicates that the Commission has authority to consider the particular problems of the interstate riders of the Company, who now pay a dual fare, with a view to fixing a rate which would encourage such riding.
The court holds that the statute cited does not empower the Commission to fix rates which would discriminate against intrastate passengers in favor of interstate riders, and that the Commission was correct in holding it was without jurisdiction to fix interstate rates.
Various other points in support of the principal contentions were raised by Mr. Spiegel on behalf of the petitioners. Many of these were attacks upon the accounting methods of the Commission. The court does not deem it necessary to discuss these, since all dealt with matters within the Commission's discretion and judgment.
Petitioners, as to a number of the items questioned by them, stated that in view of the absence of evidence in the record or lack of mathematical finding in the order, they could make no estimate of the effect of possible disallowance on the rate of return for the future test period. Assuming that the whole of each of these contested items should be disallowed (which petitioners did not claim should be done, since further investigation might have disclosed justification for all or part of each item), and using the present method of determining rate base and the rates in effect prior to Order No. 4052, the rate of return to the Company would be 7.35%, only a little over 7%, which the Commission found would be within the area of fair rate of return, n13 and no increase in rates would have been justified. However, in view of the conclusions heretofore set forth with respect to the items questioned by the petitioners, it is evident that the Commission was justified in allowing the Company some increase in fares.
n13. The following table assumes disallowance of the total amount of increase in officers' salaries, directors' fees, and legal fees; adjusts federal income tax reserve to reflect loss on Maryland operations of the Company; and excludes from rate base an alleged deficiency in depreciation reserve and allowance of working capital for materials and supplies.
Capital Transit Company
Restatement of Page 20 of Order No. 4052 Based on
Adjustments Proposed by Mr. Spiegel
Exhibit Spiegel As
No. 38 Adjustments Adjusted
Passenger Revenues $ 27,409,365 $ 27,409,365
Station and Vehicle Privileges 202,844 202,844
Switching Revenues 81,067 81,067
Other Operating Revenues 2,912 2,912
Total Operating Revenues $ 27,696,188 $ $ 27,696,188
Operating Revenue Deductions:
Operating Expenses $ 21,927,472 $ 165,088 a $ 21,762,384
Depreciation 1,936,736 1,936,736
General Taxes 1,374,912 1,374,912
D.C. Income Taxes 92,128 8,254 b 100,382
Federal Income Taxes 1,116,399 81,554 c
139,000 d 1,058,953
Total Taxes $ 2,583,439 $ 49,192 $ 2,534,247
Total Operating Revenue
Deductions $ 26,447,647 $ 214,280 $ 26,233,367
Net Operating Income $ 1,248,541 $ 214,280 $ 1,462,821
Weighted Investment in Rate Base
Property $ 23,420,691 $ 3,511,125 e $ 19,909,566
Rate of Return Earned 5.33% 7.35%
a Exclude from Operating Expenses:
Excessive salaries and directors' fees $ 106,000
Excessive legal fees 71,000
Allocated to D.C. operations -- 93.27% $ 165,088
b Increase in D.C. Income Taxes based on above
adjustment to operating expenses -- 5% $ 8,254
c Increase in Federal Income Taxes based on above
adjustment to operating expenses:
$ 165,088 -- $ 8,254 = $ 156,834 X 52% = 81,554
d To adjust Federal Income Taxes to include the tax
saving applicable to the loss on non-jurisdictional
(Difference between income taxes as shown for
total operations and as allocated to D.C.
operations on Exhibit No. 38) 139,000
e To exclude from the rate base:
Deficiency in Depreciation Reserve $ 2,430,000
Allowance for Materials and Supplies 1,320,000
Allocated to D.C. operations -- 93.63% 3,511,125
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