Monday, Jul. 04, 1949

Who Starved the Long Island?

The Long Island Rail Road last year carried more passengers (109 million) than any other road in the U.S., yet it went bankrupt three months ago. Why? Thousands of commuters who ride in & out of Manhattan every day on its crowded, squalid, undependable trains have long thought that they had the answer to that question: they thought that the Pennsylvania Railroad, which owns the Long Island, drove its subsidiary on the rocks by overcharging it for services rendered and underpaying it for services received.

Last week the Nassau County (N.Y.) Transit Commission, an unsalaried board of seven prominent citizens appointed by the Republican New York State Legislature, said indignantly that the commuters were right. The Pennsy, the commission found, had milked the Long Island of upwards of $2,000,000 a year in intracompany deals. Some of the deals : P:The Long Island, using its own tugs and barges, hauls Pennsylvania's freight across New York Harbor to Greenville, N.J., earning the Pennsy $1.10 in terminal credits for every ton of freight. For doing the work, the Long Island gets only 35-c- a ton. Thus, the Pennsy gets 75-c- for doing almost nothing. Said the commission: these revenues over the years would have more than wiped out the $12 million in accounts payable which the Pennsy claims is now due from the Long Island. P:About eleven miles of Long Island track form a vital freight route to the Brooklyn waterfront. Fees paid for use of this track by the N.Y. Connecting Railroad (jointly owned by Pennsylvania and the New Haven) totaled $300,000 last year, less than half of what the commission thought they should be. P:The Long Island owns a freight yard near Manhattan, but leases it to the Pennsy, which pays it a piddling $13,000 a year. This forces the subsidiary to deadhead its own cars to less accessible yards, at a cost last year of about $370,000.

In bankruptcy, the Long Island is still being run by David E. Smucker, the chief operating officer of the road before it went broke and now one of the trustees. He had no comment. This week the Pennsy talked back, saying: "The commission has not . . . unearthed anything new or anything that has been kept secret by the Pennsylvania ... A complete misunderstanding of the facts." The road also noted that the New York Public Service Commission had once said there was "little basis" for the impression that the Pennsy had been draining the Long Island.

*Maximum penalty: $500 fine for first offense, up to $2,000 for any subsequent one. If the company is found guilty, and if it is unable to win a reversal, Standard might just as well go out of business.

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