[PRCo] Re: Wha[i]t a Minute...

[Fred Schneider]

This is an interesting concept ...

Bled dry by underlying companies.

It simply means that instead of PRC paying for its own property, it  
rented its property.   It never paid to build 650 miles of track.    
Other companies paid to build 500 or so miles of track and PRC merely  
rented it.   It was a common way of doing it in Pennsylvania.    Bled  
dry?

Is that any different from me deciding not to own a fleet of trucks  
for my business, but rather to rent them from Avis?   Then I go  
broke.   Do I accuse Avis of bleeding me to death?   It's a business  
expense.   I need trucks.   I chose to rent them instead of buy them.

Or I choose to rent telephones or computers or my office...

It was very common in the traction industry to have ABC Trolley  
Company build the line from A to B to C and then lease it for 3% each  
year of what it cost to build.

What happened in 1950 was the dissolution of the underliers.   The  
stockholders who invested in ABC Trolley Company lost everything.    
Their company would simply be rolled over into the operating company  
and they would get stock in the new operating company, let's, for  
simplicity, call it PRC company.

Unfortunately in 1950 this new PRC company doesn't have a really big  
chance of making money so the stock the ABC bond holders or  
stockholders get in the new PRC company might be almost worthless.    
Before they at least got 3% of their investment every year.   Now  
they have a good risk of getting zip.   Unless this PRC company can  
sell out and reinvest in something worthwhile.   Something like  
making aerosol cans or smoke detectors or fire alarms.

Sadly, the people who made money in the trolley industry were those  
who had enough brains to build the lines in the first place and to  
insist on cash on the barrel head.   The dumb ones built and took  
stock.   The really bright ones inflated the value of the property  
the built (the old $600 toilet seat concept) and still demanded it in  
cash.   It wasn't ABC or DEF that bled PRC but it might have been the  
promoters and construction companies that took their money up front  
back in the 1890s and ran with it.

And there was another problem over the years ... most trolley  
companies expect to pay off their mortgages with inflated dollars.     
Your home mortgage takes an identical number of dollars each  
month ... part for principal and part for interest.   But the typical  
trolley company mortgage was not done that way.   It was simply so  
much interest every year for 20, 25 or 30 years and then the  
principal came due at the end.   And few companies ever bothered to  
establish a sinking fund to pay off the principal.   So we have a  
company formed about 1902 with a 30 year mortgage (very common  
scenario), they paid off the interest every year, but now, in the  
bottom of Depression, in 1932 the principal is due.   And they never  
set aside the money.   Not the least bit uncommon.   If there was one  
company doing that, there were hundreds and hundreds.   They all  
planned to pay off the mortgage bonds with inflated dollars.   Or  
they would reissue new bonds to pay off the old.   Only in 1930,  
1931, 1932, 1933, 1934, 1935 ... no one had money to buy worthless  
paper for worthless trolley lines.

Bled to death?   I'd rather believe there were a lot of idiots out  
there with blinders.

Other than that statement, I agree completely with Holland.

On Jun 12, 2006, at 4:50 PM, Holland Electric Rwy. Op. H.E.R.O. --  
Import SPTC 1.48 Models // James B. Holland wrote:

> Yes, there were other companies who did Very Well.       But that  
> is Not
> The Whole Story.
> ..
> PRCo came out of its second Pro--Loonngggeeed Bankruptcy in the Very
> Early 1950s  (Nearly Fifteen (15) Years!!)  and it may have been  
> its 3rd
> bankruptcy.
> ..
> PRCo was bled dry by all the underlying companies it bought out in  
> 1910,
> before and after.       Some of these had  999--Year  Leases  (that is
> Not a typo  --  yes 999-year leases!!!)  which had to be honored with
> Payments  In  Money!!       This was   <apparently>    totally
> eliminated when they emerged from Bankruptcy in early 1950s;  don't  
> know
> how this issue was addressed in the previous protracted bankruptcy but
> these payouts did persist until the 1950s, or until the bankruptcy
> started in 1937.
> ..
> PRCo did not have the cash to go forward  And  Regardless__Of__Reason,
> 1950s saw flight to Private Auto which saw massive decreases in  
> transit
> ridership, Even In Pgh.       This, Not Surprisingly, resulted in even
> less Cash for PRCo.
> ..
> By  About  1955  the vote came in to form a County Wide Transit System
> which meant the end of PRCo  --  this wasn't realized, of course,  
> until
> 1964    ----    but when ones head is put into the gallows, one  
> doesn't
> spend much money, especially when money is not on hand in the first  
> place.
> ..
> To make Any Kind Of Valid Comparison to Other Systems,  We would  
> need to
> compare many facts about Income, Expenses, Assets, Liabilities,
> etc.       I don't have that info  --  Ed might have some.
> ..
> The Trustees during the 1937 bankruptcy Did The Railway Well.        
> Most
> of the PCCs were purchased during this time frame  --  had this Not
> Occurred, we wouldn't have had any PRCo to talk about after WW2   
> --  it
> would have folded or been incorporated into a County Wide Transit  
> System
> Much__Earlier  than 1964!!!!       According to some accounts,  
> there was
> substantial track renewal during bankruptcy as well.
>
> Boris Cefer wrote:
> ..
>
>> But there were transit companies in the US that did better.
>>
>> B
>>
>
>> From: "Fred Schneider" <fwschneider at comcast.net>
>>
>>
>>> We simply need to understand that this was a private company,   
>>> separated by 1950 from the Philadelphia Company, totally  
>>> dependent on fares for revenue.   Furthermore they were operating  
>>> in a political climate that could, in its best sense, be  
>>> described as adversarial.    If PRC did anything to make money,  
>>> such as investing money in other areas (gasoline stations on its  
>>> property, for example), the city came down on them like a ton of  
>>> bricks because that might increase the condemnation costs to the  
>>> city.    There was nada that PRC could do that was correct in the  
>>> city's eyes.   And the Pittsburgh Post Gazette didn't make life  
>>> easy either; they habitually showed Charles Palmer frowning.
>>>
>>> I'm afraid, Boris, that you you are attempting to compare what  
>>> you saw in your youth in Europe with Pittsburgh.   What was run  
>>> as a communist or socialist venture for the good of the party and  
>>> the needs of the public.   The other was operated to squeeze the  
>>> last ounces of money out of a system on behalf of the investors  
>>> and subject to state regulators.  The goals and operations are  
>>> totally different and cannot be compared.
>>>
>>> Under those conditions, it was a miracle that the cars ran at all.
>>>
>>>
>
>
>>> On Jun 12, 2006, at 12:37 PM, Boris Cefer wrote:
>>>
>>>
>>>> They also did not waste money on wiring cosmetic. They simply  
>>>> laid a fluff of wires.
>>>>
>>>> B
>>>>
>
>
>>>> From: "Fred Schneider" <fwschneider at comcast.net>
>>>>
>>>>
>>>>> They also repaired the cars; they simply did not waste money on  
>>>>> body cosmetics.   In general, PRC cars ran pretty well and  
>>>>> suffered few in service breakdowns.
>>>>>
>>>>>
>
>
>>>>> On Jun 11, 2006, at 2:41 PM, Boris Cefer wrote:
>>>>>
>>>>>> They did, but did not repair the cars!
>>>>>>
>
>