facilities on December 31, 1931, was $707,337.03. The total cost of reproduction new, less depreciation, based on our primary valuation as of June 30, 1918, including additions and betterments subsequent to June 30, 1918, was $673,267.54. The total maintenance cost, including taxes and insurance for the year ended December 31, 1931, was $45,859.33.

The total revenue from storage and handling charges on westbound in-transit freight stored on these piers for the year ended November 30, 1931, was $21,504.55. Of this amount $16,584.08 was for storage, $3,514.81 for handling, and $1,405.66 for extra handling. The Jersey Central has extensive ground storage space on the water front of Jersey City devoted to the storage of heavy commodities, principally structural steel. The total revenue derived from ground storage and handling on westbound in-transit freight during the same period was $434.58. Cars were also used to a large extent for the storage of westbound in-transit freight, the principal commodities being rags and waste paper. Prior to 1929, large quantities of rags and waste paper were stored on the piers, which because of fire hazard were subsequently ordered removed and then stored in idle equipment in the yards. The total revenue derived from storage and handling of these commodities during the year ended November 30, 1931, was $6,678.59.

The total revenue for the year ended November 30, 1931, derived from storage charges on eastbound freight was $51,378.53. Of this amount $50,470.36 was for ground storage.

The average handling cost at these piers, whether from car to dock or from dock to car, is 42.8 cents per ton and for necessary double handling 85.6 cents per ton. The tariff rate as previously shown is 20 cents per ton for each handling.

In 1928 the vice president of the Jersey Central proposed to the other trunk-line carriers that the published labor charges for handling in-transit freight be increased to 50 cents per ton. The proposal was not adopted. Manifestly the carrier must bear the deficit in this operation.

The Jersey Central, contrary to the practice of the other trunkline carriers, does not publish an insurance rate of 8 cents per $100 of value on freight stored in transit at railroad terminals. At Piers 11 and 14 its insurance rate is $1.29 per $100 of value, and it has refused to lower this rate to conform with the charge made by other trunk lines. The high rate is caused partly by the inaccessibility of these piers from the land side for fire-fighting apparatus.

198 I.C.C.

LEHIGH VALLEY

The Lehigh Valley has a large warehouse in the Borough of the Bronx, New York City, known as the Lehigh Valley Bronx Terminal Warehouse, herein referred to as the Bronx warehouse; a freight shed at Claremont Terminal, together with Piers B, C, D, G, and I, in Jersey City, and Pier 44, East River, New York, all of which are devoted to storage and warehousing. The Pioneer Real Estate Company, a wholly owned subsidiary of that carrier, also owns a plot of land in Manhattan which is leased to the Starrett Investing Corporation which, in turn, subleased it to the Starrett Lehigh Building, Incorporated, which constructed a large warehouse on the ground. The Bronx warehouse will be considered first.

Bronx warehouse.-The Bronx warehouse is a 12-story modern building of fireproof construction located a short distance from the Bronx Terminal of the Lehigh Valley on the Harlem River. It was constructed at a total cost of $1,419,631.83 and was opened for operation on May 15, 1929, and is owned by the Pioneer Real Estate Company. Of this amount $128,779.97 was for land and $1,290,851.86 was for the warehouse. All of the stock of the Pioneer Real Estate Company is held by the Lehigh Valley, and the directors and officers of the real-estate company are also officers and directors of the railroad. The Lehigh Valley is thus the sole owner and operator of this warehouse.

The Lehigh Valley does not directly perform storage or distribution service in this warehouse, but rentals are made through its land and tax agent, who leases entire floors, or parts thereof, to tenants for offices, light manufacturing, storage, and warehousing purposes. The rentals are usually made on a square-foot basis, either on long-term or short-term leases. Although the building has been in operation since May 15, 1929, a very large portion has never been occupied.

Only one of the tenants, the Lehigh Harlem River Terminal and Warehouse Company, herein referred to as the Harlem Company, conducts a public warehouse business, which is confined to the storage and distribution of automobiles. The Harlem Company rented the eighth floor for a term of one year, beginning on November 1, 1929, at a monthly rental of $800 for the first quarter, $900 for the second quarter, $1,000 for the third quarter, and $1,100 for the

Effective April 10, 1932, the tariff was amended to provide that "At Bronx Terminal, East 149th St., N. Y., automobiles, passenger, C.L., on their own wheels, in carloads, not delivered within the 48 hours free time will be stored in our warehouse at the following rates of storage and while so held, this Company shall not be liable for loss or damage, except in case of negligence of this Company." The rates provided are those applicable on eastbound in-transit freight.

fourth quarter, amounting to an annual rental of $11,400. In July 1930, the Harlem Company sought a reduction in its rent to $500 per month, on a per month basis, on the ground that its business had been unprofitable. The general land and tax agent of the Lehigh Valley in a letter, dated July 24, 1930, to the vice president and general counsel, advised as follows:

we should revamp the lease, effective June 1, 1930, and rent him the space at $500 per month. He is willing to accept a monthly tenancy and for the same reasons we granted the original lease it would seem advisable for us to enter into a new contract rather than to have him vacate.

Several inspections of the storage conditions at the Bronx warehouse, made by our representative, disclosed that on June 29, 1931, the Harlem Company occupied space on the tenth, eleventh, and twelfth floors in the warehouse for the storage of automobiles for which it did not pay rent. Inspection made on January 22, 1932, disclosed that the second, fourth, and fifth floors were only approximately one half occupied and the tenth, eleventh, and twelfth floors were entirely empty. At this time the sixth floor was found to contain 86 automobiles for account of the Harlem Company and on a third inspection, February 25, 1932, it was found to contain 186 automobiles, for which periods no rental was being paid for the space occupied. A lease for use of the sixth floor was subsequently entered into with this concern and made retroactive to January 28, 1932, providing for a monthly rental of $500 for the entire floor, with the proviso that "Inasmuch as only 50 percent of the space was to be used at that time, rental is to be at rate of $250 per month until the use exceeds 50 percent of the area at which time the rental shall automatically become $500 per month."

There appears to be no uniformity in the amounts charged to various tenants for similar space, which may be explained, in part at least, by the necessity of finding tenants to occupy some of the space and produce some revenue rather than let the whole building remain vacant. The minimum rental, per floor, in the Bronx warehouse varies from $14,000 to $20,000 per annum, except for the space occupied by the Harlem Company. This concern pays considerably less than the minimum rental both for space it occupies permanently for merchandise storage and for the so-called temporary space used for the storage of automobiles.

For the year 1931 the rental received from the building yielded a return of slightly over 2.5 percent on the investment. This makes no allowance for depreciation of 2 percent, which is the figure used by the carrier in determining its return.

The evidence shows that the Lehigh Valley directs its efforts to leasing space in the Bronx warehouse to tenants who will produce

freight traffic to the carrier's lines. Numerous prospective tenants were refused space because the rail traffic their business would produce was not considered sufficient to warrant alloting them space. In a letter from the vice president of the Lehigh Valley to the general land and tax agent, with reference to leasing space in the Bronx warehouse to the Bates Chevrolet Company, he said:

There would no doubt be some advantage from a real estate standpoint in making this lease, but at the same time we desire to keep the space in the warehouse available for prospective tenants who will be of some value to us from a traffic standpoint as well, and for the time being we do not desire to conclude any leases in this property from a purely real estate standpoint.

Starrett Lehigh Building.-On June 23, 1930, the Pioneer Real Estate Company leased certain lands located in Manhattan to the Starrett Investing Corporation for a term of 99 years, at an annual rental of $120,000 for each of the first 21 years, and for each subsequent period of 21 years the rental was to be determined on the basis of 6 percent of the value of the land as determined by a current appraisal. The lessee undertook to construct a building on the leased lands to cost not less than $6,000,000, and not more than $9,000,000 and to contain not less than 24,000,000 cubic feet of space. The Lehigh Valley agreed to lease the entire street or ground floor of the building at a rental of $50,000 per annum for the first 21 years. Dur ing subsequent periods this rental is to be increased or decreased accordingly as the rental paid by the Starrett Investing Corporation to the Pioneer Real Estate Company is increased or decreased under current appraisal. The lease is to run for a period of 99 years. The cost of the leased land was $1,806,953.13, and the carrier expended approximately $200,000 in making track changes and installing the necessary facilities on the ground level of this building. The Pioneer Real Estate Company guaranteed a mortgage of $4,500,000 on the land and building, which was given by the Starrett Lehigh Building, Incorporated, the assignee of the lease from the Starrett Investing Corporation, to the Title Guaranty and Trust Company of New York City.

On June 22, 1932, a few days prior to the hearings, the Pioneer Real Estate Company was forced to take over this property by assuming the mortgage of $4,500,000. The result is that the Lehigh Valley has this large enterprise on its hands, in addition to the unprofitable Bronx warehouse venture.

While it was not determined that the Lehigh Valley took any active part in the operation of this building, the lease provides, among other things, that the lessor should build the first floor so as to make it suitable for the operation of trains and also should construct cranes and a subgrade suitable for the construction of tracks

thereon, and the carrier agreed to provide tracks and other facilities for station operations.

National Storage Company.-The National Storage Company was incorporated under the laws of the State of New Jersey on April 11, 1867. In 1902 the Lehigh Valley acquired with the exception of directors' qualifying shares, all of its capital stock for which it paid $6,000,000. Officials of the carrier are the principal officers of the storage company. The storage company conducts a commercial merchandise warehouse business in Jersey City, and for that purpose uses a warehouse consisting of several units, some of two stories and others of six stories, of brick construction. The warehouse is served by sidetracks of the Lehigh Valley. The approximate size of the warehouse is 200 feet by 150 feet, containing about 120,000 square feet of floor space.

The property of the storage company consists of approximately 111 acres of land upon which has been constructed, besides this warehouse, railroad tracks, piers, docks, elevators, and several small structures. These structures were almost totally destroyed by the well-known Black Tom explosion in 1916. For some time thereafter nothing was done with the property, but in 1921 the storage company leased the greater part of it to the Lehigh Valley, retaining for itself a portion of the land, approximately 180,000 square feet, together with certain structures thereon, and wharfage rights to about 175 feet of bulkhead between Piers 4 and 5. In July 1931 the storage company was using Pier 4 instead of Pier 6, as reserved in the lease. Pier 4 has an area approximately three and one half times that of Pier 6. However, taxes were being paid by the storage company on the basis of the smaller pier. When this situation was called to the attention of the Lehigh Valley by our representative, assurance was given that an adjustment would be made based on the property occupied. Under the lease the carrier agreed to pay the entire cost of maintaining and operating the property and to pay all taxes, except franchise taxes on the business of the storage company.

The evidence shows that approximately $1,000,000 was advanced to the storage company by the Lehigh Valley shortly after the Black Tom explosion to defray the cost of a partial reconstruction of the property. In November 1930 total advances as shown on the books of the carrier amounted to $1,094,638.01, which amount was transferred to cost of the stock and increased the carrier's investment in the storage company by that amount. During the year 1931 it appears that the carrier advanced a further sum to the storage company of $35,245.16. The books of the Lehigh Valley show the total investment in the storage company as of December 31, 1931, as