Senator EAGLETON. Did you say the debt of the company, at the present time, is approximately $30 million?

Mr. CHALK. Something under $30 million. Mostly long-term debt.

Senator EAGLETON. You reiterated today, apparently what you have said before the House committee, that the properties of the company were above or below the line.

Mr. CHALK. It makes no difference to us. We view them philosophically as one company.

Senator EAGLETON. Philosophically you view them within the entire company and would they be available to pay off current obligations and current debts?

Mr. CHALK. Always have been.

Senator EAGLETON. Why have they not been so utilized to avoid the crisis element present in the hearing today?

Mr. CHALK. The major crisis element is the payment to the pension fund.

Senator EAGLETON. Right.

Mr. CHALK. All other debts are being paid in the normal course of business.

Senator EAGLETON. Let us talk about the pension and welfare fund. Mr. CHALK. The pension and welfare debt is a burden that although when the contract was originally made with the union, under conditions that then existed would have been justifiable, and is justifiable under normal conditions, back in April 1968 and shortly prior thereto a different situation arose. The matter was called to the attention of the union by a letter, which I directed to them on April 9, in which I told them that I think it is time that we had a reevaluation of our labor contract.

I had in mind the crisis which existed in the city of New York, under similar circumstances, when a labor situation arose. Eventually the company was taken over by the city of New York. At that time the head of the union said: "Well, we didn't know you were in a difficult position. Had you advised us of that, we might have revised the contract."

With this thought in mind, on April 9, 1968, I dispatched a letter to the union. I told them that in view of the serious nature of conditions that existed in Washington, and with no knowledge as to how long these conditions would continue to exist, I requested a renegotiation of the contract.

Now, our contract is a unique one. It provides for arbitration on any point, including the making of a contract or possibly its change. At that time I did request a change in the terms of the contract which would modify the payments to be made to the union, at least for some period of time, and then we could come back to that subject at another time.

But I did suggest that we sit down and renegotiate the contract. Had this been done at that time, we would not have the problem we have today. I am not blaming the union. It is their duty to try to get as much as they can for their men. It is certainly an understandable and proper feeling.

At the same time, I also feel that they should recognize the company's position where it runs into difficult situations, such as last year when

we were impoverished, burned out, marched on-and lord knows what happened to us. Whatever happened, it happened altogether.

We tried to get the union to waive these payments or possibly add them on at a future time. This is the subject that I think is a proper one and could resolve the problems. I think it is a union-management negotiation, which is a concern to every one if it affects the service, but I do think it is something that could be worked out by sitting down with the union and working it out.

I still feel we can work it out. Now, hopefully, assuming that we are, through action of the Commission, placed in a healthier earning position, then we would have a much easier time with our banks and our other sources for supplementary financing, whereby we would not have the problem of taking care of the union fund.

Incidentally, that amount is not $2 million. I believe it is closer to a million six or seven.

Senator EAGLETON. What I am trying to get at, Mr. Chalk, your testimony the other day and your testimony this morning indicated these properties were available. If the union, which is a signatory to the contract, wishes to hold firm to its commitment under the contract and wants the contract filed, are you going to make some properties available to pay off the $1.6 million or $1.7 million?

Mr. CHALK. It is not a question of making the properties available, not on a forced sale. I am not going to an auction block. I don't believe a businessman, under a circumstance such as this, should be forced to go and sacrifice his capital assets under distress.

In the normal course of business, I believe we are doing the negotiating right now with brokers, and so on, for the normal sale of some of these properties. As a matter of fact, I do understand, and have understood for more than a year, that the property that was mentioned is under condemnation, or contemplated condemnation, by the city in connection with a road project or some other city need and has been appraised in excess of $1 million.

As I understand it, and I am sure that if it is in the city budget, it will probably be granted. We certainly would go along on that. We will take the entire $1 million and apply it toward our normal debts, including the union. In fact, the union would get No. 1 priority. I won't say we will give the whole thing to the union, but I would say probably 75 percent and use the other 25 percent for normal payment of obliagtions.

Incidentally, I would like to call attention to the fact that the scrip system, which was put into effect this past year, has also been a great problem and a great cost to the company and has been a problem for the union, too.

Senator EAGLETON. Using your term, then, I don't think we want to require you to go on the auction block or a distress sale, but using your term of normal course of business events, would you expect that you would be able to dispose routinely and through normal business channels enough of your properties above or below the line in order to retire this obligation to the union, $1.6 million or $1.7 million, within the next 90 days?

Mr. CHALK. I would be inclined to feel so. There is no guarantee that I can, but under normal conditions, I certainly would. I would try real hard, I promise you that.

Senator EAGLETON. The market value from real estate is up at the present time?

Mr. CHALK. Yes, sir.

Senator EAGLETON. You are fortuitously in a financial market where you are not going to unduly suffer because of market conditions.

Mr. CHALK. No; as a matter of fact, sir, I am negotiating right now on several properties, not just one, and not the one we are talking about. So it is possible, and probable, that within 90 or 120 days the problem will no longer exist.

Senator EAGLETON. Now, what about the employee contributions to the fund? It is my understanding that presently-and these are moneys taken out of the salaries of the employees that the company is in arrears on the transfer of those funds.

Mr. CHALK. No, sir; that is not true. The employees' contributions have been made. They are current.

Senator EAGLETON. Have they continually been current?

Mr. CHALK. Yes, sir.

(Subsequent to the hearing the following telegrams were received:) WASHINGTON, D.C., April 29, 1969.

Hon. THOMAS F. EAGLETON,

U.S. Senate,

Washington, D.C.:

I am advised testimony was given before your subcommittee today to the effect that employee contributions to the union funds were not being made on a current basis. Mr. Chalk previously testified payments were current. I am advised by the controller of D.C. Transit that said payments were made under date of April 21 and that the company trustee of the fund has an acknowledged receipt thereof from the bank of deposit. Will you kindly see that this information is incorporated in the record. Statement follows:

DONALD S. DAWSON, Special Counsel, D.C. Transit System, Inc.

JACK LEWIS,

WASHINGTON, D.C., April 30, 1969.

Staff Counsel, District of Columbia Committee,
New Senate Office Building, Washington, D.C.:

This is to certify that Mr. George Apperson, president of Amalgamated Transit Union Local 689 did on this date, April 30, 1969, receive a copy of a letter from the National Bank of Washington dated April 28, 1969, addressed to D.C. Transit System Incorporated, Retirement Allowance Committee, 2250 26th Street Northeast Washington D.C., attention Mr. Godfrey Butler, Secretary. Please be advised of the following: check #A25126 in the amount of $74,170.16. Received as March contribution to the employees retirement plan, the bank verified the receipt of the above check on April 22, 1969. However, the bank policy is to notify the retirement allowance committee on the following Monday of the receipt of all monies.

SIDNEY H. GARDNER,

Financial Secretary, Local Division 689.

Senator EAGLETON. Do I take it, with the latter part of your prepared statement that you gave us, that you have today, for the first time, added on the notion that to use your words-D.C. Transit will not stand in the way of public ownership of the transit system?

Mr. CHALK. That is correct, sir, if this is what Congress wants. I will not stand in the way of what the Congress wants.

Senator EAGLETON. Is that a fresh start with you today that has been added on since your testimony before the House a few days ago? Mr. CHALK. That is correct.

Senator EAGLETON. In your prepared statement you also point out six points wherein you felt the public ownership was unwise or improper. How do I construe your statement? Is it wise or unwise for the public to own the transit system? How do you relate the last part of your statement with something that occurred a few days prior to this?

Mr. CHALK. I think that is true that private ownership, such as the D.C. Transit System, is a more efficient medium to operate the transit system. I still feel that way, that it is more efficient. But I am not going to let that efficiency stand in the way, and my concept of efficiency is apparently not the controlling aspect.

There seems to be an antipathy to private ownership or profitmaking, and, after all, I am not in the business as a philanthropic venture. I take care of my philanthropies in a different way. In business I wish to earn a legitimate profit. If this is contrary to the public concept, I am getting tired of fighting it. So I believe that I am right. I believe that private enterprise can do a better job. I have said many times that a dollar in the hands of private enterprise will go 10 or 20 times as far as it will in the hands of public ownership.

But the two are not reconcilable in that respect.

Senator EAGLETON. Have you ever previously discussed with any governmental agency the possibility of the sale or public acquisition? Mr. CHALK. Yes. I was called by the head of the Subway Authority, WMATA, and we did have a meeting at that time, and we did discuss this possibility. I think that was sometime last year.

Senator EAGLETON. Did they initiate the concept of a buy-out?
Mr. CHALK. Yes.

Senator EAGLETON. WMATA indicated they might want to acquire the D.C. Transit System?

Mr. CHALK. That is correct. At that time I think I had made some statement in the newspaper in response to a question whether the company would be available for sale. I had indicated that at a price in excess of a dollars, it would be. That probably initiated their interest in coming to me. I think that was the time that I did not get the rate increase that I expected. And I said: "It is too little and too late." And I probably, with a feeling of disappointment, said: "Well, I really would like to sell this company and get out of it." I was sort of disgusted.

Senator EAGLETON. Was that near the end of 1968?

Mr. CHALK. I think it was about the time that the last fare increase came out. It was in 1968.

Senator EAGLETON. Did you and WMATA meet?

Mr. CHALK. Yes.

Senator EAGLETON. What happened at that meeting?

Mr. CHALK. I suppose it was a fencing discussion. They wanted to know whether I was serious. I said: "Look, at a price we can always be serious." I said: "I would like to continue the operation of the company. And if you would like to buy it, I would still operate it, because I intend to carry on its operation, because under law it would have to be operated by private enterprise.'

In any event, the net result of that discussion was that a formula could be developed that might satisfy both sides. We discussed a

formula where they would hire some transportation experts and I would hire some transportation experts and let some outside parties appraise the value of the transit system. That was the general nature in the event we decided to make some sort of arrangement of that nature.

Senator EAGLETON. Wasn't the proposal reduced to writing? A tentative contract?

Mr. CHALK. Yes. As a matter of fact, I submitted a copy of the proposed contract to them shortly thereafter, within a week or two, which did make provision for two appraisers, one appraiser selected by the company, one selected by the WMATA, and if the two did not agree, the two of them would select a third.

Senator EAGLETON. And then what happened?

Mr. CHALK. Nothing.

Senator EAGLETON. And it was dropped?

Mr. CHALK. I never heard from them again. I am sorry. I understand that subsequent to that they did hire an appraisal company and did ask permission to have a staff of six or eight, whatever men they wanted, on our premises to appraise the company. I believe that appraisal was completed about 6 months ago.

I also have an appraisal. I think both appraisals have been completed, but neither, with the exception of the fact that I ventured my number, which is the approximate $40 million-I haven't heard what their's is. I don't intend to discuss it here.

Senator EAGLETON. Is the $40 million figure the difference between $75 million and the debt?

Mr. CHALK. No. The $40 million was the evaluation placed by the transit experts on the transit system ex any real estate, operating or nonoperating.

Senator EAGLETON. That is your appraisal?

Mr. CHALK. Yes.

Senator EAGLETON. $40 million for the system, includes what? Your rolling stock?

Mr. CHALK. Rolling stock.

Senator EAGLETON. What else?

Mr. CHALK. All the equipment, all movables, spares, the training, everything else that goes into the valuation of the company. Senator EAGLETON. What about the garages?

Mr. CHALK. No real estate. Less the debt of the company.
Senator EAGLETON. Under $30 million?

Mr. CHALK. Yes, under $30 million, that is correct.

Senator EAGLETON. So the net cash outlay would be the difference between $40 million and under $30 million, that is, between $10 million and $12 million?

Mr. CHALK. Something in that area would represent the net without real estate.

Senator EAGLETON. Of course, some real estate would be indispensably necessary for the company?

Mr. CHALK. Yes. The base alone would cost us $6 million and could not be reproduced today for less than $10 million.

Senator EAGLETON. That would be in addition to acquire functioning property?