The vicious cycle of service cuts, fare increases and plummeting ridership continued in 1950, but with a new twist. The Public Utilities Commission allowed the company to raise its base fare from thirteen to fifteen cents and to make cuts in streetcar service on a variety of lines after it reported that net earnings had dropped 67 percent from the previous year. The need for the fare hike, which went into effect in July, was not unexpected, but what happened next was a surprise. In August, the Wolfson-controlled board of directors suddenly doubled the company’s quarterly dividend from fifty cents to a dollar per share.186 The move raised many eyebrows; if the company was in such desperate straits that it needed a fare hike, as it claimed, how could it also be distributing record dividends? “The July earnings statement of Capital Transit will be released next week. Local financial circles are awaiting its figures to see how the transformation from rags to riches came about,” the Washington Post’s S. Oliver Goodman wrote with dry sarcasm.187 The July statement indeed showed a slight rebound due to the fare hike, but earnings were still down from the previous year and certainly didn’t justify a doubling of dividends.
A posed publicity photo from the late 1940s shows riders boarding a Capital Transit streetcar at the Rosslyn loop on the Virginia side of Key Bridge. D.C. Public Library, Washingtoniana Division.
At the very least, it was bad form to extract higher fares from patrons and immediately deposit the new income in shareholders’ pockets. And this was just the first of many actions the company’s new management took that estranged regulators and the public alike. Wolfson’s next move was to petition for a four-to-one stock split, angering both the PUC and the ICC. Stock splits, of course, are normally associated with rapidly growing, highly prosperous corporations, not declining transit firms. Yet the price of Capital Transit stock had been soaring, doubling in value from late 1949 to late 1950, as investors rushed to join Wolfson in draining Capital Transit of its cash reserves. In January 1951, ICC examiners wrote that Wolfson’s proposed stock split was “unlawful, unreasonable, arbitrary, capricious and unsupported by substantial evidence.” Rather than providing real value, the ICC saw it as “a speculative device to increase market prices temporarily and thereby enhance the opportunities of present stockholders to dispose of some or all of their holdings at a profit.”188 Unfortunately, closer study revealed that regulators had no legal basis to oppose the split, no matter how badly it sat with them. In late 1951, the stock split was approved.
By then, Wolfson and his associates had taken over all the top executive positions in the company, as well as almost all the seats on the board of directors, despite Wolfson’s earlier pledge that he would stay on the sidelines. In April 1951, the company’s longtime president and board chairman, Edward D. Merrill—an efficient technocrat who had persevered with the new owners for more than a year—finally stepped down. His replacement as president, John A.B. Broadwater, was one of Wolfson’s closest associates but had no transit experience. Neither, of course, did Wolfson, who became board chair. Top executive salaries were also substantially hiked.
Wolfson moved his family to Washington in late 1950, settling into a spacious mansion in the well-to-do Forest Hills neighborhood. Having done so, he was able to claim in a January 1952 open letter that “[w]e are particularly proud of the fact that today, for the first time in many years, Capital Transit Company has become a predominantly Washington owned and managed enterprise.”189 It’s unclear who, if anyone, was swayed by that disingenuous statement, but it soon didn’t matter. Wolfson left the city later that same year, returning to Florida.
Meanwhile, the massive investor cash-out continued. On top of the higher regular dividends the company started paying in 1951, in January 1952 it declared an additional special dividend of $2.50 per share (the equivalent of $10.00 per share before the stock split), an extraordinary windfall for investors. While the splitting of this financial “melon” met with widespread dismay, the chairman of the PUC sheepishly explained to the public that it was all perfectly legal. The money being tapped for the dividends was in accounts that could legitimately be distributed to shareholders. As if to rub salt in the wounds of the public, just three days later the PUC agreed to another fare increase, this time affecting the widely used weekly passes.
With the PUC appearing unable or unwilling to harness the excesses of the Wolfson gang, outraged congressmen soon stepped into the fray, ordering their own investigations into the company’s finances. Representative Fred L. Crawford (1888–1957) of Michigan fired off a letter to the chairman of the PUC demanding an explanation. “Information comes to me that the Florida interests which purchased CTC are milking the property at the expense of those citizens of the Metropolitan Area who are compelled to go about their business by means of CTC transportation.”190 He urged his Senate colleagues to likewise investigate the “monkey business” at Capital Transit. His colleague, James C. Auchincloss (1885–1976) of New Jersey, called Capital Transit’s actions “little short of ridiculous.”191
Gibson Crockett drew this cartoon that appeared on the front page of the Evening Star on March 2, 1952. D.C. Public Library, Star Collection, © Washington Post.
Multiple investigations by the PUC and Congress were soon underway, but the company’s management continued to drain its coffers. The handsome $1.00 regular quarterly dividend was bumped to $1.40 and then $1.60 over the next few years. Operating profits, when there were any, were never enough to cover these payouts. The money came from the cash reserves that had accumulated over the war years, accounts that Wolfson clearly had set his sights on from the beginning.
Given the Wolfson team’s unapologetic profit taking, observers wondered if they were deliberately trying to alienate Capital Transit’s overseers. Relentlessly pushing the PUC to grant ever more fare hikes—the base fare climbed to seventeen cents in 1952 and twenty cents in 1954—company officials nevertheless remained dissatisfied with the increases they received, complaining vociferously that they needed more and more. At the same time, they fought all attempts by the transit union to win higher wages for workers. Whenever the PUC granted wage increases for transit workers, the company demanded new fare hikes to cover the cost so that the profit stream would be untouched. The company’s stranglehold on the PUC, its own workers and the riding public seemed unbreakable. An anonymous transit rider wrote to the Evening Star in April 1953, pleading, “Please, citizens of Washington and the Metropolitan Area, can’t something be done to save us all and the Capital Transit Co. from the money-mad Wolfsons?”192
That same year, President John Broadwater testified that if the company weren’t allowed to make a 7.5 percent profit, the entire operation would have to be turned over to the government. Most observers took this threat as a cue that Wolfson and his gang were getting ready to abandon ship. The Washington Post editorialized that “[t]he milking operations of the Capital Transit Co. took a spurt forward yesterday…. It is no longer possible to avoid the conclusion that the owners of CTC are stripping away its assets with the object of dumping an unprofitable wreckage on the city.”193
The PUC, under pressure to stand up to the Wolfson group, retaliated in 1954 by obtaining a court injunction keeping Capital Transit from issuing another large dividend. At last, the investigations, court cases and other legal actions were finally catching up with the company. Its executives signed an agreement with the PUC in August whereby it would not ask for another fare hike before 1955 and would take steps to start hiring African Americans as operators. In return, it would be allowed to issue a modest dividend. The settlement seemed to ease tensions for the moment, but the city’s transit system remained a ticking time bomb.
That bomb finally exploded in July 1955, when the annual contract with the transit union ran out. Negotiations for a new contract quickly reached an impasse. While the union wanted increases in both wages and pensions, management refused to agree to any raises that weren’t fully covered by increases in fares or other gross receipts. Union president
Walter J. Bierwagen (1911–1986) sharply criticized the company’s intransigence: “We cannot consent to any contingencies at all. The company was purchased with the idea of certain risks and can’t adopt the policy of profits for Wolfson and risk for the employes,” he said.194
Cars park on streetcar tracks in the middle of Pennsylvania Avenue in July 1955. Library of Congress.
On July 1, a massive strike ensued, snarling city transportation and hardening opposition to the Wolfson regime. The Evening Star reported, “Downtown Washington staggered under its heaviest traffic flow in history today as thousands upon thousands of strike-thwarted transit riders added automobiles to the city street system.” Long lines of cars “packed solidly in every lane from dozens of key intersections” choked traffic to a standstill.195 Among the affected commuters was Vice President Richard Nixon, who was seen reading a newspaper in the back seat of his chauffeured car as it inched along Beach Drive in Rock Creek Park.196
District officials relaxed parking restrictions (metered parking spots were free during the strike) and allowed automobiles to park on the streetcar tracks that ran down the center of Pennsylvania Avenue and other major routes. The free parking spots likely enticed more commuters to drive to work, potentially exacerbating the problem. Garage owners reeled under a 20 percent drop in business as they “sadly watched their regular patrons park free.”197
Everyone blamed Wolfson. “Mr. Wolfson has made almost every one in town mad at him—so mad that the striking workers find themselves in the novel position of looking like heroes to the rideless public,” the Star observed. “I could tell you what I think about Wolfson and the company, but you couldn’t print it,” one striker told the Washington Post. Another remarked, “Some few of us laid a dollar or two away, expecting this to happen sometime. But for a lot of boys it’s pretty tough. If Mr. Wolfson and his clique would have given his employees a little of the money they paid in dividends, there wouldn’t have been a strike.”198
District officials demanded that Wolfson come immediately to Washington to help resolve the crisis, but he remained in California, where he was “taking a few days off,” according to his Jacksonville office.199 Furious congressmen and senators immediately proposed legislation to wrest the Capital Transit franchise away from him if he wouldn’t come to terms with the union. When Wolfson finally appeared before Congress on July 12, he was unrepentant. He complained of the “wild and irresponsible statements impugning my honor.” “Apparently a scapegoat, on whom to vent the resentments of the community had to be found,” he said, concluding, “The victim of the great amount of hate and bitterness engendered by this most unfortunate strike appears to be Louis E. Wolfson.” He went on to attack the Washington Post, the city’s “so-called morning newspaper,” which “has got some young fellow as publisher who married the boss’s daughter, and it keeps hammering away about slicing melons and dividends.” After all this emotional talk, Wolfson made it clear that he would not budge from his position that any employee wage hike had to be directly funded from increased fares, and he dared Congress to take his franchise away, arguing that in the end it would cost taxpayers $40 million.200 Having done nothing productive to help resolve the crisis, he then left town as quickly as he had come.
The strike dragged on into August, wearying local residents and damaging businesses that depended on transit riders. Under pressure to force a solution, Congress had no choice but to devise a takeover. By the end of the month, a plan was agreed upon that would revoke Capital Transit’s charter after an additional year and give the D.C. commissioners broad authority to work out an interim transit arrangement. On August 14, noting that Capital Transit had “failed to measure up to its responsibilities as a public utility in the District of Columbia,” President Eisenhower signed the measure into law. Within a week, the strike finally came to an end. Workers were granted part of the wage increases the union had sought, but fares were increased as well. Capital Transit agreed to run the city’s streetcars and buses for the rest of the year until its franchise ended.
Workers clean and lubricate a switch on Pennsylvania Avenue on August 22, 1955, as the strike ended. D.C. Public Library, Star Collection, © Washington Post.
The strike had lasted fifty-two days, making it the second-longest transit strike in U.S. history. So much time had passed that workmen had to take special actions to get the system back into operation, including lubricating rusting switches and cleaning out clogged conduits. Out on the Cabin John line in Maryland, tall grass choked the rails and had to be cleared away. When the cars finally began resuming their rounds, it was a tremendous relief to transit workers, who had lost a substantial amount of income, as well as riders who had struggled to find alternate modes of transportation. “I’m sure going to be glad to stand out there waiting to catch a streetcar,” one commuter told the Washington Post. Even cabbies, who had made extra money during strike, were glad to see it end. One cabbie grumbled, “It will get some of these women drivers picking up their husbands off the street.”201
Once the cars were running again and city life was back to normal, the PUC began wrestling with the question of how best to manage the transition when Capital Transit’s charter expired a year later. The commissioners were convinced that an all-bus system would be best for the city in the long term and that now was the time to make the switch. District Commissioner Thomas A. Lane, speaking on WWDC Radio’s weekly Report to the People, argued that the strike had actually strengthened prospects for the next transit company because the new all-bus operation would be faster, less expensive and would increase the capacity of major traffic arteries without requiring costly street widening.202 Further, with an all-bus operation coming, Capital Transit by law would be responsible for disposing of its old equipment and removing the streetcar tracks from the streets, saving taxpayers considerable expense.
Passengers are all smiles as they ride a bus from the Chevy Chase terminal the day transit service was restored. D.C. Public Library, Star Collection, © Washington Post.
At hearings in the fall, the PUC heard many witnesses endorse the idea that buses were the city’s most forward-looking option. Capital Transit, faced with the expense of removing the streetcar tracks, found itself defending the much-maligned system and arguing that streetcars were more profitable than buses. In 1954, streetcars had earned $1.08 for every mile they traveled, whereas buses made only half that amount. In fact, Capital Transit’s bus operations had actually lost money in the early 1950s. These figures were deceptive, however. The profitability of streetcars depended on the fact that they operated on the most densely traveled city routes, carrying large numbers of passengers, whereas many bus routes covered greater distances in the suburbs with considerably fewer passengers. When per-mile operating costs were factored in, streetcars were more expensive to operate than buses, at $0.946 per mile versus $0.663 per mile for buses.203
The most compelling defense of streetcars came from a New York engineering firm, W.C. Gilman & Company, which had conducted a study of the Washington mass transit system for Capital Transit and released its findings in October 1955. The Gilman report concluded that it would be a mistake to get rid of all the city’s streetcars right away, arguing that streetcars moved as quickly as buses on congested downtown streets. The report noted that Capital Transit’s modern PCC cars were in good condition, were more spacious than buses and offered a more comfortable ride, assuming the tracks were smooth and well maintained. The report then went on to argue that the massive public investment then underway to improve roads and highways was encouraging too many people to switch to driving automobiles instead of taking public transit.204
JAUNTY AND FLAMBOYANT
After the report came out, the anti-streetcar sentiment seemed to shift. The PUC backed away from the all-at-once approach, favoring a phased conversion to buses. However, the question of who would ultimately take over the city’s transit system remained unanswered. Several companies submitted proposals, but all were reje
cted. Finally, in June 1956, O. Roy Chalk (1907–1995), the owner of New York–based Trans Caribbean Airways, offered to buy Capital Transit for $13 million and oversee a gradual seven-year conversion to all-bus operations. Chalk held marathon meetings with officials from both Capital Transit and the PUC to iron out the details of the agreement. Company shareholders delightedly approved the deal, which was highly favorable to investors, as did Congress, which passed a bill incorporating the main tenets of the deal. President Eisenhower signed it into law in July, and Chalk took ownership in August. Under Chalk, the name of the company was changed from Capital Transit to the D.C. Transit System.
John A.B. Broadwater of Capital Transit receives a check from O. Roy Chalk for the purchase of the city’s transit system as attorney Edward F. Colladay looks on. D.C. Public Library, Star Collection, © Washington Post.
The last of the city’s powerful transit moguls, Chalk was among the most colorful. Impeccably dressed, full of energy and ever attentive to appearances and public relations, the “jaunty and flamboyant” Chalk, as the Post described him,205 contrasted sharply with the dour Louis Wolfson. Chalk had been born in London, the son of a Russian father and Polish mother, who brought him to the United States when he was three years old. The family settled in the Bronx, and Chalk later attended New York University Law School. He learned the New York real estate business through family connections and made money during the Depression by buying real estate at depressed prices. He was a consultant on military air transport during the war, spending time in Washington, and afterward bought a surplus military transport plane to start Trans Caribbean Airways, a charter airline that he would later sell to American Airlines. By the time he bought Capital Transit, he was a millionaire.
Capital Streetcars Page 18