The New York, Westchester & Boston 2:
Financing ‘The Westchester’
By Robert Scott
Financing the Westchester was always a headache for the New Haven. When the line was originally proposed, New Haven directors were assured only $5 million more would have to be spent after franchise problems were resolved.
Instead, it became a continuing financial drain on the New Haven. In 1911 and 1912, Harris, Forbes & Company, then the country's largest investment company, handled two Westchester issues of 4-1/2 percent gold bonds. With their total face value of $19.2 million guaranteed by the New Haven, they were, in effect, New Haven securities.
Sold to the public at a discount for $96.25, the New Haven received only $92.50 a share. J.P. Morgan & Company had taken a commission of $288,000 on the bonds sold at $94 to brokers Harris, Forbes.
When completed, the Westchester ran from Port Morris in the Bronx to Mount Vernon. From here, branches ran two miles to North Avenue in New Rochelle and nine miles to Westchester Avenue in White Plains. The new railroad totaled 18.03 miles but also used 3.72 miles of existing New Haven tracks from East 174th Street to the Harlem River near Willis Avenue.
Southbound passengers could catch IRT Lexington Avenue trains at 180th Street. A short ride to the 177th Street station on the Lexington Avenue line enabled a transfer to the IRT 7th Avenue line. NYW&B passengers also could continue south on the Harlem Division line to the terminal at 42nd Street and Fourth Avenue, where a short walk would give access to the 3rd and 2nd Avenue elevated lines.
Fares on the subway and elevated lines were a mere five cents. They would remain at that figure until 1948, when the fare was doubled to ten cents.
A Money Loser
From the start, the Westchester operated in the red. As the guarantor of principal and interest on the Westchester's bonds, the New Haven had to make up its losses. In 1913, the NYW&B reported to New York's Public Service Commission that a total of $22.3 million had been spent for construction, right-of-way, rolling stock and interest—an astonishing $1,237,000 a mile.
The final cost to the New Haven, which owned the Westchester's stock and guaranteed its bonds, had been $36.4 million. The difference of $14.1 million represented elusive expenditures made before construction started.
The NYW&B would continue to drain money from the New Haven for the 25 years of its existence. Not once during this period did the line earn enough to pay its bond interest. Unlike most commuter railroads, the Westchester adopted an unusual ticket-handling method, emulating the system used in the subways of London, Paris and Berlin.
No tickets were collected on Westchester trains. Instead, each station had an employee at its entrance and exit gates. Passengers' tickets were punched at the entrance gate. On completion of the trip, the punched tickets were dropped in a chopper box as the passengers exited at the destination. To prevent abuse of this system, tickets were color-coded.
Fares cost about half as much as commuters paid on the New Haven or the Harlem Division of the New York Central. In fact, attracted by its lower commuter fares, most of the Westchester's passengers were drawn from the other two lines.
During the Interstate Commerce Commission hearings early in 1914, members of the New Haven's board of directors testified that construction of the Westchester and diversion of passengers was a way of reducing the New Haven's high costs for use of the newly completed Grand Central Terminal and to relieve train congestion on tracks leading into the terminal.
This was patently a lame excuse. The New Haven already owned the four-track Harlem River branch then being electrified and enlarged to six tracks by Tammany Boss Tom Murphy's construction company at a cost of $10 million. Moreover, the Westchester was already using these same tracks to reach its terminus on the Harlem River.
Because the nine-mile line from Columbus Avenue in New Rochelle to White Plains afforded no relief to the New Haven, the Westchester actually provided no service not already offered by the New Haven's existing lines.
One reason for the directors' collective lie was probably their expectation that they were about to be indicted on antitrust charges under the Sherman Antitrust Act. Had they admitted their actions were intended to discourage or control competition, they would have convicted themselves even before the trial began.
When the ICC issued its subpoenas early in 1914, many recipients suddenly developed mysterious illnesses. Hiram M. Kochersperger, the New Haven's comptroller, suffered "nervous prostration" and retired. On his doctor's advice he went to Europe, making him unavailable to testify. Only he could unravel the New Haven's cooked books.
Chief counsel for the ICC was Joseph W. Folk, former Governor of Missouri, known as "Holy Joe." Folk had a reputation of being relentless in his questioning. When he asked the New Haven president how long Kochersperger had been ill, Charles Mellen's answer was, "Since the Commission commenced to get after the New Haven's accounts."
Other witnesses who also suffered sudden illnesses included New Haven director William Rockefeller, Morgan attorney George McCullough Miller, financier Morton F. Plant, and Edward D. Robbins and Samuel Morehouse, New Haven Railroad attorneys.
Criminal indictments charging violation of the Sherman Anti-trust Act were handed down two days before the 1914 mid-term elections, eliciting howls of protest. The list of defendants--21 directors of the New Haven--reads like a veritable Who's Who of American business.
The government cast its net wide. Among the 50 alleged co-conspirators were other big names, including J.P. Morgan; Peekskill's Chauncey M. Depew, New York Central president and former two-term U.S. senator; Pennsylvania Railroad president Alexander J. Cassatt; Hiram M. Kochersperger, the New Haven comptroller sojourning in Europe; Oakleigh Thorne and Marsden J. Perry, who had been associated with the Westchester before the New Haven acquired it.
Two of those named were dead: Morgan had died in Italy the year before; Cassatt, brother of Impressionist artist Mary Cassatt, died in 1906.
Bail for the defendants was set at $5,000 each. "A man doesn't like to say he's out on bail," said banker George F. Baker--but he posted bail anyway. Herman Miller, son of 82-year-old Morgan attorney George McCullough Miller, was furious at the Wilson Administration for its timing of the indictment.
The Billard Affair
In weaving a web of dummy corporations and dummy directors to conceal its machinations from stockholders and the government, the New Haven occasionally got tangled in its own net.
Perhaps the most bizarre of such fictions involved one John L. Billard, an obscure coal dealer in Meriden, Connecticut. Billard had no relationship with the New Haven Railroad other than that the coal he sold had been hauled by them.
In 1907, the 63-year-old Billard had taxable assets of only $30,000, a horse and buggy, and a piano. Two years later, the New Haven announced that it had sold 109,948 shares of Boston & Maine stock to the unheard-of Billard for $13.7 million. The divestiture had been ordered by the Massachusetts Legislature.
How this was accomplished strains credulity. For Billard to swing the deal, New York's National City Bank lent him $11 million and accepted the stock as collateral. This left a balance owed the New Haven of $2.7 million, for which the railroad obligingly took Billard’s unsecured note.
Fourteen months later, the New Haven agreed to buy back all of Mr. Billard's B&M shares. In the meantime, these had gone up in value to $16.5 million.
Billard’s profit was a cool $2.8 million. In addition, he received dividends on his B&M shares that exceeded the interest on his notes by an additional $164,948. When the New Haven asked him to turn over his profit to them, Billard refused. He was on solid ground. Nothing had been recorded on paper. In fact, railroad officials had assured legislators that no agreement existed between them and Mr. Billard.
Billard hired Homer S. Cummings to represent him. Cummings was a former Connecticut prosecutor who later became FDR's Attorney General. After prolonged haggling, in 1916 the New Haven agreed to let Mr. Billard keep $1.5 million--well over half the profit he had made on the deal.
A wily Connecticut Yankee had bested the New Haven and reaped a fortune without risking a penny of his own money.
Editor’s Note: Read the next chapter in Robert Scott’s story of the NYW&B in next week’s issue of The Westchester Guardian.
Developer Clifford Harmon and the NYW&B
At the turn of the 20th century, real estate developer Clifford Harmon recognized the role rapid transit would play in the development of suburbs. He first applied his theory by buying a 130-acre farm and creating the community of East Lansdowne in Pennsylvania, a streetcar ride from Philadelphia. Building lots were created and sold to city dwellers for a low down payment with the balance paid in small regular amounts.
Using the same device, Harmon next created the community bearing his name on the soon-to-be-electrified New York Central's Hudson Division. The possibilities inherent in the proposed New York, Westchester & Boston soon attracted his attention. Purchasing real estate along its right of way, he developed two communities: Pelhamwood in Pelham and Larchmont Gardens in the town of Mamaroneck. When the NYW&B opened in 1912, Pelhamwood's station was named Clifford. Two avenues in Pelhamwood are named Clifford and Harmon.
Interestingly, both communities also have street names familiar to residents of that part of Croton originally called Harmon. The name Pelhamwood includes Wood, his mother's maiden name. Sales of lots in Pelhamwood were handled by his Wood, Harmon & Company from a sales office at Benedict Place. (Benedict was Harmon's wife’s maiden name.)
In the village of Harmon, the Wood, Harmon & Company sales office was at the northeast corner of Benedict Boulevard and Riverside Avenue, an intersection intended to be the commercial center of the new community. (A nail salon now occupies the building.) Young Avenue is also common to both places. According to one source, Pelhamwood's Storer Avenue recalls a former Harmon associate in Boston.
Farther north, Larchmont Gardens was developed by Clifford Harmon at about the same time as Pelhamwood. It would become a station stop on the Port Chester line when the NYW&B came through in the 1920s. Street names in Larchmont Gardens include a Harmon Drive. Its Wood Street, Thompson Street and Lakeside Drive are names found on the original plan of the Harmon community that was later absorbed by the village of Croton-on-Hudson.
Still another Harmon development, Shore Acres in the town of Rye between Guion and Otter Creeks, was created in 1914. A diligent map search, however, reveals no evidence here of Clifford Harmon's narcissistic penchant for personalizing street names.