for the fiscal year 1938 were $576,662.81 less than in 1937, and
the total operating expenses in 1938 were $24,762.56 less than
in 1937. The decrease in operating expenses was due to a
decrease of $131,742.79 in damage costs (injxiries to persons
and property) and a decrease of $24,569.24 in power costs, as
compared with the fiscal year 1937. Payroll costs for the
fiscal year 1938 were $160,245.45 more than in the preceding
fiscal year, refiecting the 3% increase in wages made effective
on April 4, 1937, a 5% increase on October 31, 1937 and an¬
other 5% increase on January 30, 1938, together with an
allowance of one week's vacation with pay, effective May 1,
1937, to employees who did not formerly receive vacations
and a second week's vacation with pay to employees in ser¬
vice five years on May 1, 1938, these vacation allowances
representing an increase of approximately 4% in wage costs.
During the past few years the percentage of revenues
required for taxes has constantly increased and in the fiscal
year 1938 the sum of $2,335,347.81 was required to be paid or
accrued for taxes of the System, an increase of $149,341.07 or
6.83% over the preceding fiscal year. The ratio of taxes to
total payrolls for the fiscal year 1938 was 25.73% as com¬
pared with 24.52% in the preceding fiscal year and the ratio
to total operating revenues was 11.26% as compared with
5.9% for the fiscal year 1930.

TAX UENS

Early in May of this year announcement was made that
on August 5, 1938, the City of New York would sell tax
liens amounting to $1,383,496.54 against predecessor com¬
panies of the Brookl3m and Queens Transit System. The
greater part of the taxes in question are special franchise
taxes for the years 1916 to 1923. There are no special fran¬
chise taxes for any year subsequent to 1923 which remain
unpaid.

All of these taxes in controversy have been in litigation
for many years an'd the attempt of the City to anticipate
the determination of the issues by the Court and proceed
with the tax hen gales was, to say the least, most irregular.
Your Corporation instituted suit to enjoin the sale. The City
thereafter notified your Corporation that it was withdrawing
from the sale $61,939.38 of paving charges, $78,070.44 of
the real estate taxes and $169,412.69 of the special fran¬
chise taxes, which had been improperly included. The Su¬
preme Court granted temporary injunctions as to the items