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Payne Alters Hurley Ship Plans New Shipping Board Chairman Ho Staff -- Holds Ships at chairman of the shipping board, is beginning to exhibit to the shipping world that his policies are different from those of his predeces- sor, E. N. Hurley. According to per- sons close to the board, it is already evident that Mr. Payne considers his administration must meet conditions entirely different from those which confronted the Hurley administration and that these conditions demand 4 different method of treatment. Mr. Payne considers it a necessity to practice the strictest economy. Economy, as it is interpreted by shipping board today, it is said, means fe. return to the United | stares of as much money from the sale of government shipping property as can be raised. Furthermore, the new chair- man is determined 'that all extra es- tablishments of the shipping board must be abolished. The bureau of planning and statistics has been dis- banded and press agents and other unessential employes are to be dis- missed. Even J. H. Rosseter, director of the division of operations, it is said is to resign and all the bureaus to be placed upon a lower cost basis. According to the plan already said tc be in mind, Chairman Payne will cut the salary list and thereby reduce the overhead expense of the board by $7,000,000 per annum. ie BARTON PAYNE, the new Favors Private Ownership Persons close to Mr. Payne say he Coes not contemplate any radical change in the policies of the board although his method of carrying those policies out, will differ from Mr. 'Hurley's. He is reputed to believe that the government should not en- 8age in any form of private business and therefore he will attempt to bring to an end both the business of ship- _ building and of ship operation on the Part of the government. So long as these two activities must be engaged in by the government, Mr. Payne wishes to exercise those functions With the smallest expenditure possible. While it may be possible to, bring the business of shipbuilding to an end rapidly and thereby enable the disbanding © of the Emergency Fleet 'Orporation, the business of ship oper- ation must continue until all the 80vernment ships are sold' to private interests, or permanently disposed of. Under the Payne plan of rigid econ- omy this last promises to be a long drawn out affair. Mr. Payne is re- puted to be opposed to writing off $1,000,000,000 of the cost of building our vast merchant marine. He would prefer to return to the treasury of the United States every cent that con- gress has appropriated for shipbuild- ing. Must Sacrifice Wood Ships Even under this scheme, Mr. Payne is ready to acknowledge that it will be impossible to obtain for the wooden ships the full cost to the government. They must be sacrificed at a loss. But he hopes to avoid such a loss on the steel ships. Mr. Payne is said to be holding out for a quotation on the standard steel ships of $210 a ton for spot deliveries. That is a higher price than has heretofore been asked for the vessels. Many commitments ot sales were made before Mr. Payne took charge and most of these were made through the New York sales office established under the Hurley administration. Mr. Payne is said to be planning to discontinue the New York sales. office entirely. Under the suggested Payne plan, it is said, with the full cost quoted on ships offered for sale, the purchaser would be required to make a cash payment of 25 per cent, and payments of 20 per cent each year until the whole had. been paid. Interest would be charged on the deferred payments. Such a marking up of the value of these ships would check the ship sales and the government would be con- pelled to continue its possession and operation. So long as the government is compelled to continue operating slich~ ships as it owns, Chairman Payne believes that the government should enjoy the full return from such operation. The government should charge the full freight that can be obtained, with due considera- tion to the needs of American com- merce. Shipowners will not object to this policy as their main fear from government operation is that the vast power possessed by the shipping board through the ownership of a large merchant fleet would be used to break the freight market. Mr. Payne is said not to entertain any intention. an pio patents it will be considered good. business by private ae purchase a government ship under 465 pes to Save $7,000,000 Yearly by Reducing High Figure -- Will Change Accounting Methods such terms is problematical. Ship operators will be able to make a profit of $60 a ton of shipping per year up until 1921. But a 10,000-ton ship costing $210 a ton when pur- chased from the government, will represent a capital investment of $2,100,000. During the first year, the owner will be able to earn $600,- 000 net, of which amount the govern- ment takes $360,000 in excess profits taxes, leaving to the owner or pur- chaser a profit of but $240,000. To earn this much the owner has been compelled to pay down to the ship- ping board in cash 25 per cent of the sale value of the ship, or $525,000, leaving a balance of $1,575,000 plus interest unpaid. During the second year under the proposed plan the owner would have to pay to the shipping board $315,000, plus $78,750 in interest on the purchase price of the ship, or a total of $393,750. De- ducting from this second payment, the net earnings from the ship during the first year, the purchaser will be com- relled to put up $153,750 additional capital on his property. To Revise Methods After the second year the earnings of the ship will be problematical. When paying profits taxes to the gov- ernment the owner is permitted to deduct from 5 to 10 per cent for structural depreciation, but the gov- ernment will not allow any deduction on account of a depreciation in the market value of the ship. It is esti- mated by some ship operators that after the first year ships will not be worth more than $180 a ton, and the capital account of an operator who has invested in a 10,000-ton govern- ment-built ship will have depreciated accordingly. An operator should at. least be able to discount his capital depreciation from the earnings of the ship during the first years 'of its service, otherwise the investment will not be considered a good one. In justice to Mr. Payne, however, he is desirous of revising the accounts of the shipping board in such a man- ner as to make all profits and losses appear in plain black and white. This will necessitate an extensive revision of accounting methods. The manner in which the operating returns have been kept affords an excellent example _ of .what Mr. Payne: has - to reform.