Richmond Palladium (Daily), Volume 35, Number 44, 21 December 1909 — Page 4

PAGE FOUR.

THE RICHMOND PALIADIU3I AXD SUa-TJLiEUfCA3I, TUESDAV, UECEJIHEK 21, 1909.

The Richmond Palladio and SiB-Telegraw Published and owned by the PALLADIUM PRINTING CO. issued 7 days each week, evenings and Sunday morning. )ff!ce Corner North 9th and A streets. Home Phone 1121. RICHMOND. INDIANA. tolpb G. Leeds.. EdMo :brl- M. Morsam . . . Mal Edtr larl Brrahardt Aaaoriatc Editor IV. II. Pouaiatoae Biew Editor. SUBSCRIPTION TERMS, tn Richmond 5.00 per year (In advance) or 10c per week. MAIL SUBSCRIPTIONS. ")ne ynar. In advance '5'22 lx month, in advance S.feO Dne month, in advance RURAL ROUTES. ")ne year, in advance '12 ilx months, in advance 1-50 )ne month, in advance 25 Address changed as often as desired; soth new and old addresses must be Slven. Subscribers will please remit with rder. which should be given for a irvecified term; name will not be entered until payment Is received.

Kntcred at Richmond, Indiana, post sffice as second class mail matter. i ' To Assacistion of Advertiser. (Now York City) Mm 1 1 this follwtlcn. Oaly tlw fleam of MiUUH la ita refers an by tat Aasoetatloa. BOARD Of WORKS MAKES A REPORT ON WATER WORKS (American News Service) 20-operation of the Mayor and Com mun Council in the premises, which was promptly granted. Mr. Maury was employed at a compensation of $."i0 per day, for time actually and necessarily employed in the investigation; and an assistance civil engineer to do more common technical work was furnished ty him at $H per day; and the firm of Edward A. Pratt & Co., of Peoria, Illinois, expert accountants, was employed at $15 per day to go over the water company's books and report a3 to investments, profits, expenses, etc. The work was begun in September and completed the middle of November and cost the city all told about $1,9C)0 a sum larger than anybody expected, but not more than the work was worth, when the completeness of every phase of it. and high character and profes sional reputation of Mr. Maury and his assistants are considered. This board were considerably surprised and somewhat disappointed at some of the conclusions of the report, viewing them necessarily from the standpoint of the non-expert or layman, yet a rather careful study of the same convinces us that for the most part, if not altogether it represents the most modern and scientific method of dealing with the facts found and the subjects considered. The Investigation. On the first conference with the consulting engineer it was agreed that the scope of the investigation should cover the following items: -tailed inventory of the property of ..i l.inds belonging to the water company. A valuation in detail of said property based on the present cost of reproducing it, less the existing depreciation. An examination of the physical condition of the water works, with a view of showing its degree of adequacy, where it was deficient, and the necessary recommendations for additions and changes to give it the greatest efficiency. An examination of the water company's books, in order to show, first, the cost of the water works up to date, and second, the yearly receipts, expenditures, and profits of the company. The inventory made was complete, covering real estate, pump house, reservoir, wells and galleries, water rights and rights of way, the distribution system, covering the entire system of mains and service pipes, fire hydrants, pumps, boilers and all other machinery, together with all pipes, fittings and other personal property, down to the smallest detail. The inventory covers fifty-five typewritten pages, besides a large number of maps and other exhibits, covering as much more space and was by far the most laborious portion of the entire work. Report on Valuation. The valuation of all this property also involved as much labor and considerable research in order to insure accurate present values of all this mass and variety of property. The report fix?s the total value of the water company's property, after allowance for depreciation, at $r..M-.s;)'.:i. To this is added SKMHX for working capital, and $11V MKVtiO for "going value"; making a gross valuation at this time of $717.71S.X5. The item of "going value" is explained to represent the amount of advantage a "going concern" of this sort has over a new concern until the latter secures a normal amount of business. In other words, it represents the loss of profits (exclusive of interest on investment, which is counted a part of the actual value) which a new water company, having no competition, would sustain before reaching a normal value of business. While this Board understands that "going value" is now considered one of the elements of real value in a running business, to be considered in case of sale of same, there is, in the present cast, another Important if not vital, factor to be considered, which in most cases does not appear. This is the fact that the contracts and franchise rights of the water company in this city will expire in less than three years; and that this city is under neither legal nor moral obligation to that company beyond that time. In other words, when the water company made Its first

JUST A FEW THINGS Yesterday the Board of Works affixed its approval to a franchise sought by the Richmond Natural Gas company, which Is seeking to enter the artificial field. In effect this franchise is not alone one which Is granted to the company In question, but through the force of competition has also to do with, the Richmond Light, Heat & Power company. No one will say that such a franchise is unimportant, particularly seeing that It will be operative for twenty-five years if it is accepted by council.

When the Board passed on this important action and signified its approval to the whole proposition it can not have had a consciousness of .having taken any counsel or advice from any one except itself. Its action then is entirely on Its own head, apart from the reprehensible and indefensible method of acting in. at least, not an open fashion. We do not consider its record in this matter in accord with modern views on the subject. For many believe that all action of city officials shall be in the open and not in secret conference behind closed doors, and that the people shall know what the state of the city business is. Such a thing may not mean anything to the present administration but it means something to those citizens who like to see things done with the consultation of the people. Was there any thing about those meetings which could not have been- transacted openly? We hope not. Why the hurry? The Board has therefore placed itself in a position which may be criticised. The action of the Board of Works may be regarded with propriety by the citizens as being entirely on it3 own head.

This being the case what has the Board of Works to show as the fruit of its arduous labors? Have they affixed their signatures to a modern franchise which protects the people? Have they overlooked any small items? Let us take the franchise which is the result of their sufficient wisdom and see if there are not some points that the citizens of Richmond would at least like to have threshed out before they place their approval on the franchise.

The principal reason why any franchise should be granted to the petitioners from the standpoint of the city (which is supposed to be the standpoint of the Board of Works) is the hope of real and beneficial competition. Competition may be fairly supposed to keep down the rates and improve service.

Is competition assured? Is there any clause in the franchise which provides that the company shall not have any working agreement as to rates with its competitor which would make competition a farce? Is it not conceivable that the companies might tire of competition and get together on rates? Investigation will show that gas rates all over the country are being lowered while Richmond may remain tied up on a ninety cent maximum rate and no competition. Richmond ought to get sixty cent gas before many years. And the citizen, not so many years distant can not be expected to look back with fondness toward those who fixed the rate so high and did nothing to introduce a clause which would at least guarantee competition under penalty of forfeiture which would reduce the rates. (And yet in the clerk's office there is an excellent model for such a clause in the case of the C, C. & L. which dares not for one second enter into an agreement with the Pennsylvania or sell out to them.)

Is there in addition, a clause introduced making it obligatory for the company to manufacture its gas within the city limits and enjoining it from buying gas of a third company? (For it is by the use of these two expedients that the citizens of other towns have seen their fancied competition fade away like a dream.)

Is there any provision for the city to buy the plant if it so desires? Is it not conceivable that a situation may arise in which the city would give a great deal to be able to really regulate the gas situation in order to protect its municipal light plant? If not, what harm could it do? And here let us say that we hope that the city of Richmond, will never again delude itself that it can buy under the old style conditions which are so carefully framed and manipulated that they are worthless. Let the city buy in a perfectly businesslike way. Let it use the right granted by the legislature to buy stock at any time at an appraised value, under certain restrictions for the city's protection to keep the stock from being watered. Then the city will never be up against it. as it is now in the water works situation. Indeed some cities go so far as to reserve the right to designate a buyer, with the right guaranteed to buy of that buyer. Have these things been brought up?

And has there been anything introduced into the franchise to protect the people in the matter of purity and quality of gas? Has It been considered? It is not for nothing that the New York provisions on this score for the protection of health and the guarantee of a square deal in the matter of quality, exact the conditions that gas must be of twenty-two candle power and that it shall not contain more than one hundredth of one percent of sulphur. Does the Board know, or has it made any inquiry about the effect of impure gas and does it not believe that when the citizens are paying for the highest quality of gas that they should receive what they pay for? And has the Board arranged for an up-to-date testing of meters such as modern franchises call for?

We believe that these are a few things that the Board has not taken -into consideration. If it has not ta'ven them into consideration and has known o ftheir value, what can they say to the citizens of Richmond when these matters do not appear in the franchise which they have so sufficiently rushed through, after a confidential and hurried consideration? Have they considered these things? If not, why? If they have considered these things do they regard them as of no consequence? Other towns do. It may be that the citizens of Richmond would like to have some of these little bagatelles considered, such as real competition, the right to buy, the guarantee of health, and the requirement of real quality. At any rate these are a few things the citizens should know about and this paper merely calls their attention to them in the absence of any appareut disposition of the Board to notice them. There are also some more things which we have to say about them. It is still our opinion that the Richmond Natural Gas company may yet be perfectly willing to enter the field under a franchise which grants a modicum of real competition and protection to the people. For this reason we still see no reason for the hurried and secretive action which we regret has been taken.

seven-year contract with the city, it voluntarily took the risk! of the city reilewing that contract; and when the same was renewed in 18!) for twenty years more, the company again took the risk of afurther renewal in 1912. Going Value Item. Now, with this significant fact staring them in the face this short tenure of life as a "going concern" this Board cannot admit the justice of the "going value" item of $1U.S2Tms!. as a part of the present value of the property. On the contrary, we believe the brevity of the existing contract, and the consequent jeopardy in which the greater part of the company's investment lies, should, at least, off-set that item. And. as a basis for purchase, we do not believe the item of $10,000 cash should be included, for it isn't likely that this amount of cash would be turned over with the property in case of its sale to the city, or anybody else. The net value of the physical property is fixed at a little less than $000,000. and the members of this board regard this as a high valuation for the same. And when wc examine the accountant's report, we find the total cost of the property, beginning with the amount paid to Wiley, the original contractor, and adding every dollar Invested since. In

cluding cost of service pipes and set

ting meters, with no deduction for de preciation, to be $15.G58, we believe that valuation is not even sustained by the report Itself. The Depreciation. More than this, we regard the depreciation figured off the valuation made by the consulting engineer as very low, considering the age of the various parts of the property. For instance, the life of the pipes in the ground is counted at 100 years, and the average age of all these pipes is 20 years; but instead of deducting 20 per cent from the present value of new pipe of similar size and quality, he only deducted 5.S per cent. Again, he deducts only 18 per cent depreciation for the two large pumps for the whole term of service, which for the six million pump, has been 23 years, and for the four million pump, has been 15 years, or an average service of twenty years, considering that the higher priced one has run the longest. This would make the average yearly depreciation on pomps less than nine-tenths of one per cent. On the boilers a total depreciation was made of 30 per cent for their average term of service of ten years, or three per cent per year. - As the average life

of a boiler in continuous service Is from ten to twelve years, this rate of

depreciation appears too small, even 5 after considering that these boilers were seldom crowded for any great! length of time. j Based on Theory. Thes-3 depreciation estimates are probably based on the theory "that the depreciation is small at first and very great at the last. But, as far as is market value is concerned, the greatest depreciation of this pipe and machinery occurs in the early years of its life, as soon, in fact, as It becomes "second-hand." Thus the small depreciation in wear in the early years is off-set by the large market depreciation in that period; and this would account for and justify the common custom of charging a fixed yearly rate of depreciation running the entire estimated life of the particular kind of machinery or property under consideration. The ordinary average annual rate of depreciation on water works plants, taken as a whole, is about two and one-half (24) per cent. The value of the Richmond plant at first was about $33.,000, and the present value, based on duplication, as fixed by Mr. Maury, before any deduction is made for depreciation, is $5,000. The average investment for the whole period of twenty-four years would, therefore, be $500,000. Applying the Rule. Applying this rule of ti'-j per cent yearly depreciation on that amount, we would have as the total actual depre ciation of the property at this time the large sum of $300,000: which, being subtracted from his reproduction value of $005,000, would leave as the actual present value of the entire water works property, the sum of $oE,000, in stead of $596,892.04. Mr. Maury's total depreciation of the entire property in the twenty-four years is $t8,093.02. This is but 13.73 per cent, or a little over one-half of one' per cent per year. When it is only claimed that the life of the mains is 100 years, and the life of the pumps, boilers, meters, valves, fittings, etc., is admitted to be very much less, one half of one per cent does not appear to the members of this board as a fair rate of annual depreciation on the water works property as a whole. One of the most valuable parts of the report is that concerning the efficiency of the present system in the matter of fire protection, and the recommendations for betterments. These include a new twenty-inch main from the pumping station to the city, coming in on the National Road to Main and Twenty-third streets; a sixteeninch main from there to South B and Seventh streets, and various twelveinch, ten-inch and smaller mains in different parts of the city; a new five million gallon pumping engine, with 200 H. P. boiler; also an increase in the output of the Cooper well from a twomillion to three million daily capacity: the closing of many "dead ends," and Increasing the sizes of mains at various places; two additional ten-inch mains across the river, the installation of over 100 additional intermediate hydrants, etc. As to the latter recommendation, the board's information is, that so far as the business and factory districts are concerned, the number of hydrants is practically adequate at this time; and that, taking the city as a whole, there is no need of more than twenty-five additional hydrants in the near future; but these recommendations for betterments are, for the most part, needed and the same would result in better service and fire protection to the property of our citizens. The cost of all these improvements is estimated to be about $135,000, which, added to our estimate of the present worth of the physical property (after depreciation be deducted) $305,000, would make the value of the plant $500,000 after they were installed. We would, therefore, consider that sum would be a fair price for the water works after these betterments were added, whether the purpose be to purchase the same, or to renew the existing contract, which expires in October, 1912. Is Not Satisfactory. On the question of Investment and profits, the report is not satisfactory, because it is incomplete. It shows the entire cost of the water works property at this time, and also shows the growing cost of the different classes of the property in itemized form, but does not show what the investment was each year, so the same could be used as a basis of profit. The report of receipts, expenditures and profits covered the past six years, from July ist 1903 to July 1st 1909. In order to show the per cent of profit each year during this period, the amount of the investment should have been set out as a basis for calculation. It does, however, show that there were net profits during that period of $274,914.85; that, of that amount the sum of $70,875.75 was paid in cash dividends; thus leaving $108,039.10 to be added to the value of the property. This difference of nearly $200,in in the amount of the investment within a period of six years illustrates the importance of knowing the actual investment each year in order to know what per cent of profit was made each year: and the accurate annual per cent of profit is very essential when it comes to the consideration of proper water rat?s to be charged in a new contract. A Complete Report. In conclusion, we beg to suggest that this water works report is by far the most exhaustive as well as expensive one that has ever been prepared for this city on any subject It involves the condition, both physical and finan cial, of property valued at a half mil lion dollars. This institution comes into close touch with practically all our citizens, and its schedule of charges and its methods and management are of direct and vital interest to all of us. As to the conduct of the property, on the personal side, by its present offi cers, we have no words but those of commendation. Our official relations with the water works company through these officials have been most pleasant and satisfactory. We have always found Secretary Dill to be fair, intelligent and responsive to all reasonable suggestions. The propriety, if not necessity, for an expert examination and report on

the property was, as we have stated, generally recognized, in view of the

apparent need of expensive betterments in order to affort the most adequate fire protection; in view of the expiration of the present contract in 1912. and in view of the possibility of the purchase of the property within that period, as provided in that contract. Not All Approved. The members of this board. In making this somewhat extended comment and analysis of the engineer's report, j instead of submitting It to your honor-j able body with a brief, but sweeping endorsement, have been constrained to: this course by this fact: While we rec-! ognize the value and importance of the engineer's report on the condition of the property, and his recommendations for betterments, as well as his inventory of the plant in detail, and the analysis of the books by the accountant, we were unable to give our approval to all the conclusions of the report. And while the facts found and recommendations made meet our hearty assent, for the most part, we did not desire, either by a general concurrence or even by our silence, to place ourselves In the position of endorsing some of these conclusions, which we have taken the liberty to consider, discuss and dissent from in this our report. Neither did we desire that the incoming administration should be misled by such silence, in connection with any further negotiatios it may have with the water company. We believe in municipal ownership, not only for its direct benefits, but as one of the surest means of raising the standard of the public service in our cities; and we do not doubt but that a majority of the citizens of Richmond also believe in it. We should be glad if some practical way might be discovered whereby the city could become the owner of the water works. But, unless some public spirited capitalists be found who are willing to buy the property and lease it to the city (a remote prospect) allowing the latter to pay for it out of he profits in excess of a moderate interest charge within a term of years, we see no way for the city to become its owner in the near future, in view of our present indebtedness, rate of taxation and general financial condition. Might be Successful. It has been suggested that perhaps another persistent effort by the Light, Heat & Power company to purchase the municipal light plant might prove successful, and in that event the city might be in a position to buy the water works. But as such a proposal would have to be approved by a majority of the voters of the city we cannot believe such a change is probable, in view of the unparalleled success of the city's light plant in the past three or four years. The only alternative, then, is the making of a new contract with the water company before October, 1912. But in so doing, the idea of municipal ownership should be kept in view. and such contract should only cover) the time necessary for the city to pay off its bonded debt and get in a position to take over the property and it should include an option for the city to purchase during such time say, ten years. It is our own belief that the present hydrant rates are too high being the highest in Indiana, we are informed and also that a substantial reduction could fairly be made to private consumers; and that instead of a meter rental, a small minimum charge should be made to cover intereston meters and expense of statements where little water is used. This board would have been glad to take up negotiations with the water company, looking to a new contract, but the delay of the consulting engineer's report, together with the time required to examine and digest the report afterwards, left no opportunity for us to even take up the work, to say nothing of completing it, in view of our retirement from office January first, next. A Little Blarney. As this is the last formal communication we shall have to present to your honorable body, we gladly take this occasion to express our thanks and appreciation for the uniform kindness and courtesy shown the board as a body and its members individually, by the members of council, (he mayor and all the officials of the city and their subordinates. Our official and personal relations with all have been most pleasant, and while we have not always agreed in our views, there was no bitterness, and, what is still better, there has never been a charge or hint or thought of graft made by anybody connected with the city government against any body else connected therewith, despite the fact that the legislative department is unanimously republican, and the executive department is demo cratic. This speaks well for both par ties and well for the public service of this city during the present administration. We have all done our best

2700 PHONEO

TELEPHONES As a Christmas Present Why not give to your loved ones a telephone as a Christmas or New Year's present- It will not only give joy at the time, but happiness and pleasure every day in the year. Do you know that the telephone annihilates time and distance and puts you in direct touch with everybody, everywhere. A Home 'phone automatically connects you with 11,000 persons in and around Richmond and toll connection to every city in the country over both the Independent and Bell toll lines. A 'phone costs four to five cents per day. Stop and consider the many advantages and you will readily see that it is not an expense, but properly used will actually save you money.

RUSH YOUR ORDER IN TODAY

and done it honestly and in good faith. Most of us will shortly retire, but our record will remain, and of that record let us not be ashamed. John Hallowell, W. P. O'Neal. B. B. Johnson, Board of Public Works. THE SWEATER GIRL: We have heard of the Gibson girl, the Summer girl, the Golf girl and other girls and now comes the Sweater girl. She knows her sweater can kept white by using rub-a-lac and then it hung on a coat hanger till its thoroughly dry and thus it retains its original shape. Join the ranks of the sweater girl for your grocer can furnish you with rub-a-lac CARD OF THANKS. We wish in this way to thank our friends for the floral offerings and many expressions of kindly sympathy during the illness and at the death of our little George. Mrs. Lula Brower and parents. PALLADIUM WANT ADS PAY. See the new Dutch Ware AND NEW PICTURES Just Received at MOORMANN'S BOOK STORE 520 Main St. The Flower Shop 1010 Uaia SL Pfaoce 102 XMAS Only a few days off and we still have a Nice Assortment Of Toilet Waters and Perfumes, all odors, and in packages from 25c to $2.00 per bottle. Fine Leather Tourist Cases, filled. $2.25 to $15.00. Silver Shaving Sets. $1.50 to $6.00 Smoking Sets, each 50c to $3.00 Shaving Mirrors, each $1 to $5.00 Military Brushes, per pair, $1.75 to $5.00. Manicure Sets, each $2.00 to $15.00 Fancy Pipes, each, $1.50 to $6.00 Fine Box Paper, per box, 25c to $3 Perfumes in bulk or fancy package. If you want quality, inspect our stock. LEO E FBBE'S PHARMACY 830 Mala SI.

NEW GOLD COINS FOR CQRISTT.1AS PRESENTS Anticipating feeosaal Holiday decxd fer cew QtH Cciss cf the "Saist Gesdens" design, we have seared a saiscest cf these ccias in tae varices deacaiaaticas. which we will be pleased teexebasse with car frieais csd patrcas wittsal extra cost We sacgest as a cost seasible Xcss Gift test yea fiive year frieads a Saviass Aeccaat witb car lUsk. DICKINSON TRUST COMPANY

30,000 CALLO Per Day

NATIONAL BRANDS CIGARS FOR xhas These are cigars you can depend on for quality and they cost no more than Inferior brands. We have them in all sixes of packages from 50 cents to $3.50 and in all grades. Our -Flashlight" at $1.00 per box of 25 and the "Official Seal" at $1.25 per box of 25 are special values. Adams Drug Store 6th & Main. The Rexatl Store PALLADIUM WANT ADS PAY. Ola Glcso r Gpoelalo Ivory Day Till Christmas. LILLIAN RUSSELL DAN HOPKINS HENRY LLOYD r. cigars 8 for 23c. Box of 50 $1.50. WM. PENN, box 25 12.00 WM. PENN. box 12 $1X0 ROBT. BURNS, box 25. ... $2X0 SIR FRANCIS GRANT, box 25 $24)0 (The aristocratic smoke.) LA LITELLA, box 25 $2.00 Havana cigar. LA LITELLA, box 25 $14)0 Cupids.) REIN A PLANT A, box 25.. $1.23 (For smokers who are critics.) SAN BENITO, box 25 $1.23 (Fine Domestic Cigars.) 8ARONA, box 25 $14)0 (Mild and pleasing, each In a paper cup.) G. P. S. CIGARS, box 25.. $14)0 (Exceptional Values.) SANTA GLORIA, box 50.. $14)0 SAN PORTO, box 25 75c Havana Filled Stogies. Jn boxes of 25 for $14)0 ANNA HELD. PATHFINDER,' CON8ELLOR, 4 sizes. CHEROKEE MAID, EL. TELLICO BURDENA CIGARS. Uaay cf aiave trcria tzi eSm labxfer256 c ..QcSley Drrj S&ra

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