AUCKLAND TRAMWAYS.

Auckland Star, Issue 123, 24 May 1919, Page 13

AUCKLAND TRAMWAYS.

PUKUHASE BY CITY. DEFINITELY DECIDED. SUBJECT TO POIX. The City Council held a special meeting yesterday afternoon at -which it was decided definitely to purchase tbe Auckland tramways, subject to the consent of the ratepayers at the poll to be taken on June 11. A meeting of the Council as a who!.- in committee was held tirsi to ConMdf- the report of Mr \V. Ferguson, M.l.i .X.. ~f Wellington, with regard to the valuation. 2EH FERGUSON'S SEPOKT. COLM ii. yuiTK .irsriF'iKn. Mr. Ferguson reported as follows: — The m.itter submitted for my consideration and comment is the proposal that the lity louncil should purchase the rights and assets • ■!' tin' Auckland ELctriu Tramway Company, Limited, as a L r "in.LT rom-crn as ai July 1 next, for the r-iim of tl, 143,750. subject to certain -light adjustments, and a payment in respect to a year's net profits, which it U assumed, will not increase the total Eur:! to be paid in the I'jrra of debentures beyond •_",.! so.OuO. It, is manifest from the aiiiiu.U balancesheets of the company that the earnings denved from the undertaking have been ample under the pa.-t management to provide for the interest on the debentures to be issued, and therefore it is quite -.in: c ces.-ary for mc to enlarge upon thai aspect of the proposal. It only, therefore, remains for mc to advise as to whether tile present value of the asset are such as would wnrrane mc in recommending the purchase of the tramway system under the option that the Council holds, at about tI.KSO.OOO. The official-: of tile Tramway Company have afforded mc every infor -union, and at my request have, where possible, scheduled not only the primary cost of the work.-, but al-o of al' subsequent alterations and improvements. These schedules 1 have considered and checked by comparisons with other works within my knowledge. 1 hare visited every part of the tramway system, and I am satisfied that the whole of tbe undertaking has been well kept In order, and has no: been allowed to depreciate unduly. As the concessions to the company had so long a period still to run, the first expiring in 11132. and the subsequent rights at varying date up ; ; ll 1047. it is self-evident that in the interests of the company the work-; and plants would be kept by it in good working order. Had the proposal to purchase taken place within the last few years of the franchise then the question as to whether the renewals had been ample during the latter end of the concession period would be of much greater importance than it is at present: hut quite apart from that aspect I am satisfied that the upkeep has been good and sufficient. THE WEAKEST TART. The weakest part- of the undertaking is the power station. A la'rpv portion of the generating plant is in sniall units and of old design, and is not such as trould be erected at the pre-ent day, ■with a view to obtain t'.ie greatest economy; nevertheless, it performs ite •srork successfully. The fact that the power station is not one of modern de-:gn. and i= not favourably situated for the economical handling of fuel is, under the circumstances of the proposed purchase, not a matter of eerious moment. It may be r-.-asonably anticipated that within a very few years hydro-electric power must become available for working the tram services, and tile present power station would then be held in reserve as a standby, large enough to carry on a limited car service in case of any temporary stoppage of the electric current. The Tramway Company have acquired a freehold adjacent to the existing station, which is available for extensions. thereto, and eon!d be so utilised if tho acquisition by the council of the trains should lead lo such an early development in business as would require fresh p!ant to be erected prior to the hydro-electric power becoming available; probably, however, it would in such a case be fuund to be more economical to take some current from the city electrical station, and. if necessary, to extenl tho-«> wnrkr, a≤ being situated more conveniently for tbe cheap supply of fuel and condensing water. I am, therefore, of opinion that the comparative obsolescence of some- of the generating plant is of smaller moment than if it were anticipated that tne station would be required for active it-e for a great many year-. The piant would be of material value a- a standby station, and as it would be ui-ed so seldom, its efficiency in a matter of comparatively small moment for such a purpo=e. TIIE TRACKS. 1 have satisfied myself from the data submitted by the company that the tra. k has been kept in excellent condition. Material reconstruction of the lin-es originally installed has been carried out, and in assessing the present value I have taken into consideration the fact that a large portion of the original Wnr,s was scrapped when the lines were ref in-tru ted. The route mileage of 27.10 miles i- equivalent to a length of singe 1: ie of over ~>o miles (4,005 chains:} of this iength of single line 3,393 chains is la.d with the rails weighing 9Ztbe to the yard, whilst SS4 chains has been laid or re-laid with llOlbs raik. Of the concrete foundation originally adopted only 1. ;'.-')-> chains now rema.n, the balance of tiie old work having been reconstructed, and nearly all the new work laid wi:ii timber cross sleepers. The timber sleepers are principally Australian hardwood, only l.'J chains remaining with soft wood' tie.-.' OVERHEAD SYSTEM. Tiie overhead svr-tem is in good order and self-acting switches have been ins-tal-i-d. Hardwood piles and span construct.on have bt-fii used in the suburbs, and where iron poles have been re-erected tii. v have, where it was found desirable, b--n reinforced with a concrete filling, Tvh.ch in -u:ue caees has been reinforced wi:h metal burs. All the underground feelers put uo;vn under the Sr=t contract have, where iound to be faulty, l*en replaced by new work, and the feeder svstera is sufficient for ihe present requirements. Tile rolling stock is satisfactory, ard has been much improved in small details, and in many ways (air brakes,, wind screens, etc.), since its original purchase. I have satisfied myself that the system of periodical overhaul is such that tiie cars have been properly maintained. j l.

BUILDINGS AXD WORKSHOPS. The land values I have accepted at the Government valuation, though probably the market value would be greater. The buildings are, in every case, suitable. The car barns are large enough to house all the cars, the repair shops are quite modern, are well laid out, and of suitable size and design, and have sufficient machinery and plant for the requirements of the service for many years to come, and there is empty land on which extension can be made when needed. The arrangement of the stores at the workshops is satisfactory. I carefully examined the stock sheets as at June. and December last, and I am satisfied that, so far as the exigencies arising out of the war have permitted, the stocks have been kept up, and that the values .affixed to many of the articles are far ; lower than those at which they could be obtained at the present time. In the company's balance-sheet of date 30th ■lune. lltlS, the "Rights and concessions ami expenditure in electrical construction and reconstruction" is set out as, £1.1:26,1 IS; "Real estate"' stands at C2:i.-">3:2: and "Stores and materials" at C4:i.">49: total. £1.103.109. I assess the original cost of the actual tangible assets as having amounted to £1.100.000. leaving an apparent deficiency of £03200 to represent the book value of "* Rights and concessions," or about SJ per cent. It must, however, be noted that the local officers of the tramway have heen unable to supply mc with several important itPms which should be included as part of the value of the works as a going concern, such as: — (a) Extras that were paid in connection with the original installation, and of which the local office has no details, but which are known to have been considerable, (b) Cost of altering telephone and other work on the installation of the trams, (c) Cost of obtaining Order in Council and other legislation, (d) Engineering and managerial expenses, as relating to the original works and to new works and reconstruction. (c) Unexpired present value of the leasehold pro-( perty. In my estimation the cost of these items would largely cover, if not more than cover, the apparent deficiency in the valuation of the tangible assets. I therefore accept the balance-sheet figure of £1,126,118 as being a correct estimation of the value of the works at the time they were carried out, either originally or after reconstruction. APPRECIATION OF ASSETS. It remains, therefore, to be determined j how far the appreciation of the assets i arising from the increased cost of labour and materials counterbalances or overwhelms that obsolescence and depreciaj tion that cannot be met by repairs and ! replacements. It appears to be quite I certain that with the readjustment that will follow peace, whilst there will be a material fall in the present value of many of the requirements of the trams, it is" unlikely that the prices, for a very ilong tinjc, if ev.>r, will recede to those ruling before the war. It is also hu- ' manly certain that the wage charge for labour, which in New Zealand, in those services concerning thr tramway undertaking, have increased during the war period from 22A per cent upwards, will never fall to "the level of 1014. _ I therefore judge that the permanent increase in the cost of materials and labour as estimated over the whole undertaking, aie fir greater than the obsolescence or depreciation that has not been written off by the company. As the above position appears to mc to he unanswerable, I have not deemed it necessary to further deal with the matter by ascertaining in detail the actual cost at which the tramway undertaking j could be to-day constructed. Such J ascertained estimated Co3t. less J the wear and tear of the preJ sent system as compared with a new onp, would Vie the present value to the Council. Such an inquiry would be a prolonged and expensive one, and ' does not, under the existing circumstances, appear to be warranted, and indeed it is doubtful if it could be completed before the option expires. My conclusions, therefore, are that at a sum I approximating to .€1.180,000, the City Council, are quite justified in purchasing J the rights and assets of the Tramway Company as a going concern in terms of the option.

COMMTTTTSE'S REPORT.

UNANIMOUSLY ADOPTED. When the members met in open Council, the Mayor presented the following report: — The matters arising out of the option held by the Council from the Auckland Electric Tramway Company having been referred to committee, the committee i has to advise that -Mr. Win. Ferguson, J M.lnst.C.E., Wellington, who last month was engaged by the Council to report upon the terms of the option and upon the tramway system generally, with particular regard as to whether at die price and upon the terms named in ' tiie option the Council would be justified ' in purchasing the business of the Company, has now submitted his report. Mr. Ferguson reports upon his investigation of the Company's affairs and offers valuable comments upon the tramway undertaking; among other conclusions at which he arrives, there is the following: " It is manifest from the annual balancesheet of the company that the earnings derived from the undertaking have been ample under the past management to provide for tbe interest on the debentures to be isi-ued. and therefore it is ' quite unnecessary for mc to enlarge upon that aspect of the proposal." Mr. Ferguson concludes with the following judgment:—"My ronclusions, therefore, are ' that at a sum approximating to £1.180.----000. the City Council are quite justified 1 in purchasing the rights and assets of 1 the Tramway Company as a going con- ' tern in terms of the option." I Your committee desires to point out that this re-ult confirms its own judgment as to the value of the concern and ; .supports the investigation of the Mayor and thf* report? of the Council's officers, upon which it was decided to neeept the , option given by the company on the :2nd April. 1019." The committpe reports that notice of i intention to purchase in terms of the i Tramways Act lias bei-n advertised, and I that up to the present no objection has been Indeed. The committee further re--1 ports that arrangements have been made I for a poll of the ratepayers to be taken on Juno 11th. HUP. upon the question of j a loan for £1,250.0(10. with a view to i the Council exercising its option. The 'I committee recommends that the question I of purchase of tip company's business in terms of the option be commended by j the Council to the support of the ratepayers, it being deemed, after full inves-

tigation, and due consideration of every phase of the business, that such recommendation is in the best interests of the Auckland community generally. The committee further recommends that the question of the Council duly exercising the rights secured to it in terms of the option be referred to committee with power to act. Obviously no further action would be taken until the poll on June 11th is taken, for the Council's policy will be now determined in accordance with the decision of the ratepayers upon the loan proposals. On the motion of the Mayor this report was adopted.

DISCUSSION AT MT. ALBERT.

EXTENSION WANTED. The purchase of the tramways by the Auckland City Council was discussed by the Mount Albert Borough Council at a special meeting last evening, presided over by the Mayor (Mr. T. B. Clay). Mr. Clay suited that acting on the resolution passed by the council he had obtained a legal opinion in which it was advised that the terms of purchase of the assets of the company within t\w borough would have to be in accordance with the deed of delegation, and that the only stipulations that the borough was reasonably entitled to make were that the fares now charged to and from the district, and the concessions now in force, should be continued after the purchase. It was decided to agree to the purchase, providing the present fares to and from the borough were not increased, unless a universal fare of 2d were adopted, the present service not to do diminished, and the City Council to run within six months after the purchase, two extra ears from Queen Street to Mount Albert during the rush hours on week days, chargiim a minimum fare of 2d. Several members referred to the need for the extension of the tram service along Edendale 'Road to serve the thickly populated district between Mount Albert, and Dominion Road. The chief obstacle to the construction of a tramline to the district, it was stated, was the railway line, which would have to be crossed in the vicinity of the Kingsland station. The Mayor pointed out that it was the intention of the Department to duplieae the line between Newmarket and New Lynn. The completion of this work would render possible the construction of a tramline to Edendale. It was resolved to recommend that in the event of tlte City Council acquiring the tramway eystem. an undertaking should be given that the proposed Edendale extension would be carried out when the present difficulty in connection with the railway had been overcome.