KELBURN TRAMWAY

Dominion, Volume 16, Issue 179, 17 April 1923, Page 7

KELBURN TRAMWAY

WILL IT PAY CITY TO BUY? SPECIAL COMMITTEE’S REPORT TEN PER CENT. RETURN ON PROPOSED PRICE

in view of the poll of ratepayers to be taken on April 26 on the question of the acquisition by the City Council of tho Kelburn Tramway Company's line, plant, and property, the special committee set up to go into the whole question (and on whose advice the City', Council offered £45,000 for the business) has issued a report summarising the position, and adducing arguments in favour of the purchase.

The report is as follows: — “As there appears to be some misapprehension in the minds of a number of electors regarding the wisdom of tho purchase of the Kelburn Cable Tramway by the City Council from a private company now owning the undertaking, it should be explained that originally the statutory authority for the installation of such a tramway was vested in the City Council, but for financial and other reasons, the council decided to delegate its rights to a private company, and by deed dated July *22, 1899, delegation was made in favour of tho Kelburn and Karori Tramway Co. Ltd. The City Council made provision in that deed fcr a right to purchase the undertaking, and special clauses were inserted in the deed accordingly. These, in brief, provided for the payment by way of purchase money of suph a sum as would cover the capital expenditure incurred by the company, plus what ( was equivalent to a guarantee that, tlie profits would not be less than 7 per cent, per annum. , i “This last provision accounted for . the rejection of several attempts made during the life of the company to take over tho tramway because of the fact; that, like most undertakings of the kind, the first few vears were not’ profitable ones. In February, 1910, the City Council was again prompted to approach the subject of a purchase, and a special committee outside, of the council was set up as commissioners to investigate and report. In a full and comprehensive memorandum to the City Council these commissioners declared the amount payable hv the City Council to the company to be £43,587 as at that date, but negotiations were not carried any further at that time.

“In February of this year the original term of 21 yeans expired and proposals for sale and purchase could thenceforth be .made by negotiation ; or arbitration at. any time (as'against seven yearly periods previously). The present negotiations were opened about the ’ middle of last year. A ; special subcommittee of the Tramways Committee of the City. Council made a thorough investigation. and in a report to the City Council dated July 19a 1922, recommended the purchase. The proprietors in the first instance, named their price at £50,000, but subsequently -accepted the council’s offer of £45,000, subject to the poll being carried. “The question is being asked as to the expediency of the proposal to add this tramway undertaking to the activities of tlie corporation. Tlie matter might be set out in two questions:—(l) Is it desirable or necessary that this tramway should bo long to the city. (2) Will it pay the city to buy it at £45,000? “Dealing with the first of these, it should lie pointed out that sooner, or later this tramway must pass into the hands of the citv. The company, realising this, cannot rely on such a security of, tenure as would warrant capital expenditure of any great <ii- : mansions. Certainly, the directorate would be justified in hesitating. A constant state of insecurity is created, particularly with the changes of the personnel of the City Council as the biennial elections come around . It is idle to stats because the company is now giving a good service, that this is a good reason for leaving them alone. As a matter of fact, the existence of a privately owned connecting link is a source of constant worry to those engaged in planning future development of tho city’s tramway, system. N° sooner is a now work in that portion of the city heights suggested than it is at once banned because it might become i a feeder to this privately-owned line, increasing its earning capacity and thereby, ultimately, its cost to tho city. “Much has been said about the pol-i-y of the council regarding other 'routes and it should be pointed out that it is exactly because of the existence of this privately-owned line that difficulty is experienced in tills connection. Much work is contemplated in that locality and a bigger vision is only available by the removal of what has proved to bo a disturbing factor. . “Plans for an improved Raroa Road tram system are prepared, and as a loan proposal has actually been carried, it is not intended that this route be abandoned. A second route connecting with the city proper at a point near the intersection of Manners and Willis Streets is also contemplated and it is imperative that this line be put down as soon as possible. It is. however, not regarded as desirable that the city should enter into competition with the private company, especially as this other suggested route will tap Unland Road and the Karori and Northland districts. “Dealing now with the answer to the second question, that of finance: There is no denying the fact thqt.it will pay the city handsomely to invest this money, and viewed from this point alone there is no argument against it. The Kelburn Tramway Company has been, for a number of years, paying its shareholders 7 per cent, in addition to writing down capital values, creating reserves and paying income tax of from £6OO to £7OO per annum. As the corporation does not pay income tax this is saved to the council. Taking the last balance sheet of tho company as a guide, we find that the net profits are £4489, representing about 10 per cent, on the £45.000 proposed to be paid. The capital expended in tho tramway system of the City Council docs not earn so high a rate of profit. To put it another wav. the purchase of the Kelburn tram‘at the price named would, if the profits were maintained, not only pay for itself, but would nearly provide interest for another loan which would go a- long way towards ing a second outlet to the inhabitants of the western portion of Greater Wei- j lington.” . Tho report is signed, for the special committee—Councillors H. D. Bennett, T. Forsyth, and G. B- Norwood.