PROPOSED PURCHASE

Evening Post, Volume CV, Issue 91, 17 April 1923, Page 11

PROPOSED PURCHASE

ARGUMENTS IN FAVOUR

KEPOET TO CITY COUNCIL.

A report summarising the position in regard to the purchase of the Kelburn cable tramway, and adducing arguments in favour of its purchase, has been pre^ pared by a special sub-committee of the Tramway Committee—Councillors H. D. Bennett, T. Forsyth, and C. B. Norwood. The sub-commit tee previously recommended the council to make the purchase at £45,000, and it was later instructed to draw up a report setting forth its reasons for the recommendation. The report was submitted to the Tramways Committee yesterday afternoon.. The text is as follows:—

"As there appears to be some misapprehension in the minds of a number of electors regarding the wisdom of the purchase of the Kelburn cable tramway by the City Council from the 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 City Council decided to delegate its rijjit to a private company, and by deed dated 22nd July, 1899, delegation was made in favour of the Kelburn.and Kurori Tramway Company, Ltd. The City Council made provision in that deed for 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 such a sum as would cover the capital expenditure incurred by the company, plus what was equivalent to a guarantee that the profits would not be less than 7 per cent, per annum.

"This last provision accounted for the rejection of several attempts made during the life of the company to take over the tramway, because of the fact that, like most undertakings of the kind, the first few years were not profitable ones.\

"In February, 1910, the City Council was again prompted to approach the subject of purchase, and a special committee outside of the council was set up as commissioners to investigate and report. In a full arid comprehensive memorandum to the City Council these commissioners declared the amount payable by. the City Council to the company to be £43,587, as at that date; but negotiations were not carried any further at that time. THE 192S NEGOTIATIONS. "In February of. this year (1923) the original term of 21 years expired, and proposals for sale and purchase could thenceforth be made by negotiation or arbitration at any time (as against sevenyearly periods previously). The present negotiations were opened about the middle of last year. A special.sub-commit-"tee of the tramways committee of the Wellington City Council made o thorough investigation; and, in a report to the City Council dated 19th July, 1922, recommended the purchase. The proprietors in the first instance named their p.'ice 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 the Corporation.; The matter might be set out in two questions: 1, Is. it desirable or necessary that this" tramway should belong to the city 1 2, Will it pay the city to buy it at £45,000? "Dealing with the first of these, it should be pointed out that sooner or later this tramway must pass into the hands of the city. The company, realising this, cannot rely on' such security of tenure as would warrant capital expenditure of any great dimensions. Certainly the directorate would be justified in hesitating. A constant state of insecurity is created, particularly with the changes in the personnel of the City Council as the biennial elections come round. It is idle u td state, because the company is now giving' a good service; that. this is a good reason for leaving it 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 the city's tramway system. No sooner is a new work in that portion of the city heights suggested than it is at .once banned because it might become a feeder to this privately-owned line, increasing its earning capacity, and thereby, ultimately, its cost to the city.

"Much has been said about the policy 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 this connection.

"Much work is contemplated in that' locality, and a bigger vision is only avail-, able by the removal of what has proved to be 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 arid 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 Upland road and the Karori and Northland districts. PROBABLE PROFIT. "Dealing -now with the answer to the second question—that of finance: There is no denying the fact that 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 £600 to £700 per annum. As the Corporation does not pay income tax, this'is saved to the coun- ! cil. Talcing the last balance-sheet of the 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 the tramway system of the City Council does not earn so high a rate of profit. To put it in .another way, 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 providing a second outlet to the inhabitants of the western portion of Greater Welling' ton."

The poll of the ratepayers of the city o,n the question of purchasing the undertaking will be held in conjunction with the elections on 26th April..