MR LEWIN'S MINUTE

Evening Star, Issue 19409, 18 November 1926, Page 2

MR LEWIN'S MINUTE

LARGE INCREASE OF EXPENDITURE. The minute of the town clerk (Mr G. A. Lcwin) stated: In submitting a brief review of the profit and loss statements of the several trading departments for the halfyear ended September 30, 1926, the first point to be noted is a substantial drop m the net profit in almost all the accounts as compared with the corresponding period of 1925, In a general way, this is to be_ attributed very largely to the _ to make a serious effort to avoid intensifying the unemployed difficulty by curtailing many of the gangs that had been engaged to cope with the abnormal conditions arising out of the Exhibition. Immediately prior to and during the five and a-half months of the Exhibition we were obliged to _ very largely augment the employees in several of the departments, notably in the tramwavs and electrical departments. r fhe Exhibition closed on May 1, and by the time matters were sufficiently advanced to adjust many'of the outdoor employees to the altered conditions it became evident that the unemployed problem was likely to he fairly acute. With a view to helping the situation extra work was found for the enlarged staffs rather than curtail the oxpendi-; ture to a normal level right away. The result of this is, naturally enough, reflected in the statements for. the halfyear now under review. Taking first the city tramway account, to September, 1925, the declared profit was £6,876 4s; to September, 1926, this is reduced to the narrow margin of £414 Os 4d, and this result is shown despite the fact that the tramway revenue increased for the half-year to September 30, 1926, by £11,665 _ns compared with the corresponding period of 1925. A perusal of a few of the principal figures will show at a glance just where the abnormal expenditure has gone:— Sept., Sept., 1925. 1926. Power and traffic expenses £26,132 £32,234 , General expenses ... ' 4,166 4,689, Repairs and maintenance ... ... ... 7,088 17,624 Interest 9,337 9,673 Renewal fund 6,950 7,888 Total of these items £53,653 £72,108 In respect of the power and traffic expenses it should bo explained that this is mainly due to the increase in mileage run—from 799,481 miles for the 1925 period to 900,100 miles for the 1926 period. The bonus granted to the traffic staff in recognition of their Exhibition services, and the fact that during that same period holiday leave accumulated and had to be taken during the past six months, accounts for a further £2,000 under the head of traffic expenses. The heavy increase'in repairs and maintenance from £7,068 to September, 1925, to £17,624 for the 1926 half-year is due in part to the accumulation of work during the busy period of the Exhibition, and also to the attempt to ease tho unemployment problem already referred to.

It is plain now that at least some of the additional expense that has been incurred during the past half year is an offset to the abnormal earnings of tho preceding six months. Tho increase in the contribution to the renewal fund of £938, and the £326 by which the interest charge has gone up, is due to the extensions—the Exhibition line and the .Richardson street lino—and these added costs must be regarded a,s the first direct evidence, so far as the profit and loss accounts are concerned, of the new capital expenditure as part of the £IOO,OOO loan. U will therefore he seen that quite a. number of exceptional factors have been at work to influence the financial result of the half-year’s operations, hut, apart from the increase in the contribution to renewals and interest, they are all more or less of a temporary nature, and wo should expect to see all of them entirely eliminated or vastly modified during the current halfyear. Moreover, the 1 summer halfyear. is the better _ half-year From a tramway revenue point of view. ■ —Mornington Line.—

Tho revenue earned by this Hue is £I,OBB above the September, 1925, figures; but here, again, as on tho city lines, the expenditure lias increased by a net sum of £1.868, which results in a profit of £l6l ills lid for the half-year to SOfch September, 1926 s

la comparison with £941 9s 4d for the ! corresponding period of 1925. > The traffic expenses rose by £405,-. general expenses by £97 9s Bd, and repairs and maintenance by £1,429 16s : Bd. The latter of these increased snms \ is due to the fact that \the Mornington i renewal fund has been depleted, by the installation of the electric equipment, and therefore all renewals have been charged direct to revenue. ,On the basis of previous years this account should right itself m two or three years’ time, but it is disappointing to find a reduction in the power expenses of only £ls 17s 2d as the result of the change over from steam drive to electricity. The new proposal was based on expectations for a much greater saving than is indicated by these figures. —Roslyn Line.— Here the revenue shows an advance of £427 17s 8d on the September, 1925, 1 figures; but the somewhat heroic at- i tempt to put the line in better order has resulted m an increase in the expenditure of £2,629 9s 9d. To September, 1925, the loss was shown as £439; I while to September, 1926, the loss is j £2,640. The whole of the heavy expenditure that has been called for on this lino since it passed to our ownership, and which now amounts to about £17,000, must be regarded as something quite apart from ordinary maintenance, and the earning power of the line is and will be for many years overtaxed by the heavy demand for interest on this abnormal expenditure, added to the interest charge on the debenture issue of £35,000. It is now understood that all the expenditure of what might rightly be regarded as exception and due to the condition of things as at the time we took over the lino has been provided for. If this should prove to be the case the financial results should show a gradual improvement in the future; but it is much to be feared that the progress will be of a very slow order, due to the baneful effects inseparable from over-capitalisation. The outstanding “drag” on the lino is, without doubt, the electric extension to Maori Hill, and that position _has been intensified by the bus service that caters for a portion of the district. Viewed in the most favorable light, it is to be recognised that the Roslyn line does not provide an attractive proposition from a profit earning point of view. —The Electric Department.

There is little of an outstanding nature in connection with these accounts. The profit shows a decline to the extent of £2,618 12s 6d, in spite of an increase in the revenue of £5,649 4s 7d, as compared with September, 1925. Here, again, the increased expenditure is due to some extent to assisting the unemployment problem hy refraining from reducing the staff of casual workers. The effect, too, of increased capital expenditure shows itself as inteVest charges increased by £1,047 depreciation by £232, and contribution to renewals by £1,047. Those three items alone almost account for the falling off in the surplus as compared with 1925. —The Gas Department.— This is the only one of the trading accounts in which the profit to September, 1926, shows an increase as compared with the corresponding period of last year. The revenue is up bv £2,860, of which £2,705 is absorbed by increased expenditure, so that the net surplus is £155 above that of last year. In view of the heavy capital expenditure in contemplation in connection with the gas department, it is satisfactory to find the account in such a sound state. —The Water Department.—

Here the revenue has increased by £950, but the expenditure has called for £2,990 more than we spent for the half-year to September, 1925, with the result that the surplus suffers to the ! extent of £2.040. Some special work at Ross Creek Reservoir has accounted tor i £BOB more than the outgo for the corresponding period of last year. The expenditure on maintenance of the water reserves varies considerably from year to year, but for the past four years the average has been about.£7oo. For the half-year just completed we spent £1,604. Part of the routine work I was allowed to accumulate in 1925,' and j has been made up during the past six ; months. There is nothing to cause apprehension in connection with this account. —Summary.— Summarising this data, we get this result as a comparison of the revenue, expenditure, and neb for the two periods under review—viz., September, 1925, and September, 1926: Revenue. 1925. 1926. Gas £53,785 £56,596 Electricity 83,364 89,013 ‘Trams 69,076 89,445 Mornington 7,380 8,477 Roslyn 8,655 9,083 Water ... 27,583 28,533 Totals ... ..'.£249,802 £281,147 Expenditure. 1925. 1926. Gas ... ... ... £41,240 £43,946 Electricity 59,783 68,050 * Trams 62,425 89,004 Mornington ... ... 6,448 8,316 Roslyn 9,095 11,723 (Loss.) Water ... 16,528 19,518 Totals ... £195,519 £240,557 I Net Surplus. 1925. 1926, Gas ... >..£12,495 £12,650 Electricity 23,581 20,963 ‘Trams 6,651 442 Mornington 941 161 Roslyn ... ... ... 439 2,640 (Loss.) Water >.. ... ... 11,055 9,015 Totals ... ... •The bus revenue and expenditure are included in these figures. The table shows, therefore, that, despite the fact that the total income has increased by £31,345, the actual surplus is reduced by £13,693, or, in other words, we spent £45,038 more during the half-year to September, 1926, than wo did in the corresponding period of the previous year.