ACQUIRING THE GASWORKS.

Manawatu Standard, Volume XLI, Issue 9757, 24 March 1914, Page 5

ACQUIRING THE GASWORKS.

MEETING OF RATEPAYERS.

STATEMENT BY THE MAYOR

i meeting of ratepayers convened by the Mayor in connection with the gasworks Tj a n P ro P osa^s -. t°ok place in the Municipal Hall last evening. About a hundred ratepayers were present.

THE MAYOR'S ADDRESS. The Mayor thanked those present for their attendance. The Borough Council, as they knew, proposed at an eaj'ly dato to take a poll for a loan of' £IOO,OOO for the acquisition of ihe gasworks. It was not compulsory under the present procedure to hold a meeting of ratepayers, and resolutions by such a meeting had no force, but the Mayor thought it due to them that they should be given the fullest information upon the matter. The loan was a large one, said the Mayor, and was of very great importance to the town. DATE OF THE POLI, Coming to the details of the proposal, the Mayor said the loan was to be placed before the ratepayers on April 22nd.

GAS COMPANY'S AGREEMENT. He read the following summary of the principal provisions of the agreement between the Palmerston Gas Company and the Borough Council: 1. The right of the company to manufacture gas for the inhabitants of tho borough is for a term of 28 years, ending 27th August, 1915. 2. The corporation has Ihe right to purchase the works at the end of 23 years, by giving one year's notice of intention to do so. The price fixed is tho

cost price of the buildings and fixed plant, less one per centum per annum for

depreciation in value of the buildings and other works, and without any compensation for a continued lease, which is provided in case the corporation does not purchase. The moveable plant to be valued by three arbitrators, one appointed by the corporation, one by the company, and the third by the two arbitrators so appointed. The award of any two shall be final.

3. The corporation had also the right to purchase the works at the completion of the first 12 years, that is, August, 1899. In this case the price was to be as set

out above, and in addition the mean pro

fits of the previous three years. A lead ing solicitor laid down a basis of ascer

tabling the mean profits as the difference between the usual percentage paid on tho capital in use, and the amount actually paid by the company—that is to say, the current rate of interest was 5 per cent, and the company paid 8 per cent: tlu; difference of 3 per cent was the mean profits. 4. If the corporation failed, to _ purchase at the close of 12 years, at; is the case, and al.-o fail to purchase at the close of 20 years, then it must grant the company a further term of 21 years on the same terms and conditions. In this case, however, there is a condition that tho corporation can_ purchase at any tirno by giving one year's notice of the terms and conditions provided for tho purchase at the end of the first 28 years, as set out above—that is, without any compensation. 5. If the works had been erected on private land, the corporation had t!io right to purchase the said land at the net price paid for it by the company. 6. The company has the right of supplying the street lamps, and the corporation with gas during the agreement. Tin- price of gas to the corporation is 33 1;3 per centum under the cash price paid by ordinary consumers. 7. The company is compelled to make good all. breaks in the roadways caused by connections with private premises, and to indemnify the corporation against, actions for negligence in leaving obstructions on the roadway. 8. There is no provision for a further lease after the expiration of the additional

21 years mentioned above. 9. There is also a clause which provides that the Council may itself install an electric light system, or grant conct"-s:ons to facilitate the introduction of <i ctrio lisrht, or any other system or method of lighting. To this is added the proviso that if the company is prepared to supply and maintain such other system of lighting on the same terms it shall have preference. AMOUNT OF LOAN. Continuing, the Mayor snul the loan to be placed before the ratepayers was a<- sollows : Purchase of works *.. £63,000 Acquiring land and itemises ... 5.000 Extension of plant 30.000 Total ... ... £IOO.OOG Tho amount for the purchase of land and premises referred to the Broad street property, which hud been separated from tho works on the advice of the borough solicitor. The further extensions, for which £30,000 was provided, consisted of a now gas holder, extension of carbonising plant on the latest system, and extension of mains, services, and meters. Where gasworks had been taken over by some municipalities, said tho Mayor, it had been found necessary almost immediately to go to the ratepayers for a further loan to provide for extensions. The Palmerston Council was anxious to avoid this, and it must be remembered that, although the loan was for £IOO.OOO. it did not necessarily folio,v that the Council would take the whole sum. Only what was actually required would bo borrowed COST OF WORKS. On the 31st of January last the position of the company, as per balance-sheet, showed the cost, ot the works, including tho Broad street property, to be £57.189, and in fixing the amount of the loan at £65,000 for the purchase of the works, the Council had been guided by the additions and extensions during the three previous years. Ihis would leave a sum of nearly £13,000 to provide for extensions and additions from tho time of taking the loan and taking over the works (about 20 months), also for-purchasing the stocks on hand of coal, fittings, etc. The Council would be entitled to one per cent depreciation per annum, and the company showed the depreciation in their annual balance-sheet each year, but tins would, of course, be a matter for accountants to look into later.

THE QUESTION OF PROFITS. In dealing with the question of profit*, the balance-sheet disclose profits for the year at £8146 10s 4d. The charges included income tax, which amounts to Is 4d in the £, also rates, (axes, stomps, and dirrciuis fees, which would amount to not less than £llOO per annum. The Council was exomjrt. from these charges, which would l>c saved, and a siding into the work:, as arranged with (he Railway Department, would save another £SOO per annum, so tiiey eouid estimate the profits to the borough on t!u prosent rates at, £9546 10s 4d per annum. . .tier providing for payment of interest and a sinking tund of per cent, amounting in all to £6OOO per annum, on the proposed loan of £IOO,OOO, they would note that ihero would still be a sum available of £3546 to l>e devoted either to the reduction of price to the consumer, to the general rates, or t-o a reserve fund, this being a matter lor the Council to consider later. THE PROSPECTS OF EXTENSION. It is anticipated that if the price of gas is reduced by the Council, there will be a. large increase in the amount of gas sold, so that this would, of course, add materially to the income. this being the o v :perioiKe in other towns where the works have been taken over. As the Joan provides lor extensions, the only additional cost would be tinraw material. Another matter that must bo taken into consideration was the depreciation allowed each year by tiie Company, and this represented over £SOO per annum. The present consumption of gas was about, 61 million feet- per annum, and the average increase per annum was 10 per cent. CONDITION OF THE WORKS. In company with the o»?in<"«jr, the Council made an*inspection of the works and found everything in \erv good order. The machinery h-d been specially \\<'!l eared for. There were 36 retorts in use. and 13 spar© ones. To givc\some indication of the number pf consumers, iho Mayor stated there are 2200 meters in use, and 318 lamps for street lighting.

FINANCING THE LOAN. The Council had decide# to make the sink ing fund li per cent,, aijd.for a period of 33 years, this being . aegparf to obtain the State's guarantee to the loan, wliiih should .materiallyai^.'them. Near' tinwhole of the borough Joans expired ba\uci

1915 and The. Coancil would then be able to opnsojjdate and go on to the London Inarket. The present existing loans, and incroaifig the proposed gasworks loan, would be in the. vicinity of £300,000, or a little less. This was a great deal lees thaa loans of other towns of a similar size, and it must also be recognised that with a -sinking fund of li per cent, the total debt for the purchase of the works would disappear at the expiration of 33 years, leaving the work's, as far as the £ioo,ooo loan is concerned, free of debt. Another matter that the Council must give immediate attention to was the acquisition of further land in the vicinity of the works. There was an education reserve adjoining, apd the <!buncU hoped to come to some arrangement with the Education Department to acquire about 2A acres by way of exchange, or some qther method. This would be dealt with after tiie poll was taken. THE PRICE CF GAS. The present price charged was 5s 5d and 8s per 1000 feet, according to quantities used. The charge made to the borough was ts 6d. The average "price, at Wanganui was s>: Napier, lighting ss. cooking 5s 7d, power 4* 2d (the cost of\eoal at these two ports was lOd per 1006 less than at Palmers-. ton-North); Hamilton, lighting 3s 4d. cooking 7s 6d. THE LEGAL ASPECT. A good deal had been said, continued the Mayor, as to the validity of the agreement between, the company and the borough. About,seven years ago the Council took up this question, and gave the company notice that they intended testing the agreement. At that time the Feilding Council had commenced an action against tV»ir company, and "I tf.-rk it will be well to remind vou oi the judgment of the Appeal Court" in connection with same." said the Mayor. The questions put were as follows: 1. Is the agreement of November sth, 1396. vai.d or invalid in whole or in part. and. if in pan only, then in what part? Reply: The agreement is valid." 2. Assuming that the defendant cornpar, v has fulfilled, and hereafter fulfils aii the conditions of the agreement, is the plaintiff corporation now entitled to an injunction restraining the defendant company from interfering in any manner with the streets of the borough for the purpo*« (ai of repairing and renewing ext.,ting mains and connections, cr d>) for the purjKwe of laying fresh mains and connections, or to any other remedy or decree establishing the rights (if any) of the plaintiff coniorationAnswer: No. 3- Assuming the defendant company has fulfilled, and continues to fulfil all tlu> conditions of the agreement, i* ir entitled! during the term and extension thereof provided :n the said agreement, to the exclusive right of supplying gar- (a) for the purpose of public iiiditing in the borough.' lb) for the pur{>ose of private lighting to the borough ? Answer : Yes.. ■ 4. v\ as the assignment by the original licensees to the defendant eonipanv valid in hv. V Answer: Yes.

•judgment was entered up for the defend»ndrc<;nipa:iy with co-:< c:; rhe highest- scale. Mr ikli, K.C.. an:! Mr H< rrett. K.C., •ippoar>d for the piamtifi-;, and f)r F'.ndlay and Mr \on Haast appeared for the company. As a result of the finding in the reii.kng caee. a resolution was passed bv the Council, in May. 1908. to the effect that r.o further action be taken by the Council in connection with threatened proceedings. On these jtoiiits Pafmeieton s agreement is identical with Foilding. "You have only to Triink of tno Hamilton ca-e. wliere a ioan was taken for, I think. £9.000." said the . la\or. It did not end there, however. J he matter was taken to the. Privv Council rA rc^ !t t . hat if <- ,0 « £38.000 instead ot iaC'Oe. Notwithstanding the heavy price they paid in this way. I understand the ratepayers have tio cause to regret taking over the works. Further. I have on!v to remind you that the balance-sheet of the local company provides £IOOO for legal expenses, and this ts earned forward from year to year." AVOIDING LITIGATION. "Vanous opinions have been obtained from time to time by the Council, but I think tnt Feilding .decision warrants the ounci! in avoiding law, because it would not end here, but would bo carried to the V-V Council. I consider that we have to approach this matter in an honourable way, and I am satisfied »thar the directors will act Fairly with the Council when the time arrives for a settlement."' fair treatment from the DIRECTORS. All our past business transactions have been most cordial, and I would like personally to thank the directors for the iniormation that has been supplied from tuiie to time. The gasworks has no doubt been a good investment for the company, but they naturally realise that it cannot go on for ever. The borough lost its opportunity years ago. when the works could have been purchased at a very knv price, but that is past history, and it is useless to refer to it now. The directors have been fortunate in having the services of such a competent manager as Mr M. J. Kennedy, and a gfeat deal of the company's success in the past is no doubt attributable to his careful management, f am hoping to see Mr Kennedy and the exeeilent staff of the gasworks in the employ of the borough later. 'Applause.) I would also like to mention riiat under tiie agreement the company have the right to charge the borough for street lighting the price charged to the ordinary consumer, less 33 1-3 per cent, bin they have never insisted upon tins. an ] have charged the borough the lower price charged to the largest consumer. Further, th<> agreement states that th 'f have the right To add a sum equal to the difirrence between the cost of coal as between Paimerston and Wanganui. tiie ♦ inference i»> freight being ICs lid per ton, and (lad this been insisted upon we should have had to pav a further iOd per thousand teet."'

IX CONCLUSION. R?ga»d:n;r ti»e benefits to be derived tne purchase of the gasworks gener'ily. the Mayor said the fact that ntuni-cipa.itic-s the world over were striving to acquire gasworks was proof of the wisdom of securing them. At present in th<> South "stand the following gasworks are owned i~y t ! .<> municipalitieslnvercargill. Dunedin, Uamaru. Temuka, Rangiora. Sumner, Lvtt Hon. West Coast. Greymouth, Wesfporr. Nelson and Blenheim. In the North Island, coming nearer home, Foxton, Levin. Woodville, Marten. Masterton. Grey tow it, Carterton. Petot.e. Wanganui, Eltham. Waipawa. Cambridge. Waihi, Hamilton and Dargavdie owned their own works. Marty of these were taken over from private companies, and from nearly all these works large profits were being rttnde, and in many instances the profits ■were being allocated to the reduction of rates. Tn -addition to this, the charges for gas' ha've invariably been reduced, and other concessions given to consumers that couid not be obtained from private companies. The present and previous Councils l'.?d gives the HKitler of purchase every consideration. and were strongly of tho opinion that the works shoufd become the }>ror)trry of the town, and this opinion they were satisfied was backed up*by tlie majority of the ratepayers. "After hearing the figures I Wave placed before you this evening," concluded the Mavor. clearly showing that the ratepayers will not be called upon to pay interest or sinking fund, and that there will be a large surplus over and above this, it is hoped that everyone will unite in carrying the loan on the 22nd of April, tints bringing "our own town into line with others by owning their own gasworks." (Applause.) The Mayor said that, if sanctioned by the ratepayers, the works wculd be taken over in August of next year. By that time a new Council would have l»eon elected, and the present Council could not bind them. He wished to emphasise the point that the Broad street property had been put into the balance-sheet of the company at cost price. The Council had debated whether they would take over the land, but I Metered it was highly necessary that- there should be showrooms for the convenience of customers. Then, if they had the loan there would be nothing further to provide for hi the way of extensions, and that meant that the price of gas could be reduced. He did not anticipate that the whole of the £IOO,OOO would be taken. They could leave what they did not require. He sincerely hoped they would unite and curry the loan, and so bring 1 almerston into line with other towns in the matter of lighting. (Applause.) , Mr R. Gardner said he was sure all present at the meeting would join in thanking the Mavor for the very clear way uu which ha had put the matter before them. Seeing' that the works were a profit-making matter, there could be no objections to the loan, znd lug, the hope that it would be. , . , Replying to Mr Gardner, the Mayor saiii ♦lie Gas .Company had been paying 10 per oent dividend, and the reserve fund appeared on paper as £30,000. but it had cone .iutu the works. The Council would have to pay for every item of the works,

such as pipes lifted and so forth. Thai Mayor informed MrG&Arer that he pre ferred not to take a resolution, as it was not necessary, and would create a precea,riv J\ M i lverton asked I,ow tho Council 8 eStimate of the VAlue of. the. Mayor said the amount he had mentioned was thd amount shown in books tl i OSe books were audMp UicT Ruther ] urd «ntl Connell. shmL'n 'M 0 " u . r Sod the borough should pav th«v value of the shares in the The Mayor referred Mr Milverton to the agreement, which laid down the procedure for ascertaining the value. Mr Milverton: Is there anything to nreworks ' g GrCCtiKg itß mvn S** Tlie Mayor said Palmorston's agreement was on all-fours with that of Feilding, the egal \ lew ot which he had explained. In v ' the decision in that case, would HIT tr ti° k le o,inc 'l U P in establishing their own works? Mr Milverton: Yes. I would. The Mayor: Then the Council would get a pretty hot time of it. Cr. Nathan said the point should be made clear that thev could only estimate the value of the works as at last January and that they would not take over the works until August, of next year. He pointed out that the average outlav per annum for extensions fey the had been £oooo If they had purchased the works last January the price would have >een w52.189. As they were not going to purchase until August, 1915, -thev could !S y n?L- ,mat , e the cost of at *»w00. I hen the stock of coal was verv low when the balance-sheet was made up, and in August would probably have inj? ijfm r to worth. Allowing for i.oUC for contingencies, and £IOOO for inci eases to meters and filling the company lml ordered, the total came up to somewiiere about £65,000. though they could not lav for certain what the value would be in It would not be wise to have asked for a loan for the hare cost of the works in January last. Surely the proper thing to do was to raise ample money for the purchase of the works in 1915. It. was mure than possible, said Cr. Nathan, that the £oo.ooo for extensions would not be required in the immediate future. The ratepayers should bear in mind, however, that they did not have to pay any interest if they did take it. It was more than likelv. ho reiterated, that that sum would not be needed for extensions for a year or two, hiit certain provision would have to be! made for a gas-holder.' In al! cjses where] corporations had taken over gasworks and reduced the price of gas. the increase of consumption had been very marked. Taking the average increase in Palmerston at ten per cent per year, and assuming that it would continue, another gas-holder would be necessary. The profit, roughly £BOOO, shown in the last Gas Company balanceohoet, was 31 per cent on the paid-up capital. If that was not a good enough proposal, said Cr. Nathan, he could not conceive of the proposition that the ratepayers would vote for. In addition, the Gas Cornpany had a reserve of £35,000. There* was also a sum of £2OOO put aside for bad oebts and a legal reserve. All this had been accumulated during the last 15 years or so. Gas now cost Bs, 6s 8d and 5s sd. Estimating the price at 6s Bd, if it. was reduced 20 per cent to 5s 4d or 5s sd, and the profits thus reduced 20 per cent upon the present showing, there would still l>c a profit of £7396, and allowing £4550 for interest and sinking fund, there would stiil be a surplus of £2846. and that was not counting on the increase of sra.s. Cr. Nathan said any Council would have to reduce the cost of gas very considerably, snd he referred to the benefit to the small j consumer. Proceeding, he said there was another question that he always had raised, and that he would continue to raise until the Government looked into it, and gave some redress. This was the matter of foreign coal. Newcastle coal was a far better gas producing coal than the New Zealand article, and it would pay them to use the Australian coal under ordinary circumstances, but it cost 2s lid per ton extra in railing from the seaport, this being the increased freight upon what was regarded as foreign coal. He objected to inland towns haying to pay such a tax, and urged that if an inland town was energeticenough to acquire gasworks it should not. Ik- mulcted in extra expense in that way. In conclusion, Cr. Nathan said he had that day received details of the working of the municipal gasworks in Wanganui. In 1912 £2973 imd been paid in, and in 1913 £3073 had been similarly dealt with. The sinking fund each year was £1460. and they had transferred to the general account each year £2OOO. and £B9OO had been spent on extensions. Wanganui paid £68,000 for its gasworks. Cr. Nathan did not think they should do as Wanganui and Grcynioutli did—pay the whole of the profit?., to the general account, and come to the ratepayers every time they wanted money for extension. He said no body had anything to complain of in the way the directors had acted. They had treated the town liberally and generously, and had read the agreement in tho spirit of the agreement. They had worked their business intelligently, and deserved all the profit they had made. He was quite satisfied that the agreeinont would lie carried out honourably in every way. Finally, Cr. Nathan said he hoped every ratepayer) would vot« for the proposals placed so ably before them by the Mayor that evening.

Mr Edwards said they were all agreed that the gasworks should bo municipalised. He had every confidence in the manager of the gasworks and in the gentlemen who audited the books, but he thought the Council should have taken other steps to ascertain the cost of the works. The Mayor said the Council had l>een very fortunate in getting the information it had. as the company was not bound to give it anything. The Mayor reminded Mr Edwards that lio had said he had confidence in the auditors who had gone into the books. Mr Edwards reiterated his opinion that other steps shouftl have been taken. The Mayor asked what other steps lie would suggest. He said the borough engineer had prepared a report for the Council. Mr Edwards said he thought the loan was being jeopardised by including the additional money for extensions, and suggested that the proposal be divided into two parts, one for the actual cost and the other for the money required for extension. Cr. Crabb said the point was that until the Borough Council gave notice of its intention to fake over the gasworks it had no right whatever to enquire into the books of the company. It could not give notice until the ratepayers had sanctioned the proposal, as, once having given such notice, the Council was bound to go on with the matter. They could not, therefore. ascertain what the works were going to cost until the ratepayers had sanctioned the loan an<] thev gave the required notice. The May or said that was the position. After answering one or two other questions, the meeting closed with a vote of thanks to the Mayor, moved by Mr W. Park. , *