HUGE CAPITAL LOSS.

New Zealand Herald, Volume LXVIII, Issue 20977, 14 September 1931, Page 11

HUGE CAPITAL LOSS.

TOTAL EXCEEDS £7,000,000.

LOAN money already spent.

"OPEN" SECTIONS INCLUDED

|i r , Sl 6nificanco of the report hy T nmCnt RaihVa ' VS Boaid «P«>n nes under construction is revealed by a ipi a ion of the total expenditure on the sections which it advises should he abandoned That appears to bo the intenon > ongh the actual recommendation j 1 ° ac 1 case ' s l ' lat " the completion of th f. '; ne from •••to. .. is not , justified." A point that was frequently stressed before the board in the course of its investigations," it says at the conc , usion of the report, "was that, as a considerable portion of the total expenditure involved in constructing various lines had already been incurred, the spending of the balance in order to complete the line would be justified." Such a contention, the board observes, has to be considered with reference to section 20 of the Act, which reads as follows:

r JuL. rd on beinK B «tisfiecl that any railway or part of a railway can continue to be operated only under conditions that hil result > n U>e net revenue therefrom beinp insufficient to cover the working expenses thereof, or on being satisfied that the continued operation of any railway or part of a railway is otherwise not in the public interest, may cease 1o operate Ihe same ana with the approval of the Governor-txeneral-in-CounciU dispose of ihe land and all other properly of Hie Crown in respect of such railway or part of a railway. Increasing the Annual Liability.

Unless, therefore, the line shows a definite prospect of returning at least a leasonable amount of net revenue as a contribution toward interest charges," the report continues, "it appears to the board that, notwithstanding what may have already been spent, the expenditure of any further moneys for the completion of any such line would not be justified. From a financial point of view, the completion of a line which will not return sufficient to meet operating expenses is simply creating a recurring liability."

The full text of the report shqws that, in the opinion of the board, none of the six lines upon which it has reported satisfies this condition, so that the report contains the implication that if any of them was completed the board would not consider the operation of a service justifiable. These conclusions are apparently extended to those sections of the NapierGisborne and the Waiotira-Dargaville railways which have already been transferred from the Public Works to the Railways Department. If these are included the total capital expenditure on railways, "totalling 326j miles, which cannot, in the judgment of the board, earn working expenses, exceeds £7.000,000. Following is a summary of the information contained in the report of the approximate expenditure to July 51 and of the amounts required to complete the lines, the average cost per mile being shown in the last column: —

To Per Expended. Complete, mile

WharanuiParnassus . . £514,739 £2,242,261 £36,276 XapierGisborne . . 3.450.542 1,526,663 37,049 KawatiriInangahna . 256,(X10 1,597,000 38,604 WestportInangrahiia . 527,000 450,000 37,577 "WaiotiraDarsavil'e . 1,507,789 46.000 49,327 OkaihauRantnahua . 655,392 60,000 51,099

£7,041,762 £5,921,924* £39,705 + 'lncluding rolling stock and other equipment substantially more tlinn £6.000.000. +The capital cost of the Marton-Te A\v a - mutu section of the North Island Main Tinnk line was £13,700 a mile. Railway Not "Worth Repairing. Included in the Napier-Gisborne project are two sections of "open" line—Napier to Eskdale, 11 miles 67 chains, handed over to the Railways Department in 1923, and Eskdale to Putorino, 26 miles 74 chains, handed over on October 6, 1930. The capital cost of the total length was £1,039.000. This line was badly damaged by the earthquake, the report states, in sonie parts being completely obliterated, so that it will have to be practically relocated and reconstructed. The estimated cosr, of repairs is £45,000. As the section is open line, the board says it does not, call for further comment in this report except to state that last year the line showed an operating loss of £4646 and a total loss, including interest, of £26,931. The report then reviews the works m progress on the Putorino-Wairoa section of 33 miles 32 chains. They include the Kotemaori tunnel, 41 chains long, th* Mohaka viaduct, estimated to cost £l2O 000, and the Mangaturanga viaduct, to cost £BO.OOO. The total cost of th«. whole section between Napier and Wairoa would be approximately £2,516,158. Ihe board is of opinion that the line, if completed, would not earn sufficient revenue to pay operating expenses, much less return anv contribution toward interest on this large sum. This decision appears to succest the abandonment of works that have cost £2.212.845 rather than add £303.313 to the unprofitable liability. Leasing of Line Suggested,

The next section of this railway is the Wairoa-Waikokopu line, 24 miles 35 chains, which, with the wharf and bieakwater at Waikokopu has already cost £616 559. It was built to serve the Wairoa freezing works, and since th o adoption of the coast route for the extension to Gisbornc has been regarded as an integral portion of the Napier-Gisborno project. The freezing works were badly damaged by fire in February. Even should they resume operations, the line as a separate entity would not be justified As an alternative to the abandonment of the line, an arrangement might be made with the meat company to lease it for • iiso asi a tramway for the carriage of the comP3 The S board's icport, upon the extension of the railway to Dargaville is written entirely in reference to tho whole of the line from Waiotira to Dargaville, so that its condemnation of that project includes the Waiotira-Kirikopum section of 1 miles, which was handed over to the Railways Department on May 15. 19 . capital cost of this section was £1,059 350. Bevond Dargaville is the line to Donnelly s Crossing, 24 miles, built at a total cost of £177 137 The board states that, each of these open lines show, an actual 1<8» on operation and neither contributes anything to the annual interest charge. Jo |i„k B th«, m by comptoUng K '" l l°7X Dargaville section would not ma < improve the results, and a heavy annual deficiency would still bo shown. Iho g cost of construction of the line; is out of all proportion to the traffic possibilities of the district. Again, there is an impl tion that in reporting against the completion of this railway, involving an addition of only £46,000 to the past ture the board considers that the wliolo lino from Waiotira to Dargaville, and apparently also the extension to .Donnelly's Crossing, should he abandoned, [f is fio (lie cost of the northern"J .ccl Son t. '« "» of £7,000,000 odd.