MANAWATU PURCHASE

New Zealand Times, Volume XXX, Issue 6623, 12 September 1908, Page 9

MANAWATU PURCHASE

THE NEGOTIATIONS DESCRIBED. PREMIER ON THE PURCHASE PRICE. “A REASONABLE FIGURE." Tho second reading of the Wellington and Maiiawatu Railway Purchase Hill last evening gave tho Premier an opportunity of making an important and exhaustive statement in regard to the important transaction. Tho Prime Minister, in moving the second reading of the Hill, briefly summarised the history of tho Woliingtoii uud Manawatu railway, already detailed in these columns. He mentioned tho oiiginal provision that ten years alter tue completion of the line it could bo purchased by tho Stale by payment of tnc cost ot conntiuctiou, plus o per cent, it purchased between U and ill years after completion, a 10 per cent, addition to thu cost of construction was to be but no premium was to be paid it the line had been running 21 years. It was opened on November 29th, 1886, therefore tho period expired in November, 1007 and on December 7th last notice was'served of. the intention ot the country to purchase tho line. \\ hen the notice was served, a letter was sent to tho company, suggesting that steps should be at once taken to arrive at a satisfactory arrangement, and that with tms cm! in view, arbitrators should be appointed. On January 31st the company intimated that no doubt arrangements could bo completed so that the a?biti.ition could proceed on tho expiry of the twelve months’ notice-.

AVHAT COULD HAVE HAPPENED. It was plain that tho company intended waitin'' the twelve months before allowin" arbitration proceedings to commence, and in this it was within its rights. Doubtless reference would have- had to be made to the Suf)ieiuc Court on law points and eventually to the Appeal Court and Privy Council. It would have been quite possible for tho company to havo held on to the lino for eighteen months or two years after the expiry of tho notice. THE NEGOTIATIONS.

The chairman of directors (Mr Kirk-, caldio) and himself met informally to discuss the position and see if an amicable arrangement could bo made, but as the outcome of the first deliberations, tho figures upon both sides showed considerable disparity. Several further interviews followed, and it was eventually decided that tho purchase price of the railway should bo £9 00,500, with £IO,OOO for stores in hand, and £15.000 in consideration of the State acquiring the line on December 7th, making a gross total of Ao2s.<iuo. After the last interview, when they got comparatively close to a settlement, ho despatched to the chairman of directors, on August 20th, a letter detailing tho terms offered by the Government, which he read. These had bedn incorporated in the Bill. The Promier also road a letter in reply, indicating that tho directors of the company had unanimously agreed to accept the amended terms, and to strongly recommend their acceptance by the company s shareholders.

PURCHASE ANALYSED. The proncrty was burdened with debentures to tho extent of .£580,000, which matured, in Juno last, and the company proposed to pay off <£lßo.ooo. However, ai rangemonte were made to secure the redemption of the whole amount by the State. The price paid was .reasonable. Both, sides would (probably say this. It was estimated that the line would cost £005,892 to construct, to which must bo added the value of equipment. which was greater per rail© on the "Wellington and Manawatu Company's service than on the State railways. This was not to bo wondered at, for” the reason that on longer lengths tho same number of engines in ail probability could have carried on the business required to run the eighty-four miles owned by the company. Adding the value of the ordinary equipment to the estimated cost, brought it to £773,893. or £126,180 less than the amount agreed upon as the purchase price, though the estimate he had quoted was made .when material was low in price. THE 1901-3 OITER.

Sinco tho former offer of ilio Government to the company, tho capital value of the railway had been increased by „C 140,000. This was due to substantial additions to rolling stock, replacing a wooden viaduct by a steel structure, and relaying of tho tract with heavier rails. The price of the Railway in 1901-2 was .£951,845, and the country would have to pay interest on tho debentures for six years, at a loss of 1 per cent, which would have been equivalent fco a further payment of £40,800, and would have brought the price up to £992,64c. There was a difference in the present position, for the price in 19012 included all the assets of the company. Deducting tho value of the land, ■which was not included iu tho present purchase, the net prioe of the lino in 1901-2 was ,£799,518, Adding to this tho amount at which tho equipment was valued, would bring the total up to <£959,518. ESTIMATES OF THE PRICE. To purchase the lino on the basis of share value would bo still more expensive to the country. Worked out in this way, the cost of tho railway, deducting the assets which the country was not taking over, would have amounted to £980,797. From any aspect it was evident that the country was taking over the railway and its rolling stock upon better terms than it was offered in 1901. It was necessarily a difficult matter to form an opinion of the price which would have been paid Under the terms of tho original Act, but rules were laid down in that measure for the guidance of tho arbitrators, and tho ■ Under-Sec-retary for Public Works (Mr Blow) went into the position. Ho finally worked out the price at £900,000, Averaging tho cost per mile of all Government lines, it ■amounted to £3861, including rolling stock, while the not cost (excluding rolling stock) was £8293. Keeping these figures before him, they constituted a safe guide in so important a question. Tho price on this basis would have been £830,324, but it must also be remembered that tho Manawatu line contained a number of tunnels, and its rolling stock was more 'expensive per mile than that of the Government lines. FUTURE RETURNS. The profits of the company last year wore £62,162, while the amount the Government was paying was £925,000. When the railway came under Government control such a return could not be expected. It was only to bo expected that further train facilities would have to be given, and they could not expect to show the average tho company had done. Still, he was perfectly certain that there would bo a large increase in the traffic when the line come over to the State, and they were justified in looking forward to it as being a valuable part of the Main Trunk line. CAPABLE OFFICERS. The shareholders of the Manawatu Company were getting the money mentioned in the Bill without reduction of any sort. Tho whole of the negotiations had taken place between the chairman of the company (Mr J. Kirkcaldie) and himself. In this connection he paid a tribute to the part taken by Mr W. M. Hannay, the general manager, who, while acting in the kindest way possible, had done everything he could in the interests of the shareholders. Nobody could have done it more effectively than he. Mr Blow, , Under-Secretary for Public Works, had rendered valuable

assistance. Ho had been familiar with the position from the .start, and this knowledge and the information he furnished had proved very valuable. MR .MASSEY APPROVES. Mr Massey congratulated the Premier upon the near completion of the negotiations, and expressed his pleasure that , tho line would in the near future belong to tho State. However, the local bodies would lose about £SOOO a year in rates paid bv the company. It was evident that the company’s servants, from the general manager downwards, had given whole-hearted service, and he hoped this would continue. Tlie Prime Minister had been at great pains to show that money was saved by avoiding arbitration, but he (Mr Massey) would have preferred it. OTHER VIEWS. Mr Izard said thero was no more difficult Court to get through than an Arbitration Court. Ho wa*s glad arbitration had not been necessary. He asked the Premier to see that all the company’s men were taken into the Government service at a rank equivalent to that hold by them under tho company. Sir .Joseph Ward : That is provided. Mr James Allen contended that if the Government had purchased the line at tho company’s price in 1901 they would not havo had to pay any goodwill for tho line.

The Premier: We are not paying any goodwill at all.

Mr Alien: Ido not agree, [Ho quoted figures in support of his contention.] , The Premier: You arc entirely wrong trorn beginning to cud. Mr Allen, askrd had tho Premier told thorn the- gqoclwilj? IIK-' Prommr: You had bettor road my Hansard - ’ proof, and speak on the third reading.

Mr Field was quite satisfied that the country had made a very good bargain. 7i .’a<! {ailed to understand whether too leaner of the Opposition and Mr i l . lien had bee?! objecting that the sum paid was too much or too little. In tho past they had nlwavs advocated that the company should lie treated generously when tile lino was acquired. He had it from a gentleman in a position to know that the Premier had struck a very hard bargain, but his action throughout was characterised by absolute fairness end reasonable consideration for the company. Jf the matter had gone to law 0220,00 Tl would not have covered the costs of either side. The increase in traffic which would result could not be coped with on iho present Hue. He advocated a duplication of the line from Longburn tc Wtllington. Mr Herrics thought tlie provisional agreement should have been laid on the tabic of the House, so that, members could have gone through it themselves. Though they wove paying a high price for the line, he considered they were making an excellent bargain. The Premier expressed his satisfaction at the criticism of tlie Bill, which had on the whole been congratulatory. Ihere was no such thing as goodwill in consection with tho railway, nor did the law permit any being paid. The Government proposed to take all the men of tho company—except the two superior officers —and to treat them fairly and squarely. The men’s positions would not be prejudiced, and efforts would be made tc merge them with the other railway employees that would m no W l« their disadvantage. With, regard to the two superior officers, thov could on y brinir them into the Government service rv putting somebody out or superseding nther officers. He did not think the genSen would tolerate being_ put mb. the service for the sake of being put tneie. They could not have two man,cmi4 In his opinion, it v-as tue auty ef'ihe company to make proper provision for these two officers. The second reading .'.>s -Biceo 10