OUR RAILWAYS

New Zealand Times, Volume LI, Issue 12021, 26 December 1924, Page 6

OUR RAILWAYS

FINANCIAL SITUATION ' 21 MILLIONS OP NEW CAPITAL NEEDED. CAN INTEREST BE MET? > In the course of their report on the > New Zealand Railways, the Commission (Sir Sam Fay and Sir Vincent Raven) deal with the future financial situation of the New Zealand railways, and in this connection have the follow- ■ ine, comments to make:— ‘ The prospective financial situation in ‘ so far as capital is concerned, taking past expenditure on existing lines and adding thereto obligations to which the ' Government is committed, together with proposals involving further expenditure during the next eight or 10 ' years, is as follows: , (1.) Expended on existing £ lines and works to the 31st March, 1924 41,399,427 i (2.) Expended on lines not yet open for traffic. 7,025,809 (3.) Estimated expenditure necessary to complete new flines 12,911,056 (4.) Expenditure proposed on existing lines in respect of deviations, etc. 8,081,506 | £69,417,794 It will be seen that new capital , (£21,000,000) will be needed to meet the construction-cost of new lines and i improvements to existing lines, bring-* iug up the total cost per mile to > £18,696 —that 13, assuming 660 addi- ; tional miles as shown in the Publio Works report are completed. Spread i over 16 years this will mean raising £2,100,006 per annum on the average, i At the end of 10 years interest charges upon the total capital figure of, say, £70,000,000, would, at 4) per ' cent., amount to £3,150,000. The present interest payable on loans (£41,399,427) is at tko rate of £4 7s. 6d. per cent., equal to £1,811,225. The problem is to see how and whether additional net revenue to the extent of £1,338,775 can he obtained during the next 10 years to meet these interest charges. Lines proposed and under construction are no doubt necessary as develop, ment railways, and in the main will link up the system, to the advantage of traffic receipts, as well as making for reduced working-expenses per mile. jThe expenditure upon existing lines we ideal with under the head of “Management (Mechanical and Permanent |Way and Works),” and although there {may be some variation in the incijdenoe of expenditnre we may, for the I purpose of estimating the results at I the end of 10 years, accept the figure of £8,081,500 as the amount needed to put thee railways into a fair and economical working-condition. GROSS REVENUE! £11,873,159 In anticipating revenue it will be undesirable to base anything upon results since 1914, both receipts and exi penditure bearing traces of war disturbance, and it is wiser to take the figures af 1904 and 1914 and see in what ratio traffic receipts have responded to increased mileage and facilities. Between those years 535 additional miles were opened, and gross receipts increased from £2,180,641 to £4,043,3:18, or 85.42 per cent. Assuming a like increase during the coming decade with 660 additional miles of track, we have a prospective revenue of £12,950,124, reducing this to 70 per cent, increase; and we think that, apart from unforeseen circumstances, this percentage of increase may fairly be'expected to eventuate: we thus arrive at a gross revenue oF £11,873,159. We do not base this upon past experience alone. Wi have regard to the increase of population, the opening-up of new producing areas, the revenue advantage brought about by the linking-up of detached sections of the railway system, and we include also proper paymente for the conveyance of lime and road-metal as well as branch-line losses to be made good cut of consolidated funds.