TRANSFER OF THE WATER WORKS.

Otago Daily Times, Issue 4020, 6 January 1875, Page 2

TRANSFER OF THE WATER WORKS.

As a good deal is being said jnsfc now about the high price paid by the Corposation for the Water Works, and as our readers have never had the opportunity of knowing the basis upon which the whole matter rests, we think it advisable to reprint the letter sent by Mr R. Gillies to His Worship the Mayor, of date Jfay 6th, which was the means of bringing both parties to terms. ■It was printed at the time for the private use of the members of the Corporation, but,' at the request of the Corporation, was withheld from the public :— _ _. ' Dunedin, May 6th, 1874. To His Worahip Andrew Merceh, Esa., Maj-or of the -; l-. ■■■ City of Dunedin. Sir—l take the liberty of addressing you on the subject of the proiwsed purchase of the Water Works by the Corporation, premising that, I do so as a Citizen of Dunedin, and not as a Director of the Water Works Company. As such, I have always taken a warm interest, as j'ou are aware, in trying to secure the Water Works for the City on such fair terms as were consistent with my duty to the shareholders of the Company; and this must be my excuse for intrudingmyself on you now. ■' You will remember that at the recent public meeting of citizens,: I stated that I cnuld show that, had the Corporation come to terms with the Company in February last, when the offer of sale by arbitration was nude by the Company, the Corporation could have given £17 10s per share for all the shares of the Company, and yet been in a position to reduce the water rates by 25 per cent. : j This statement has been called in question, and I have been urged to disclose the grounds on which I niade it. I have refrained from doing so hitherto in the interests of the City; but now I propose placing the matter fully before you, le\yin<*you. to take whatever course may seem right to you. . In February last, there were— 5050 shares, which, at £17 10s per. ■' share, gives,-"/I ;...... £88,375 0 0 Debentures of the Company .. .. 15,000 0 0 Colonel Kitchener's Loan ~ .. 5,000 0 0 ■ Cost to Corporation ..: .. : ..£108375 0 0 The Revenue of the Company for last year was.. .. 10 016 0 0 £108,375 at: 6 per cent. -' ' ," '•. means, per annum ..'£5,502 10" 0 ■ :JReduced expenses (under : • Corporation manage- : , :.■ " ,■".-- ---; ' ment. .. ' ... ;.. ' 997 ' p 0 . - '" 7,499 10 0 Leaving a net balance in 'favour of the ' - •' - '■ Corporation of (per annum);: .. £2,516 10 0 Or 25 per cent on the gross amount of rates available for the reduction of rates. The reduced expenses (under Corporation management) t arrive at in this way-: • Ihe gross expenditure of the Company m getting the £10,000 of rates was .. £2,097 0 0 But if the Corpoiation had the Works. in their own" ' hands, the following savings could be effected: ■. "-' The Secretary's Salary, £400 (less a Clerk, at . ■ £150, to replace him .. £250 0 0 'Engineer's >a!ary.. .. 150 0 0 Salary.. .. 250 0 0 'Store and Office Rent .. 100 0 0 Directors' Fees—say, seven at£so .. .. .. 350.0 0 —— — 1,100 0 0 Reduced expenses, as formerly : . „ £997 0 0 *Tlie Corporation have those officers, &c., already. : I have said that 25 per cent, of the gross rates could be reduced, but any reduction of rates need not be on machinery, but only on household rates-that is, fivesixt is of the whole ; so that the available balance of £2olC would enable the Corporation to REDUCE THE HOUSEHOLD RATES 30 PER CENT., and this without taking into account the increase of revenue for this year, which will be alout £600 per annum, and which, if" estimated correctly at that would enable the household lates to be reduced 38 per EXTRA CHARGES. ' A charge of 2 per cent, extra would be payable on the £15.000 debentures for two and a half years—or £300 per annum for that time only ; but against this may fairly be put the increased price (said to be 2 per cent) obtainable for any six per cent, debentures the Corporation may sell to replace these, and to pay such shareholders as will take cash instead of debentures. ahe following are extra charges which may require

I to be paid by the .Corporation, but which the (W-----I pany has not yet decided upon :— I " C^onel Kitchener's Loan is treated as Shiires at £1710s, then there will °c to add 600 shares at £7 10s ..£3,750 0 9 -li boo Shares ••given him, then 100 more Shares to add at £7 10s .. 750 O » ! m ..< .:i ':■■:■ £4,500 O O ' WUl^ivS t- 6per cent "' would roduce «»e net income i Jbz7O per annum. ' «-?in^n the °ffl r <* made to the Corporation, SSO new shares have been called up by the Com- ;■ ESTt,, Of°oursV t ""I be a question what RhouldbeT £L d for £ OBe Rhare»: >bat at most, this itemprol ' >ably w<£& not int-rWthe cost to the Cor^iSS. by over £800 per annum, and in lieu of it theY wouß have full value in stout of pipes and a considerable amount of available cash. Besides the i increased revenue derivable from the pipes laid. " i?- t$ esa new shares will more than make m» the difference. The revenue is increasing at tins rate of £600 per annum. 1 EXTRA SAVINGsI A certain number of the-5050 shares get only 10 pur i 0"*110?^^ as much as the others: <hi ■ Effected saving of £225 per annum could be ; r Extra Charges :— L 2 per cent, extra on De- ■ Dentures for two and - n^ru'^ 1™ •• — £300 0 9 If Kitchener get 3 600 ' ■ •'•-■■ , shares (extreme) . ..270 o © New shares, recently is- ■ Bued - -• .. 76S 0-O v Extra Savings:- -_ ' £iS3S • • Increase of Revenue this B jearalready .. ... £600 o- 0 Saving on 10 per cent. » shares 225 0 0 Increased sources of Re- ■ x venue open to Corporai tion, but not to Com- • '■ Pany .. .. .. COO. 0 0 _ - 1,425 d 9 s Balance in favour of saviu-rs (per ~ annum.. .. .. *90 0 » Nett Revenue, &on first page .". 2,516 10 9 c Available balance for reduction of" ~ if ■- -- •• •• .. £2,606-0 9 t Or 2C per cent, on the whole Rates, or over 31 vac S ceut. on the Household Rates. ■ - . r , 7 OU Y iU observe that this is the-available amraai Dahmce for. reduction .of rates after takimr into acconnft c every possible charge that can be brousrht against the n Co-poration n..w., One of these charges would only lie n tieyable for two and a-half years, and then would ceate r alto-ether: and tii« other two areTestlmated at- thet < extreme limits, and could probably be arranjred for afc !- much less. All the savings except one, on the otter d llan<?, are certain, and can be depended upon Yo» will also notice that the above balance is over and above any profit that the Corporation might have ia. y selling then-debentures at a premium d I beg also to point out to you. that were the Corpoe ration to purchase the Works at such a price as wont* only enable them to make ends meet (which would be 1 very much more than £17 10s per share), they mud O still be gamers, seeine that no immediate additional , 7 burdea would be entaUed on the ratepayers, and they c Z m}u stlll te enabled every year to reduce the rates by the amount of the annual f ucrease of inL-ome. whichi -r is steadily increasing, and likely still furtherto increase. 1- as the City becomes filled up with houses. The CoS n pany mnow paying 12 percent, dividends oh abbofc three-fourths of their shares ; they have a ri«ht t* co y on increasing their dividends on these shares up tola n percent. It will at once be seen, that the sooner the c . Corporation buy up the Company's Works and priviie leges, the sooner will the-difference between 12 per cent, and 20 per cent, go into the pockets of the rate- -- payers in reduction of rates. '■ ■ -~ ie It is worthy also of remark, that in the above calea--3- lations no extra charge is included for the good-wSL ie IV? fo?" 8?"°? "P » valuable property; and to?----the extinguishing of a monopoly which is only in its sn infancy, but the value as determined by the retun* 8- %T lch the "ivestment will pay the purchaser at once. . The actual cost of the Works is no criterion of their ■ value—the true test is, " What revenue does the prare yP^n. your Worship considers that this is a property which, if bought at £17,105, would not only notl>e i =■ burden to the city, but would actually (after payiheto the interest on the cost of purchase) yield a balance o f now of £2600 available for reduction of rates (or 26 per- - cent, on the total rates), besides the enormous increase that may reasonably, be looked for from the growth o£ 15 the city, I think you will agree with me in deploringfc s that opportunity after opportunity is allowed to sIS £t past (or rather is rejected) of securing such a manifest benefit to the city. )■-.-■ 16 •X>L wiU cos* to the city be great as compare* ie Tirt. of similar undertakings to other cities'. a At the above pnee the cost per head would be. £5 ssl , taking the population at 18,000; whereas theMe£ '"■ bourne Water Works cost £9 per head of the populate _ There is only one other statement I wish to substao;o «ate—viz-, if the shareholders of the Company sold a 6 . £lb per share, they would be receiving less return for■u- theu- money than they are now getting-— a- The £10 share is receiving 12 per cent, divie . dend, or, per annum £i * » , £1G in six per cent, debentures would only •" jield, per annum ..' .'. -■ .. . 019 2 i- As a matt-r of figures, and leaving other" things out t s of view, is ltfair to expect the large minority of shaieholders who have all alons voted against the sale to accept of this serious reduction of their income? In conclusion, I will be happy to attend on yourself it or the Council, to explain or supportany of theabcre ir fj?«ments. You are at liberty to pubUsh or \vithhol* this from the: public far a time. But, of coursev 3 -c nothmsr is done soon, in justice to myself and to tbss n sliareholders I shall feel bound to publish it. ' (J I have the honour to be, Your most obedient Servant, !<r t>o o- ... Robert Gilliet. - ls P.O.—Since writing the above, several small matters it have occurred to me which will tend,.some of them to 2 . increase, and some to decrease, the final result, but as they will not affect that result by over' £200 ami as il the particularising of them might suggest difficulties Ld which otherwise may never arise, Ido not think it is 2r worth while to alter my letter. The general resuli . may be relied on as substantially correct. R. G-