NAPIER-GISBORNE LINE

Taranaki Daily News, 17 August 1933, Page 12

NAPIER-GISBORNE LINE

STIPULATIONS FOR DISPOSAL DETAILS OF GOVERNMENT OFFER. PROPOSAL TO RUN PRIVATELY. CAPITAL OF £1,800,000 REQUIRED. Conditions under which the Government is prepared to hand over the land and permanent works in connection with the uncompleted East Coast railway line between Napier and Gisborne, if a company could be formed to undertake the completion of part or the whole of it and its running, have been supplied to Mr. H. M. Campbell, M.P. for Hawke’s Bay, and Mr. K. S. Williams, M.P. for Bay of Plenty, in communications they have received from the Acting-Prime Minister, Rt. Hon. J. G. Coates. It is pointed out by Mr. Coates that the decision of Parliament with reference to the abandonment of the line precludes the Government from incurring any further responsibility. It is estimated that £1,800,000 will be required to pay the salvage value on the route, complete the line, equip it with suitable rolling-stock, and provide for adequate maintenance and any losses likely to be incurred in the conduct of the line for a period of five years from its opening. In the event of a company being formed the Government prefers that shareholders should be resident in the district through which the line passes. If these and other stipulations are complied with the Government is prepared to recommend to Parliament the approval of the handing over of the line or section of it upon a number of specified conditions. These provide for a 21-year lease and also set out the time allowed for completion of the various sections, the profits the company is allowed to earn on its capital, and other requirements it would be necessary for a company to fulfil. ‘ PREPARATION OF DATA.

The memorandum furnished by Mr. Coates was considered at a largely-at-tended meeting at Wairoa on Monday afternoon, when it was unanimously decided to set up x a committee to prepare data for submission to the Government in support of the claims for railway facilities for the district.

“The Government, in view of the report of the Railways Board and the Government officers, considers that the work which has been wholly or partially completed in connection with this railway has no commercial value for the purposes of a working railway, other than in respect of salvage value,” says Mr. Coates in his letter to Mr. Campbell and Mr. Williams. “It is considered that, worked as a standard railway, it would not furnish a return either upon the capital already expended on construction, or on the additional capital required for its completion; nor would the line repay the actual working expenses apart from any charges for interest on capital, depreciation, or sinking fund. If, however, a large section of the residents at the district believe that the railway, if completed, can be made to pay its way, then, in the absence of any scheme by which the works may be profitably utilised for other purposes such as a highway, the Government is prepared to hand over the works, upon proper conditions being complied with, to a company formed for the purpose of completing and running the line. “ You will appreciate that the decision of Parliament with reference to the abandonment of this line precludes the Government from incurring any further liability in respect of it, or sanctioning any arrangements that would be likely to result in the Government being subjected to pressure to undertake further capital expenditure to complete the line, or to run the line after it had been completed by a company. In order to avoid these possibilities, the first condition which the Government must make is that any company to which the lines are handed over should have assured to it sufficient capital to: — (a) Pay the salvage value of the material

on the route. (b) Complete the line to a satisfactory standard(c) Provide for adequate maintenance and depreciation of the works and equipment. (d) Equip it with sufficient rolling stock of an adequate standard. <e) To bear any losses likely to be incurred in the conduct of the line for a period of five years from its opening. > FINDING OF CAPITAL. "The amount required to cover this expenditure,” Mr.. Coates continued,' "is estimated by the Public Works Department and the Railways Board to be approximately £1,800,000. Of this amount, the Government is of opinion that at least one-quarter should be found by capital subscribed before the commencement of the work, that one-quarter should be in the form of uncalled capital in shares held by persons whose credit is sound and who can transfer them only to like persons. The other half may be raised by loan, but the Government must have submitted to it the terms of any prospectus and other application for such loan, which must make full disclosure of the whole of the circumstances under which the construction of the line was abandoned and is being recommenced. "The Government desires to avoid being put in the position of having creditors, particularly foreign creditors, coming to it at a later date, and stating that they had been induced to advance the money necessary to finance the completion of the line without being fully acquainted with the circumstances under which it had been abandoned and construction resumed. “The Government is bound to see that Jt loyally adheres to the decision of Parliament and avoids being put in a position of having to undertake responsibility for any part of the capital cost of completion, or interest, or other liabilities arising therefrom. "In the case of any company of this kind being formed, the Government prefers both that the shareholders should be residents in the district through which the line runs, and that any loan moneys should be raised in the same district or at Ipast within the Dominion, but does not make this an essential condition.” SALVAGE VALUE OF MATERIALS. Mr. Coates went on to say that upon these conditions being complied with to the satisfaction of the Government, it was prepared to recommend to Parliament the approval of the handing over of such lines upon the following terms and conditions:— (1) Upon payment of the salvage value of the materials remaining on the line—approximately £150,000 —a lease of 21 years from the date of the handing over of the line at a nominal rental, with a right of renewal for a further 21 years at a rental to be agreed upon, to be granted. Any dispute to be settled by arbitration, but the rent for the second period in no case to exceed £50,000 a year payable in monthly instalments. (2) The company to complete railway from Napier to Wairoa within. 15 jnontha of the date of the handing over

of the line and to complete the railway from Waikokopu to Gisborne within four years from such date. Parliament to be asked to authorise the handing over of the Wairoa-Waikokopu section upon the completion of the line from Napier to Wairoa.

(3) The clearance, construction and maintenance of the line and rolling stock to be to the standards of existing Government railways. (4) The company to work the line as to each of the two sections referred to, when completed, by running trains to meet the normal traffic offering from time to time with a minimum of three mixed trains each way per week. Penalty for each default £5O. IN CASE OF DEFAULT. (5) Upon continuing or repeated defaults, the whole line with improvements to revert to the Crown without compensation. (6) The provisions of sections 20 to 110 of the District Railways Act, 1908, to apply, with the modifications required to conform with this memorandum and also the following:—(a) The moneys raised by mortgage, debenture, or otherwise than by a subscription of shares in the company shall not exceed one-half of the total capital required, (b) The rate of interest on any moneys so raised shall not exceed 5 per centum, (c) The profits earned by the company shall not exceed £7 per centum per annum cumulative on the amount of the capital subscribed and borrowed. Any amount in excess of this up to £3.| per centum per annum on the total sum expended by the Government on the line (less salvage value) to be paid to the Treasury, and any balance then remaining to be held as a sinking fund for repayment of capital other than share capital. (7) On the expiration, of the first period of 21 years, the Government shall, upon giving to the company at. least 12 months’ previous notices to this effect, have the right to resume the railway on payment to the company of the then value of the improvements made by it, of its rolling stock, and of all property purchased from moneys supplied by the company. If the Government does not exercise this right and the company exercises its option for renewal for a further period of 21 years, the Government shall be entitled to exercise such right of resumption upon the same terms and the same notice at the expiration of each five-yearly period of such new lease. LAND FOR STATIONS. (8) The Government will: (a) Include in the land leased to the company sufficient of the land at Napier, Gisborne and Wairoa, which is the property of the Crown, and was used or intended to be used as sites for railway stations, engine sheds, workshops and yards for this line; and (b) will facilitate the use of other portion of the said stations by the comr pany so far as it is reasonably possible to do so upon reasonable terms and conditions. (9) The Government Railways Board will, so far as it is reasonably possible to do so, arrange for the interchange; of traffic upon reasonable terms and conditions. (10) The company to be .subject to and exempt from rates and taxes in respect of property to the same extent as the Government railways are during the currency of the lease. 1 (11) The company will be restricted from selling or otherwise disposing of its rights except with the authority of the Governor in Council previously obtained. CONSTITUTION OF DIRECTORATE. (12) The deviation of the said line to be permitted shall be within the limits defined by the District Railways Act, 1903. (13) The board of directors of the company shall include one appointed by the Government upon the nomination of the other directors, and such director shall have full access to all information concerning the company’s affairs and all rights possessed by the other directors of the company. (14) The Government to have the right at any time to have the books arid transactions of the company examined by an officer appointed by the Controller and Auditor-General. “Salvage of such materials included in the line as are of value,” Mr. Coates said in conclusion, “cannot ba postponed indefinitely,' and the salvage value would require to. be paid to the Government within 12 months from the date bf this letter (dated July 24). The Government is prepared to defer its salvage operations for that time if reasonable progress is being made in the formation of the company and the arrangement of finance.. “It is to be understood, of course, that these conditions state only the broad outlines upon which the Government is prepared to lease this property. No doubt they will require considerable re-state-, ment in fuller detail if the formation of the company proceeds, and further minor conditions may require to be inserted, but the foregoing are the broad out* lines upon which I think you desire information.”