D.—sa

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11. —The Secbetaey, Waimea Plains Eailway Company, to the Hon. the Ministee for Public Works. Ec Proposed Purchase of the Waimea Plains Railway by Government. The Waimea Plains Eailway Company (Limited), Sic, — Dunedin, 9th January, 1885. I have the honour to acknowledge the receipt of your letter of the 2nd instant, No. 59-92, which has been considered by my board. With reference to your statement that you are assured by ample evidence that this company desired to stop all through running of trains between Dunedin and Kingston by the Waimea Plains route, and that this was explained to be our reason for the change made in December, 1883, my directors again deny that they are responsible for the cessation of the through service, for, as already explained to you,- the company's time-table has always admitted of the continuance of a through service had the Government thought fit to arrange for trains to meet ours at Elbow; and they regret that you should persist in reiterating charges without supporting them with any evidence, which they now challenge you to produce. The correspondence that passed between the Eailway Department and the company in December, 1883, relating to the termination of the agreement then subsisting, will certainly not justify the charges. Eegarding your statement that tbe changes made in December, 1883, were not in the least degree necessitated by any of the features of the agreement then subsisting, my directors are at a loss to discover how you arrived at that conclusion. In the first place, the consideration the company received for performing the service between Kingston and Elbow was ridiculously inadequate. The running speed which had to be maintained in order to overtake the local traffic and comply with the Government time-table, besides involving considerable outlay for maintenance and repairs, taxed the powers of the company to the utmost. Having carefully considered the question, the board came to the conclusion that by confining themselves to the local traffic—thus reducing the mileage run by about one-third—they would be able to work the line more easily, and to the greater convenience of the settlers, without adversely affecting the revenue account. An inquiry into the working of the line during the past twelve months will fully justify the course the board has pursued, and disprove the unfounded and unsupported charge of mismanagement. In your letter under reply you state that " the Eailway Department would have been willing to make any reasonable modification in that arrangement to preserve the through character of the line ; but the wish of the company was otherwise, and the Government was warned to discontinue the issue of tickets for through traffic." In reply to this lam directed to say that the Eailway Department never indicated such willingness by making any proposals in the direction mentioned, and emphatically to deny that " the Government was warned to discontinue the issue of tickets for through traffic." Eeplying to the third paragraph of your letter, my directors fail to see by what method of reasoning you arrive at the conclusion that, because a portion of the company's liabilities (namely, the debentures), together with the paid-up capital, "apparently only exceeds by something under £2,000 the cost of the railway as formally certified toby the Minister for Public Works, therefore the cost has been certified to at too high a price." You appear to have overlooked the fact that the company's liabilities amount to over £15,000 in addition to the debenture loan. With reference to the " admissions " made by me during our recent interview, if my replies to the questions put to me may be so termed, I think I showed no disinclination to furnish the items included in the cost of the railway and the equipment, which has been certified to by a competent auditor, and approved also by the auditor appointed by the Government. I may also state for your information that during the trial of a test case for recovery of rates, the propriety of the items challenged by you being included in the cost of the railway was unsuccessfully contested in Court, so that the correctness of the construction account may be said to be established. In any case my directors respectfully submit that, as section 22 of "The District Eailways Act 1877 Amendment Act, 1878," expressly declares that as regards the guaranteed interest the certificate of the Minister as to the cost of the railway shall be conclusive, the question may be regarded as settled. My directors deem it scarcely necessary to controvert your opinion that it is opposed to the intention of the Legislature that the guarantors should pay the shareholders 8J per cent., as the intention of the Legislature appears to them to be clearly expressed in the statute. The guaranteed interest is upon the cost of the railway and its equipment, as certified to by the Minister. Had the whole of the company's nominal capital been paid up, the guaranteed interest would have yielded considerably less than 7 per cent, to the shareholders. In that event, I presume the guarantors would have argued that it was not the intention of the Legislature to pay the shareholders 7 per cent. If the company be fortunate enough to make a profit out of a financial operation not affecting the working expenses of the line, it does not appear to my directors that the matter concerns the guarantors, who have not been asked to contribute anything to the very heavy burden in the shape of exorbitant interest that the shareholders have had to bear by reason of the faulty legislation previously complained of. I may further point out that, although for the future there is a good prospect of the shareholders receiving 8-J- per cent, upon their investment, seeing they have had no return whatever for a period exceeding six years, many years must elapse before the average dividend will equal 7 per cent. I regret that I did not correctly understand the terms of the alternative offer referred to in my letter of the 29th ultimo. Both Mr. Bell and Mr. Wales understood the offer to be as quoted in my letter. In my calculation including the sum of £9,000 for redemption of the debentures, I endeavoured to show the value of your first offer only, not considering the alternative offer, as I understood it to be more favourable to the company. Upon the same method of working, and assuming the debentures for the purchase-money to be saleable at par, which you will probably admit is extremely