TRAMWAY FINANCE

Dominion, Volume 5, Issue 1418, 19 April 1912, Page 6

TRAMWAY FINANCE

THE DEPRECIATION FUND; IMPORTANT REPORT. ■ COMMENTS BY COUNCILLORS. An important report showing the position of the tramways depreciation fund was laid before the City Oounoil last evening, at the instanco of Councillor L. M'Kenzie. Tho report emanates from tho newly-establistied Tramways Board of Management, and is addressed to tho Tramways Committee, It reads as follows £ (1) Amount of depreciation and renewals fund at March, 31,1906 7,436 Amount of depreciation and renewals fund at March 31, 1907 18,076 Amourat of depreciation and renewals fund at March 31, 1908 30,252 Amount of depreciation and renovate fund at March; 31. 1909 13,495 Amouit of depreciation an<l renewals fund at March 31, 1910 57,697 Amount of depreciation and renewals fund at March 31, 1911 72,105 Amount of depreciation and renewals fund at March 31, 1912* 87,505 "(Estimated.) • "(2) (a) Tho whole of tho fund is invested in the tramway undertaking. The amount invested each year is as follows £ Ist year to March 31, 1906 7,436 2nd year to March 31, 1907 696 3rd year to March 31, 1903 22,121 ■itih year to March 31, 1909 13,242 sth.year to March 31, 1910 14,202 6th year to March 31, 1911 , 14.40S 7th year to March 31, 1912 * 15,100 "(Estimated.) "(b) No interest has been credited to the depreciation and renewals fund on the amounts expended on new works out of tho fund. "(3) (a) The whole of the depreciation and renewals fund up to March 31, 1911, has been" expended on noiv: works, comprising rolling stock,'buildings, land, additions to power station, and extension of track. "(b) No interest has been paid on the money so expended. "(c) The amount of interest on the de-. preciation and funds invested in ■ tho tramway undertaking up to March 31, 1912, at 4 per cent, compound interest, would total ,£9267. "(4) As the whole of tho fund has been expended in permanent additions to tlio undertaking, 110 part of the fund is available for expenditure on renewals." Money for Renewals. One of tho questions asked by Councillor M'Kenzie was, whether the corporation will bo in a position, when required, to find money for renewals of lines in the city without asking tho ratepayers for a loan. To this the reply made itas:— "(5) No. Unless a liquid fund of sufficient amount is created for tho purpose. This should "be done by ear-marking annually a sum of at least one-half of the amount annually charged against depreciation and invested for suitable periods. It is considered that the greater portion of the track in Lainbton Quay, Willis Street, Manners Street, and Courtenay Place will require to bo renewed in from 7 to 10 years. . "(6) If interest at 4 per cent, compound interest had been charged each year, on the amount expended out of depreciation monies on new works, the net revenue accounts each year would be as follows:— J! Ist year to March 31, 1906, net surplus 1,362 2nd year to March 31, 1907, net surplus 3,730 3rd year to March 31, 1908, net surplus 5,181 4th year to March 31, 1909, net surplus 4,699 sth year to March 31,1910, net surplus 4,309 6th year to March 31,1911, net surplus 3,770 7th year to March 31,1912, net deficit ' (estimated) 129 Net Surplus. "On this basis the net surplus on the working of the tramways since its inception totals -,£22,922, in addition to ,£9267 interest earned by the Depreciation Fund, making a total profit of J!32,189. "In addition to this, there is J!87,500 depreciation funds invested in tho undertaking, and a sinking fund for repayment of loans totalling .£35,900. 'Thoro are also accumulated profits on the accident fund totalling .£3900. "(7) The . Tramways Department is charged 6d. per 1000 gallons for water, in addition to a water rate. The ordinary charge to the publicis 9d. per 1000 gallons, with a rebate of the amount of tho water rate provided the accounts of tho metered supply exceeds tho amount of tho water rate.

"The preferential treatment to the Tramways Department for water supply equals 2.39 d. per 1000 gallons, and amounted last year to £173 (is. yd. "No concessions are made by other Departments or any other supplies.. "The tramways supply current at a preferential rate for pumping water to th® high levels, and for the lighting of tho Town Hall. The concession on pumping accounts amounted .last year to .£BO. When Roseneath, Melrose, and Wadestown pumping plant will have been in use for a year this concession will bo doubled. Tho concession on Town Hall lighting under ordinary rates amounted to .£2BG for last year. Passes. "(8) In addition to the gold passes, some 21 in number, issued to members of the council and officers of the staff, there are 35 of tho red passes in force, nine of which are allotted to the Tramways Department, eleven to other departments of the corporation, and fifteen to persons outside the. corporation staffs, mostly to charitable institutions. The value of these passes cannot bo estimated at less than .£lO each per annum." THE DISCUSSION. ' NONE Oi? THE 3 CONEY IS LEFT. Councillor M'Kcnzie said that he was thankful to tho board for its report, which would givo tho public an insight into the position of the depreciation fund. "We find," ho continued, "the fund was started in 1906, and up to now has -£87,505 to its credit on paper, but none of thu actual money is left, all having been used on new works, buildings, land, etc. Theso funds have not borno interest at all, which, to my mind, is wrong, and leaves it quite questionable whether wo should borrow; moneys of this naturo within the same department. Had any other departme it borrowed the tramway depreciation fund it ' would have been charged , interest, and therefore we should do tho samo when- it is borrowed within tho Tr-imway Department. By not paying interest, wo are enabled to swell , viir annual balance, or, in other words, we show a balance which does not really exist, and thus last year's profit on tho trains would be reduced by about JE2OOO. In Clause 5 our experts stato that we \'ill liavo to renew tho line.? within the main parts of tho city in the next seven or ten years, anil we will liavo nothing to do it with if wo pursue our present methods, so wo will either have to find an overdraft or a loan. Thus double interest must bo paid, viz., loss of interest on present moneys and tho interest wo will hayo to pay for fresh money. , "Not a Democratic Policy." "I admit that we save something in tho meantime, but it is questionable whether all theso new works would have teen carried out if loans had to be raised, and, anyhow, it is not a democratic policy to carry out such works without tho public sanction and then liavo to go to them and ask them to pay afterwards. In consideration of Clause 5, it is high time wo went into tho matter to see if wo could not find a.means of providing (ho necessary money without having to pass it on to tho public, which wo must du otherwise. A careful perusal of my questions and tho answers of tho board will clearly show our position, and I hopo that immediate action will follow. Private trustees would never adopt the present methods of tho council, and, as public trustees, why should wo work on lines that wo • would not pursue otherwise ?" Councillor Fuller: What do you mean by that? ' Councillor M'Kenzie: "I mean that if you had a depreciation fund in your business, you would not use it as has been dono here. You would want interest on it. This year wo are going to show a very big debit on our trams, and in addition to"thut we <,h»ll havo to find a sum for depreciation. This will place us in a very Berioua position." "Somewhat Misleading." Councillor liVost contended that a right yco Jjad been mate tfw depreciation

fund. If it had been a sinking fund it would havo been a different matter. Ho would bo glad to seo tho matter referred to a Special Committee. Tho statement, as published, would bo somewhat misleading to tho public. Councillor Fletcher said that tho sooner tho council tackled the administration of tho tramways and adopted a different kind of policy, tho better it would bo for tho city. The Tramways Committee, ho considered, should havo brought down some policy recommendation together with tho report. In its iWsent form the report should not havo come before the council at all. 110 moved that tho report should be referred back to tho committee witli a view to its bringing down somo recommendation. Tho whole matter was a very serious one, and ought to bo gono into straight away. Councillor M'Laren seconded tho proposal. Councillor Cameron said that ho was very pleased that Councillor M'Kenzie had shown the tramway finance in a proper light. Councillor Cameron was proceeding to discuss tho • report, but was ruled out cf order. Councillor Cameron said that one reason that the report should go back was that it referred to lines, buildings, etc., as permanent additions. These works were not. really permanent at all. Councillor Smith ruled that Councillor Cameron was still discussing the report. Committee Should Have. Reported On It, Councillor Barber contended tliat this document should not have appeared at the council table at all. It was addressed to tho Tramways Committee, and that body should have reported upon it. Councillor Smith said that tho report had gono to tho Tramways Committee, but that the committee had not had time to discuss it before tho next meeting of the council. Councillor Barber reiterated that the report should have been first considered by the committee. Councillor Puller declared that tho council had been asleep on tramway matters for some time. Councillor M'Laren raised a point of order, but Councillor Fuller was allowed to continue. He asked Councillor M'Laren "not to bo so busy," and'remarked that one would almost think that there was something in the wind. Tho Acting-Mayor said that the Tramways Committee would undoubtedly bo glad to consider the report. Councillor Fitzgerald was proceeding to deal with some details of tho report, when Councillor Fletcher again raised a protest, and councillors afterwards abstained from detailed discussion. ) , Councillor Atkinson said that it had been suggested that the report really ought to be referred to the auditor. The Acting-Mayor said that the committeo might do this. The motion referring the report to the committeo was agreed to.