The Dominion. SATURDAY, APRIL 20, 1912. TRAMWAYS FINANCE.

Dominion, Volume 5, Issue 1419, 20 April 1912, Page 4

The Dominion. SATURDAY, APRIL 20, 1912. TRAMWAYS FINANCE.

—4 The report of the Tramways Board of Management on the position of the depreciation and renewals fund in connection . with the tramways throws a most disturbing light on the tramways finance. The public will perhaps not very quickly grasp the purport of the Board's answers given to the shrewdly-drafted questions of Councillor M'Kenzie, and it is perhaps as well to state briefly, in general terms, what is disclosed in them. Each year a certain percentage on capital is supposed to be set aside for depreciation and renewals, the theory being that the fund so created shall bo kept practically liquid and shall fructify by investment year by year, so that when the need for ordinary or emergency renewals of plant arises it can be met without interfering with the ordinary finances of tho system and without necessitating loans. Now, not only have the annual allocations for depreciation and renewals been rendered incapable of fructification by earning interest; they have been commandeered for purposes for which, if the revenue could not meet the demand; loans would have had to be raised. This is obviously bad business in every way. The most serious result is that instead of there being over £00,000 in a semi-liquid fund for the renewals'that must soon be made on a large scale, there is nothing. Had sound principles been followed the depreciation fund, which would have stood at over £90,000 (including interest) on March 31 last, would in another seven years amount to about £200,000. If the existing methods arc continued it willamount to nothing, and a loan of £200,000 would be necessary if, as is quite possible, the renewal requirements amount to that sum. It is obvious, of course, that if the depreciation fund had not been.raided for the "new works, comprising rolling stock, buildings, land, additions to power station, arid extension of track" upon which "the whole of the depreciation and renewals fund up to March 31, 1911," has been expended, these works would, have had to be left undone, or else they would have been paid for out of revenue or loan money, Why,'if these new works were really necessary and justified, were they not paid for out of revenue or out of loans 1 If loans would have been unwarranted, and revenue had been drawn upon, what would have been the result 1 From the Board's figures the result would have been a series of deficits aggregating about £40,000. A very striking series of figures in the report shows that if revenue had been charged—and it manifestly should have, been so charged (as we pointed ont years ago in a- controversy with Mr. Hislop, who was then the Mayor)—with at any rate the interest on the depreciation fund used as new capital, the net revenue accounts each year would have been as follows : — J! ■Ist year to March 31,1900, net surplus 1,302 2nd year to March 31, 1907, net surplus .1,730 3rd year to March 31,1903, net surplus 5,181 •Ith voar to March 31,1909, net surplus 4,(i!l!l sth venr to March 31,1910, net surplus 4,309 6th year to March 31,1911, net surplus 3,770 7th Vear to March 31,1912, net deficit '(estimated) 129 Our own view is that there would not have been a real surplus since 1909, since it is not alone in regard to the depreciation fund that the tramways bookkeeping is complacently accommodating to the "surplus" seeker. When we noted the other day the returns for the first 11 months of the recently ended financial year we reaffirmed our steady belief that the finances of the tramways are not sound. The Council cannot now avoid facing a very serious situation. The situation is, that apart altogether from the dissipation of the depreciation fund, the tramways are being run at a loss.