TRAMWAY POWER AND PUBLIC LIGHTING.

Dominion, Volume 5, Issue 1425, 27 April 1912, Page 3

TRAMWAY POWER AND PUBLIC LIGHTING.

Sir,—l am moved by mention of my name to say something of the policy inaugurated while I was Mayor. Before determining npon it, I examined a great number of systems, nnrl gavo particular attention to the Glasgow one. As on outcome it was determined that each year's income should bear (he total cost of repairs and renewals of that year. M'o also determined that a fund should bo founded and contributed to each year, (o v.'hich » conservative regard for what had been done elsewhere, attached the misnomer "depreciation fund." I should have preferred to call it a development and assurance fund. This fund was intended to be one which would aid th'o expansion of tli« system as jcell as provide

I for any exceptional expenditure caused by an abnormal amount being rtrjuirod at any time for replacements. Though the Ulasgow fnml was called depreciation it lias been used first for repairs a:>u renewals, as large an amount as could be 50 applied was expended in repayment of tramway loans, part was used lor extending (lie system, and the balance was iuves!<?d in bonds issued by tho city itself. It was therefore an eipauMoii and assurance fund. The net amount ot tins fund, after the payment out of it 01 repairs and renewals camo to about .Ij per cent, per annum on the whole cost, including the value of laud. 1 cannot remember what the* latter was, but I think we shall be near 1 ho mark in saying that the fund would lie licarlv 5 per cent Oil plant, line, etc., etc. This plan had in Iho few years during which the. system had been working supplied in cash, applied to reduction of loans, and to accumulations a sum equal to about hall of the total cost. of the system. 'tte thought it inadvisable to attempt such high results, and we fixed our ilcpicciflfion iuiul at 2} per ccnt. on plant, etc., ctc., and as the value of our and was small, its inclusion would not have appreciably affected the percentage. Having also a sinking fund, we did not aim at having a very great margin above the depreciation fund as profit, but each year closed with one of about one per cent, on the total cost of the undertaking ibis we also held in reserve. AVe were aware that after a number of years the cost of repairs and renewals would increase, but we looked forward to an increase 111 revenue. This was shown to

oe justified, though during the last three years the increaso has not lieen so great as in normal times, but it will come again within a few years. Now, let us see what the result of this policy has been. lam not going, as somo havo done, to dissever power supply from tramways and public lighting. Thev must be considered together. Without the tramways the power supply could not pay. The total borrowings for these works have been ,£525,000. x- t , i\ow, out of revenue (that is depreciation fnnd up to March 31, 1911) and surplus - there had been m , B P ent 86,000 ! I hero was cash in bank 10 200 In hand i >oo o Other cash joq Debtors owed i ( 400 ! Value of stores 7)500 Total contributed out of revenue... 10G.200 Less liabilities, say 7,000

99,200 There were also some other items, ■ contributions from the funds to capital, amounting to about 3,200 102.400 We had also sinking fund 30,000 Making from revenue 132,100 This was after paying all renewals, repairs, etc., etc., which were at times heavy. Even the cost of the Brooklyn accident was met out of revenue and not depreciation fund. This was practically the result of six years' working. The above amount is one-fourth of the amount borrowed, and more than onefourth if you include the amount spent on the purchase of land.

Now let us see how the .£132,400 has been applied. We have the sinking funds also in hand, which to my mind is wasteful, and bad policy. True management consists in working on a small amount in hand if your credit is good, stock, etc., ctc. Now as to the .£BO,OOO. We have new rolling-stock over .£25,000 —the total value of rolling-stock being ■£8-1,000. Additions to power plant over .£25,000, the total being .£75,000. New buildings, ,£15,000. Land, .£12,000. Extensions, .MOOO. "Workshop, etc., etc., .£•11100—all of which wore necessary to cope with the traffic, but are not recurring cxcept in a comparatively slight degree.

Depreciation is charged against the .£BO,OOO, amounting to about .£2500, so that the depreciation annually charged is now .£16,000.

: ~T°" f |"°te with approval tlio Engineer's ; 'suggestion that* a~ftmd—amounting to -£nO,OOO should be kept liquid—that is, unused. This sum, with the 4:10,000 provided each year, and, say, <£5000 of profits, would amount to .£51,000. Now. what is it—or can it—bo wanted for? Remember that in no year up to now has anv of the fund been used, yet it is asked to go deal with it that during any year .£51,000 would bo available. I ask,'for what possible purpose. Wo have put in curves superior to those originally provided. Wo are constantly .renewing the weak spots in the lines, carriages are constantly having their parts repaired. The lanll and permanent way, apart from sleepers and rails, being about half cost, will bo as good one, hundred years hence as now. Wires, tools, points, plates, machines, plant/ are constantly being repaired and renewed as a first charge. Will you tell us why we should provide practically .£50,000, .£30,000 of which would be idle. It inav bo a prudjnt policy, but it looks very like tho'private storking policy. "I; remember that on one occasion, I think after we had entered into the engagement to buy the office site and to build on it, we were told that it was essential to provide, about ,£15,000 for new power. We had other requirements, such as providing accommodation for cars and building new ears and shed at the cost of many thousands. Two courses.were before us— to borrow permanently or to use the fund accruing and to borrow temporarily. My personal judgment and circumstances favoured the latter course. We had to run into debt for a time, but recovery came very soon, and thero is now, or was on March 31, 1911, a large cash credit. Tile money had only been subject lo interest as it was used, and interest was daily affected by accretions, so that it came to less than on a permanent loan. It is impossible to require in any vear a greater expenditure than the fund amounts to for tho year, unless for extensive additions. Presumably there is as much to credit now as on "March 31, 1911. What demand is thero for even that amount, plus what accrues during tho year? In time we shall want additional dynamos and engines, but tho Engineer can give warning of these no that the expenditure will fall on two or more years.

Then we are told that wo ought to charge interest on the depreciation fund. I)oe3 any bank or trading concern do this, and if it were done to what would you apply the interest? The depreciation fund is ample at present, so that if interest is added to it an equivalent, sum ought to be deducted. But perhaps it is meant that the system should earn interest on the cost, whether paid for out of revenue or not. I have no doubt it will on the average, but strong years must mako >ip for weak ones to some extent. There is also involved in this the suggestion of a policy opposed to the one hitherto adopted of extending facilities at the least possibl© cost to travellers. "No are goinp I through tad times, and we ought to be tnankiul that wo can carry on in dull times; with a profit, though it should be .less than we may expect in the future. We can feol certain that repairs and renewals aro being carried out under the engineers to the utmost of what is required. Tho net earnings, consisting of interest, sinking fund, profit, and a part of the depreciation fund form a fair return, which will be improved as time g?es on, notwithstanding the probable increased cost of repairs, etc. Citizens need have no alarm as to these undertakings though it goes without saying that thero i are possible improvements in working and management. It will be found that the depreciation fund will meet not only all - possible charges, but will provide all prudent extensions, among which I class the Constable Street one, and thereafter supplv a. considerable sum towards payment of tile debt.—l am, etc., , T. W. HISLOr. April 22, 1912.