BOROUGH LOANS.

Hauraki Plains Gazette, Volume XXXV, Issue 4787, 10 December 1924, Page 2

BOROUGH LOANS.

THE GASWORKS PROPOSAL. PRACTICAL JUDGMENT. The following views concerning the advisability of the ratepayers of Paeroa voting for the purchase of the local gasworks are from a ratepayer who is in a position to weigh the matter from the standpoint of experience, and from a perusal it will be seen that the question has received serious and capablje consideration in all its aspects :— "Referring to a circular received from the Paeroa Borough Council headed ‘Loan Proposals, 1924,’ I note that it is the intention of the council to apply to the ratepayers for sanction to borrow £6500 for the purposes of purchasing the assets of the Ohinemuri Light and Power Co., Ltd. (in liquidation), it being the company’s intention to close down the works in a few months should the ratepayers not put up the sum of £4OOO for the privilege of owning and running this much-neglected and out-of-date plant. In the ratepayers’ own interests it is earnestly hoped that they will give this proposal full consideration before casting their votes on the date of the poll.

‘-Paeroa is rapidly bidding to become one of the heavily rated towns in the Dominion. In the Government Statistician's report on local government for the financial year 1922-23 it will iie found that the average rate collected in the borough that year was £9 16s 7d per £lOOO of rateable capital value, whereas the average collected over all boroughs in the Dominion was £ll 12s. It has to be borne in mind that many thousands more will be required to complete the sewerage and reading proposals, and unless the town progresses and the capital value increases in proportion the rates will become intolerable; and when this stage is reached the town will,, as a natural consequence, go ba :k or its growth will he retarded. It is difficult to conceive the rateable value of the town increasing for very many years to come. The present capital rateable xalue on a 1920 valuation is £362,960. This valuation, which was undertaken during the boom period, is, as everybody knows, unduly high, and many properties have since changed hands at prices much below that appearing on the valuation roll. This makes our rating position proportionately worse, as the true rateable value should always be at least 10 per cent, below actual selling value. A matter which evidently is a contributing factor towards this undesirable state is the relatively high administration costs. The Government Statistician sets these down at 14' per cent, of the annual revenue, whereas the average cost over the whole of the Dominion is oniv 4.43 per cent.

“These are matters which should occupy the attention of our worthy City Fathers, and having given the rating aspect full consideration they should hesitate before putting forward any proposals which have as a logical consequence an increase of rates in their wake.

"Dealing with the proposed gasworks purchase. The writer knows of more than one local .authority who has been stupid enough to purchase on the company’s threat to close down the works in the alternative, and the ratepayers of those towns have had the privilege of ‘carrying the baby’ by means of a special rate ever since. To quote His Worship’s own words, ‘the plant at present is in a deplorable state.’ It Is well known locally that it has been running for nearly 30 yea’ s, and that for at least the last ten years it has had a minimum amount expended upon it to keep it m wdfking order. Well, why the proposal to pay £3725 for this deplorable undertaking ? Mr Marshall stated at a Chamber of Commerce meeting that the council could not buy it for less. Let the company put the works on the market to-day and they could not possibly realise much more than £5OO for the plant. The large gasholder, which is easily the most valuable part of the plant, would most probably fail to find a buyer. Gasholders for removal purposes are a drug on the market, as the cost of cutting them down, freight charges, and cost of reassembling, has to be done by skilled engineering hands, is prohibitive. The washers, scrubber exhauster, and gas-engine and gear are probably included in the plant which is in a deplorable state, but if in reasonably good order would not realise £250 for removal purposes. The balance of the plant—retorts and mains—for removal purposes aie of no value. The only other items to conisider are the land and buildings. “Ratepayers can thus judge for themselves w’hether the proposed payment for the works is a reasonable one.

“The council’s intention is to put the works in decent running order at an estimated cost of £1745, and with further sums, the reasons for which are not stated on the circular, the capita; cost of the works as amended is to be brought up to £6500. "Now, I have so far had no information concerning the estimated annual make, but I am going to put this down at 15,000 cubic feet per consumer per annum. Assuming that the whole of the 230 consumers decided to pay the increased charge of 12s per thousand cubic feet, the annual make would then be in the vicinity of 3,500', 000 cubic feet. Any gas engineer knows that this proposition is not commercially sound, as the capital charges involved woul/1 need an output of nearly double that amount <0 be practicable. The capital charges in connection with the loan w r ill lie at least 8 per cent., being 6 per cent, interest with 2 per cent, sinking fund. The linking fund is certainly a repayment of capital liability, but it has to be paid yearly whether the works pay or not, so it is therefore a charge against the revenue, A depreciation charge of 5 per cent, is also necessary, and is if anything barely sufficient to write off a plant which is now getting on to half a century of

working. These two items alone will amount to £875 per annum. Coal to produce 3,500,000 feet of gas will cost at least £B5O, and m addition there will be the wages of a working manager and assistant, general working expenses, repairs and renewals of meters, retorts, and neglected services; also office administration to make provision for. Taking all these items into consideration the annual charge wit/ be in the - vicinity of £2750. "The revenue from -He million i cubic feet of gas at 12s per thousand feet, with meter rente and residuals, would be approximately £2500, thus showing an estimated net loss of £250 per annum. “In all .the foregoing calculations I am assuming that all the 230' consumers are going to remain consumers, but this will not be the case as the logical outcome of dear gas—and gas at 12s rer 1000 comes under this heading—is to force consumers to become users of electricity. Although they may not change over at once they will undoubtedly do so in the end. A reduction in consumption will make matters relatively worse, as the capital depreciation and most of the overhead charges remain the same. The only saving of any consequence that can be effected by reduced output is in the quantity of consumed/ and this I estimate at 4s i lOd pt r thousand feet of gas carbonised. "It ceitainly has to be admitted that a gas supply is of undoubted value to a town. Gas for ecoking and heating is practically a necessity, as elect, icity cannot compete with gas for these purposes, but it must not be gas of any old quality and at any old price. To people using gas for cooking purposes 10s per thousand cubic feet is dear, and at 12s per thousand it is prohibitive. v The obvious remedy is to refuse to take over the works at the present exorbitant figure. If the company received £lOOO in addition to the valuation of the land and buildings .t would be very lucky indeed. It is - - going out of business because it can- . not make the works pay by selling gas at 10S per thousand. If anybody could make the business pay at that figure it is the present management, and it has been unable to do so even by starving the works. What, then, are the council’s chances of making it pay ? Gas costing more than 10s per thousand ceases to be a desirable commedity to any community. The obvious remedy is to refuse to any fancy price for the works. "If the capital cost of the undertaking could be reduced by £2OOO there would be a Chance of making it a commercial proposition under . good management and careful administration. To talk about making „ the undertaking pay by increasing the price of gas until it does so is an absurdity. Fully one-third of the con-, sumers will eventually drop out if the price of gas is raised at all, and this would mean that the price woul ( d have to bd again raised to compensate for the loss of those consumers. The result would be disastrous to the ratepayers. Further comment upon this point is superfluous. At the present time gas undertakings all through the Dominion are busy lowering their charges in order to compete with the electric power boards. They do not talk of raising prices, as they know fu) ( l well the consequences of such an absurd proposition. "Mr Marshall was perfectly cor- -- rect when he informed the Chamber of Commerce that ‘there was an element of risk in the undertaking.' There certainly is, and it is a risk.that should cause the ratepayers to ’ hesitate before accepting."