PURCHASE OF GAS WORKS BY THE CITY COUNCIL.

New Zealand Times, Volume XXXI, Issue 4814, 26 August 1876, Page 2

PURCHASE OF GAS WORKS BY THE CITY COUNCIL.

A special meeting of the City Council was held yesterday afternoon to discuss the report of the committee appointed to consider the offer made by the Wellington Gas Company to sell its works.

Before the business was proceeded with, Councillor Moss said he must call the attention of the Council to the fact that a member of the Council continually abused the privilege ho possessed of becoming acquainted with private matters connected with the Corporation, and publishing them in a paper he was connected with. Apart from other views of the case, it was unfair to the other papers in the town; and if proceedings of committees were to be made public by this gentleman, he should move that reporters generally should be admitted to the meetings. His remarks on this occasion had special reference to the terms of the Gas Company having been made public at a time when they should not have been made public. Councillor Gillon excused himself on the ground that some of the directors of the Gas Company were present at the conference, and might if they had chosen have made the matter public. The following report was then read : “Your committee have to report that in accordance with resolution of Council passed at the ordinary meeting held on the 17th instant, they have re-opened negotiations with the directors of the Gas Company, with the following result, viz., that the directors are willing to recommend a sale to the Corporation of the works, &c., at the rate of £l4 10s. per share, reckoning 2700 shares. Your committee are of opinion that £l4 per share would be a fair price, and advise that the works, &c., be purchased at that rate should such price be agreed to.” , . , Councillor Gillon moved the adoption of the report, and in the course of his speech suggested that as the promotion the Empire Gas Company had forced the directors of the Wellington Company to come down in their price, the Council should reimburse the promoters of the Empire Company sums they might have expended. , Councillor Mills seconded the resolution for the adoption of the report, because he considered the Council would be doing perfectly ricrht in purchasing the works. Tor a long time past he had been under the impression that the Corporation should own the gasworks and have absolute control of the lighting of the city, seeing the advantages which must be reaped from that plan being adopted. As to the proposal to start a new company in Wellington, he must say ho would be very sorry to see it carried out, because undoubtedly it would lead to a great deal of unnecessary

expense and a waste of capital. One set of works was quite as much as the city of Wellington could support, and if the two companies carried on operations simultaneously, there would for a time be very keen competition, resulting in loss to both sides, and streets would be cut up and general inconvenience suffered by the public ; and the end of the thing would be that the companies would amalgamate, and the last monopoly would be much worse than the first. Councillor Dransfield : I think we should have the opinion of his Worship on the subject before we go further. ' The Mayor : I tyilr give my opinion directly. i ■ ' Councillor Dransfield thought members of the Council might be influenced by the opinion of the Mayor. At any rate, the views of a gentleman occupying the position the Mayor did would have great weight. The Mayor said so far as that went the Council knew his views pretty well, as they must be aware he had not agreed with the report. Councillor Greenfield said no doubt this matter deserved very great consideration, and had had great consideration. It had been said that the ratepayers should have the matter put before them ; but really it did not seem necessary, for Councillors were sent there to do the best they could for the people, and they having come to the conclusion that it would be a good thing to purchase the works, their opinion ought to be accepted. So far as the new company was concerned, no doubt it would be a good thing to have competition, but at the same time the matter should be looked at from all points of view. Supposing the new company were floated and competition commenced, one company would have eventually to succumb, and so far as low rates were concerned they would then be at an end. The successful company would seek to make up its losses, and very high rates would again be charged. The question then was, would it not be better for the Corporation to step in now and take charge of the gas works, saving the waste of capital and preventing the expenditure of energy in a wrong direction, and securing to the ratepayers a good supply of gas permanently at a low price. He attributed the lower offer of the Wellington company to fear of the starting of the new company.

Councillor Moss said he had come to the meeting quite undecided as to how he should vote, but after hearing the opinions of preceding speakers he had come to the conclusion that the proposal was a good one, and should be inclined to support it. He believed if the two companies came into competition the result would be amalgamation in a short time; and if the Corporation could manage the works and supply gas at 10s. per thousand, it would be a very good thing. But at the same time the Corporation should know what it was doing. It should so far consider the matter and go into calculations that it might be able to go before the people, and show them that it would be able to keep its promise to supply at the price named and pay interest on the purchase money without any expense to the municipal funds. The Empire Gas Company were putting a definite promise before the citizens, and if the Corporation thought it could promise (and perform the promise) to give equal advantages, let it go on with the purchase, but not else.

Councillor Cleland had not been in the same difficulty as Councillor Moss. He had come to the meeting opposed to the purchase, and he had not heard any arguments to convince him that his opinion was an erroneous one, although the speeches so far had all been on one side. It seemed to be taken for granted that the Gas Company was making an exceedingly liberal offer, and that it would be very advantageous to the Council to accept the offer at once. But he disagreed from this. The Gas Company knew very well what it was about, and it knew very well that in the face of threatened formidable opposition it would be advantageous to sell out its £lO paid-up shares at £l4 per share. In his opinion the price was much too high. It was said that the plant had been purchased injudiciously, and did not represent the amount at which it was valued. Practical people said this was the case, and he thought the Corporation should not be in a hurry to relieve the Gas Company of the consequences of its mistakes. Very true, if the Council were to build works for itself, it might make mistakes, but he did not see that the ratepayers should be called upon to pay the Gas Company not merely for the increase on cost of the works owing to mistakes but also an advance of 25 or 30 per cent, upon the cost of the works. The matter should be placed before the ratepayers for their consideration, and if they agreed that it was desirable to give £l4 for shares the outside value of which was £l2 10s., then he should offer no further objection. But as at present advised, he thought the Council would do a serious wrong to the community generally to agree to such a proposition. Councillor Rainie, for the reasons already given by preceding speakers, should vote for the adoption of the report. He believed rivalry between the two companies would lead to serious waste of capital and energy, which might be better employed in other channels. As to the ratepayers being consulted, he did not think it necessary. The Council was doing the best it could for the city; and he considered the price fair. The Mayor, after regretting that he was unable to agree with the majority of the Council, said the questions they had to consider were whether the price they were asked to pay was fair and reasonable, and whether they could hope to attain the object in view, the supply of cheap gas, by the adoption of the report. He had made calculations, and he had come to the conclusion that the price was too high, and that the Council could not hope to achieve the object in view. His figures might be incorrect; but if so, he should be glad to be corrected, because he was very willing to be convinced that he was taking a wrong view of the matter. Now as to the cost—27oo shares at £l4 10s. per share would come to about £37,800, which, with cost of renewal of plant and other incidental expenses, might be set down at £40,000 in round numbers. Now, wae the property worth £40,000? He submitted it was not, and he also submitted that if the property were bought at that price the object for which it was to be bought could not be carried out in the reduction in the price of gas. Here he would diverge a moment. It had been proposed to start a new gas company, and estimates of the cost of works for that company had been made. "Whether those estimates were correct or not he could not say, but even within these last few days it had been said they were reliable, and so far as he knew they had not been- impugned. The cost of the plant and works was set down as £16,967- —say in round numbers £17,000, or even, to give a margin, say £20,000. Then they had this fact before them, that for one half the sum they were asked to give for these Wellington gas works they could get works erected. He did not say that it would be desirable for the Corporation to erect gas works. It might be' very unfair and improper to do so, but still there was the fact before them that the works could be erected for half the amount. "He had heard people inveigh against sentiment, but he believed sentiment was a vfery proper thing in its place ; yet there was a certain limit, and he apprehended they should not let sentiment blind their eyes to the fact that gas works could be got for one half the amount of the price asked for these works. (Mr Dransfield Question). Well, he should be glad if Mr. Dransfield would show his figures were wrong; but let the amount be increased to £25,000. Well, to proceed, it had been said they had no power to build gas works ; he knew there was a statement to that effect, and that there was this further statement, that the provision in the Municipal Corporation Bill conferring that powershould be eliminated; but although the gas element was very strong in the House of Representative he hoped hon. members of the House would not be prevailed upon to prevent municipalities from controling monopolies injurious to the public good. There need be no fear of wrong being done to private individuals, because the same power of public opinion which fought against monopolies would be equally potent against the commission of anything unfair and unjust

towards private individuals. But it was absolutely necessary there should be some controling power over monopolists who failed to recognise that to special privileges were attached special duties. He would say nothing more of the Wellington Gas Company only that they should have been contented with ess profits, and should have carried their service pipes farther than they had done. wa noticeable that immediately opposition «a announced-'tjiey recognised that they had not hitherto, doge their duty. The pnce was inains were extended. Ihe i errace was' how to be supplied with gas mains were being laid down in that locality; but why had this not been done before 1 He considered that wherever in reason citizens asked for gas the Gas Company were bound to have undertaken to supply them. In reference to the reduction in the price of gas, he noticed and took exception to the conditions under which persons who did not pay within a certain time were charged 15s. instead of 125., and said it would act unfairly to busy people and poor people. Coming back to the point at issue, he proceeded to adduce figures in support of his contention that the Corporation would not be able to supply gas at 10s. per thousand. The last balance sheet of the company had shown that the income for last year had been £9816 ; the cost of coals and wages had been £5397 ; salaries and incidental expenses, £9SO ; the total expenditure thus being £6377, and the balance £3436. Now, supposing the works to have been in the possession of the Corporation, there would have been an expenditure for interest on £40,000, charge for sinking fund, and a fund for depreciation in property. Take the interest on £40,000 at seven per cent. (Oh, oh !) Gentlemen had an idea that it could be got for less—that it could be got for 5 per cent. —(Mr. Dhansfield : Mr. Tolhurst told me so) —but he (the Mayor) believed they would not get the money for less than 8 per cent, at first ; but of course in time it might be got for less. However, he would take it at 7 per cent. That would be £2BOO, and there would be left of the £3436 £636 out of which to form a sinking fund and depreciation fund. And here it must not be forgotten that additional plant would be continually required. Neither must it be forgotten that the revenue had been calculated on the sale of gas at 14s. per 1000, and not at 10s. If reduced to 10s. where was the balance then? Certainly, with such a prospect he should not care to accept the responsibility of taking charge of gasworks for the ratepayers. He went on to say that whether the shares brought £l6 or £l9 was nothing to them, they had to look at facts and figures. Councillor Dkansfihd commenced by complimenting the new Empire Gas Company upon having induced the Wellington Gas Company to moderate its demands, and to come down in its offers from £lB 12s. 4d., “and not a penny less,” to £l4 10s., and also having made them offer to supply them gas at 12s. per thousand feet. He then, having expressed the opinion that there was no reason why gas should not be as cheap here as in Auckland and other places, went on to discuss the motion. He disputed the accuracy of the estimates of the Empire Gas Company, and said it was impossible that the company could know until the works were finished what the cost would really be. Estimates were very well on paper, but no argument could be adduced on them, especially on estimates of this character. The Corporation had pretty good proof of that in respect to their waterworks. Very careful estimates of the cost of those works were framed, and the Council considering £25,000 the outside limit, borrowed that sum; but no sooner had that been partly spent than it was found another £25,000 was wanted; and now, when £50,000 had been spent, it was found we still required £25,000 or £30,000 more to complete. They were told the Wellington Gas Company had made a number of mistakes ; in fact, had fooled their money away, but what guarantee was there the Empire Company was not making mistakes? And here he would point out an inconsistency in the argument of the Mayor. His Worship had spoken of mismanagement in the Wellington Gas Company, yet he based his calculations on the operations of that company, and argued that the Corporation could not make gas at less cost. Then, the two arguments were incompatible, although he (Mr. Dransfield) did not believe there was much mismanagement, as they would not find gentlemen like Mr. Pharazyn wasting their money. He challenged the desirableness of calling public meetings to get expressions of opinion on practical questions. Councillors, who individually felt the responsibility of their actions, would be much more likely to examine closely into a question than a public meeting, therefore he did not approve of that course being taken. He advocated the closing of the bargain at once. At the present time the Gas Company were in a fright at the probability of opposition ; but they might soon recover from that fright and withdraw their offer. This was not altogether improbable, seeing that no money had been paid by the new company.

Councillor Greenfield ; Some has been paid. Councillor Deansfield : Not very much. Councillor Greenfield : About £SO or £IOO.

Councillor Dransfield : Well, let it be £IOO. That is not very much. He .then proceeded to discuss the ability of the Council to produce gas at 10s. per thousand, and he quoted statistics of the Wellington Gas Company. In 1875 13,000,000 feet had been manufactured. This year 16,000,000 was made, and as the city progressed no doubt 20,000,000 would be manufactured next year or the year after. It was in consequence of this increased consumption that the decrease in the price was proposed. He was informed that the 13,000,000 feet had cost Bs. per thousand, irrespective of wages and other expenses, which however were paid for by the sale of coke, tar, and things of that kind; that this year the gas manufactured would cost 7s. 3d per thousand, and next year the cost would be about 6s. 6d. per thousand, the cost of course proportionately decreasing as the quantity of gas manufactured increased. Then in regard to the amount to be paid for interest. The Mayor had said the money could not be got for less than 7 per cent, but he had been assured that it could be got for 5 per cent, and he was proceeding to relate a conversation between himself and Mr. Tolhurst, when The Mayor thought the Council might rest satisfied with Councillor Dransfield’s word, as it would be undesirable to make the conversation public. Councillor Dransfield: Very well, perhaps it would ; but the Mayor had placed him in a somewhat peculiar position. He had said he (Councillor Hransfield) was incorrect, but when he desired to prove that he was correct the Mayor thought it undesirable. However, he believed the money could be got at 5 per cent. That would involve a yearly charge for interest of £2OOO, and it would be found on examining the matter that this would enable them to supply gas at 10s. Of course they were not going into the matter to make a profit out of it','but merely to light the city well, and supply gas to private persons at a reduced cost. As to the promises of the Empire Company, what did they amount to? Simply this— We will supply gas at 10s. if we can, and if we can’t, then more must be paid. That was exactly the position. He felt confident the Corporation could carry the project out satisfactorily, and had no hesitation whatever in voting for it.

The Mayor then mentioned that he had just received a requisition asking him to call a public meeting to consider the question. On the vote being taken Councillors Dransfield, Gillon, Greenfield, Moss, Mills, and Eainie voted for the adoption of the report, and the Mayor and Councillor Cleland against it." Councillors Bharazyn and George were not present. The Council then adjourned.