The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1898-07-20
PRICE SEEMS TOO HIGH
SOME INFORMATION ON PROPOSED
WATER PLANT DEAL.
Reported 1t Was offered for a Million
Dollars Less than the Fig
ure Named.

IN many quarters, and some objections to
the companys offer are occasionally heard
The contract between the city and the
water company, made in 1870, explicitly
states that when the city desires to pur-
chase the plant it may do so, regardless of
any franchise values, the right to which is
specifically reserved to the city. The Water
Company's charter provides that if the COM
pany and the City Council are unable to
agree on a price commission of five shall
be selected to fix the value of the works
There is a strong belief prevalent that in
fixing s3,500,O00 the price Gin the Hord
plan) the stockholders are using the earn
ing capacity of the plant for a basis, while
the true basis of sale to the city should
be the actual value of the plant itself, re-
CARELESS of what it might earn. Some of the
city officials seem to think that the ex-
pert employed by the city is sufficiently
well versed in such matters to arrive at
an accurate idea of what the plant is really
worth. Others think that it is unwise to
take one mans estimate on such an i'm
portant transaction. and assert that board
OF experts should have been employed,
has been done in other cities.
AS to the value of the Indianapolis plant,
1t can be stated on the authority of a man
well versed in deals OF this magnitude that
the plant was practically, though informal
less than the price now asked the city,
and at the time this offer was made all the
new pumping machinery had been placed
and was to be included in the purchase
price. There are number OF other facts
which seem to indicate that the price named
in the Hord proposition is excessive,
First Of al, it may be significant to make
comparison of the price put on the In
dianapohS plant and the price which the
parry are seeking to obtain from the Iowa
city for the plant there. This Iowa offer is
now hanging fire, and the stockholders are
much more anxious to dispose of their hold
ings than the Indianapolis stockholders, as
pictured by Mr.. HOrd. In the Des MONIES
pant is a total of ninety miles of mains,
and the net income from the enterprise Is
about $100,OC9 year. This plant is oIered
at 900, the city to arrange any methods
of deferred payments it may Choose ana
on these deferred payments 1t is only 70
pay per cent. interest. That the compari-
son of these two plants is very fair is evil
denced by the statement that the Indianapo-
lis plant has $50 miles of mains, with a net
income of about 100000, making the size ana
the profits just twice as much as those of the
Iowa plant; but instead of asking just twice
as much for the Indianapolis investment,
which would be 81, 100000, the Hord PROPOSE
ton calls for $3,S50OUO, or four times as much
as the amount demanded for plant one
half the size. Besides, the rate of interest
on the deferred payments in the Iowa case
is only per cent, while here 1T IS D per
cent. 1t cannot be claimed the Iowa invest
ment is anyway inferior proportlonately
to the one in Indianapolis for the mains
were put in at a later date and are sald TO
be in a much better condition Some time
ago the Newburyport, Mass, water COIN
pany asked $6O0,CVU for its investment IN
deal with the city, basing its proposition
on an alleged income of per cent on $780,
C00. However when the city obtained con-
troll of the system it only paid $lJO.CJJ. The
Kansas City case is one of much more
prominence among those. familiar with the
water works business. In that city the
company, which furnishes a great deal more
water ethan Indianapolis obtains, claimed
a b
demanded that price, but after getting
decision of the Supreme Court the city pur-
chased it at $2,S00,0G0 which is S45O,OJO less
than the Hord proposition for Indianapolis.
1t is urged in this instance that 1t was TAR
more costly to lay mains IN Kansas City,
for there, in many places, SOLID rock nad 10
be blasted before the mains were laid.
1t is worthy of note in this connection
that in Kansas City the company demanded
s4.50O,c0O for its plant, claiming that it had
been built up until 1T was earning per
cent on that amount. The Supreme Court
Of that State held that under a conlra ae
similar to the one obtaining here, the city
was entitled to purchase the plant at It's
fair cash price and construed this to mean
the price of the actual physical plant re-
gardless of any franchise rights which were
held to have expired. In the Indianapolis
contract it is explicitly stated that the city
shall not pay any consideration for iran
chise or other theoretical rights, only LOT
the actual plant. 1t is asserted that the de-
mand of the indianapolis company TOT so,7
100000 is based on some fanciful dlleged
rights aside from the actual value OF the
plant itself, as was the demand OF the Kan
sas City company.
THE RATE REDUCTION.
The city officials had very little to say
with reference to one very important sub
ject that is most always advanced by those
who favor municipal ownership of public
utilities-that is the reduction of rates to
patrons. 1t is generally urged that under
rrnrlrc iOh r
ing plants street car plants and things Of
that sort, the public reaps an immediate ad-
vantage in lower prices. as well as collater-
al advantages in the way of better service
The whole Hord proposition is DaSeu on
the theory that the revenue of the water
company estimated at $zlo 40V from ,,re Re
the revenue were to fall off 1t would be
impossible for the scheme to go through,
as it has been figured out to do so nicely
in TWENTY-FIVE years-by Controller john
son in twenty-three and one~half years
The theory Of the administratlon-and IT
is frankly admitted to be no more than a
theory-iS that with municipal ownership
will come an increase in the number OF pa
irons that will allow of a reduction OF
rates. If the patronage were not increased
however it is admitted that until the plant
is paid for no immediate advantage would
accrue to citizens in their indlVldual ca
pacity Hence it is argued that, so far as
the private consumer is concerned, the ordi-
nance pending, providing for the reduction
of rates from III per cent TO 10 per ceilt.,
would be O. better thing than ownership
by the city. The Hord proposition gives
the water company all the best of it. 1t pro-
poses that the city shall pay $l20,OOO year
for fire bydrants. The city is now paying
$S0.000 at the rate of $50 hydrant a year
This is the same rate that was paid when
the company was first organized, twenty
eight years ago, when Indianapolis was not
much more than "a third of its present size.
Although the number of hydrantS has in
creased vastly, the price has not been re-
duced Other cities get fire hydrants at
from $50 to $50 a year. according to the
number in use The ordinance now in Coun-
ell did not propose a reduction OF the ny
drant rates, the author of the ordinance,
Mr. Little, being under the impression that
prevent reduction in that direction Those
who have favored the Hord plan have gone
on the assumption that the water rentals
the city would pay in twenty-five years
would about equal what the plant is Of
fered for This was on the assumption that
the city would continue to pay the same
price for fire hydrants that it did in 1870,
when it was but little more than town
and had but few fire hydrants, compared
with the present time. If the more reason
rentals for twenty-five years would not
equal the cost of paying for the plant by
about 40 per cent And If the prices charged
consumers were reduced to a figure proper
tionate to that paid in other cities of equal
Dopulation the revenue Of the company.
off the principal of the debt and the inter-
est by any means
RATES ELSEWHERE.
Some data has been collected by those
interested in TIE water works question.
with reference to rates paid in other cities.
In Minneapolis, under municipal ownership.