The herald., 1898-10-06
CHAlfDER OF COMMERCE AND
KEssLER PROPOSITION
WATER Committees REPORT
A Method Sought Whereby Expensive
Litigation May Be Avoided-The
Question Of Arbitration

tion of city waterworks made the IoIiow M
report at the meeting OF the board OF oi
rectors held yesterday:
On June %, 1895, your honorable poo'
passed the following resolution:
"Whereas, there has already been ex
pended by the city of Los Angeles withiI
a comparatively short time more tnaf
$4,000 in litigation pertaining to the watel
supply of the city; and, whereas seriou:
legal and other expensive complicatlon'
are likely to follow; therefore, be 1t
Resolved, That, while 1t is not the rune
tton of the chamber of commerce to taxi
sides in any controversy pertaining to the
water question, the president of the cham
ber is hereby authorized to appoint 6
committee of five, with authority to make
any proper investigation or extend any
friendly offices which may aid in bringing
about such adjustment as will stop eX
pensive and tedious litigation, and con
serve the best interests of the people oi
this city,"
In compliance with the foregoing resolu
ton, your committee was appointed, anc
after mature deliberation we most respect
fully report the following as concise
statement of the facts bearing upon the
present aspect of the water question:
Estimates of the cost of municipal own
ership were submitted to the council by
the city engineer in 1897. Two plans were
suggested. Mo. contemplated the immedi-
ate extension and Improvement of the pres
ent plant to capacity adequate for pop
ulation of about 100000 The work was to
be effected in two years, at an estimated
cost of s2,3O0,000 over and above the pur-
chase price Of the present waterworks.
Plan No. contemplated smaller immedi-
ate expenditure of about $627 900 over and
above the purchase price of the present
plant, and the use of surplus earnings over
q period Of years, to extend and improve
the works with the growth Of the city.
The engineers estimates do not include
the cost of rights of way, water rights, sites
for headworks on the Pomeroy and Hook
er tract. etc. The estimated price of the
present waterworks was placed at 81 100, 600.
Since these estimates were made the Pom
eroy & Hooker case has been set down for
re-argument, and the Crystal Springs suit,
involving the ownership Of certain under
ground water, has been tried, but not yet
argued. These cases promise long litigation
and should decisions adverse to the city be
finally rendered by the last court of ap-
peal, the foregoing estimates must be ma
terially increased.
The question of arbitration Of price to
be paid for the present works was COM
menced two months ago by the appoint
ment of an arbitrator on each side, who
so far have failed to agree upon a third.
The city offered 81, 300 600 for all the prop
cl Ties VI IHc ILOS <aHSelts Slty w dtel SOIi-
pany, the Crystal Springs Land and Water
company and the East Side Spring COM
pany. The portion of these properties in
cluded within the arbitration contract of
1868, together with the East Side property,
was offered for 100000. The city has been
enjoined from taking the works until the
determined price has been actually paid.
Bonds must be voted and sold bfore this
can be consummated. All these things
considered. the time of the city's being
able to enter into possession of the works
Is remote, and the estimates referred to
must manifestly be considerably increased
to represent the cost to the city of enter
Ing into possession.
In conjunction Herewith, 1t must be borne
in mind that there would be lost to the
city over $4,000 per annum in taxes and
to the county over $4,000 per annum. AS
the city forms large proportion of the
county valuation, the loss to the county and
burden upon the remaining tax
able property would fall chifly upon the
city.
1t Is unfortunate that the proposition Is
girt about with so much uncertainty and
litigation nevertheless, 1T Is
the fact, and the aforementioned esti-
mates must in all prudence be largely in
creased to safely provide for the outlay
necessary before the city could possibly
come into ownership The engineering ex-
penses alone In the one Crystal Springs
suit, according to vouchers presented to the
city treasurer from and after October. 1891,
to August 10, 1885, amount to very nearly
81, 600.
Plan No. contemplated a bond issue of
So. 500, 900; plan No. an issue of 81, SOO 600.
For the reasons and conditions set forth
1t would appear that these sums should
be raised by from 81, 500, GOO to So 900 600, in
order to arrive at safe basis for estimat-
Ing municipal cost Taking the lower of
these two figures, 1t can be said In general,
without entering into tedious details, that
the city could slowly reduce its rates, pay
Off its bonds in forty years, and thereafter
accumulate some net earnings, all of which
Is conditional upon skilled and economical
Can such be expected where
politics is involved?
An alternative to municipal purchase at
this time of legal ENHANCEMENT and un-
certainty would be the leasing or contract
Ing of the water supply and distribution
to private parties on terms that would
quiet all titles and leave the city in q posi-
ton to acquire the works at the end of the
contract period, the funds for this purpose
to come from the invested revenue derived
from the contract
The proposition of Kessler & Co. Is of
this nature, but the provision for adjust
ment of purchase price at the termination
Of the contract is, in our opinion, too in
This proposition offers 2la per cent Of the
gross earnings for the first five years, 4
per cent for the next five years and per
cent thereafter Assuming the present
gross revenue to be about s440 900, and
fifty years hence, with a probable popula-
tion six times that of the present. to be
about $S00,O00, the rates having been stead
lily reduced, it appears that the percentage
paid the city, If invested annually at per
cent would amount to between $500, 900 and
s., 900 600 This sum would be sufficient to
purchase the plant at that date if the man
her of the valuation is then based upon the
actual condition Of the pipe in the ground,
etc. In addition to this there would be
paid taxes to the city of over $12 ,0G0 year
ly. and additional to this, would be the
payment to the county, of which the city
taxpayers form a considerable portion, the
further sum of over $4,000 year
1t appears, therefore, that proposition
Of this nature may be q favorable method
Of providing rational means to ultimate
municipal ownership the consumers in
the interim being in the enjoyment of as
favorable rates as though the municipality
itself operated the plant. Inasmuch as
the proposition is a positive quantity
free from the uncertainties of lit
tgation and politics, and provides
Immediate relief, It, or any other
responsible proposition of similar charac-
ter, is entitled to and should receive care
full attention before the city is plunged into
further expense.
The foregoing is succinct statement of
the facts as they appear to your commit
tee. In submitting this statement yo,Ir
committee desires to say that thew are of