The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1898-10-12
A NEW BLOW TO SCHEME
COMMERCIAL CLUB DEALS WITH THE
MAYORS HORD PROPOSITION.
Price OutrageOusly High-Nr. Mason's
Plan for the City Owning
Plant.

club directors. According to the verbal
statements of the committeeman they had
made an exhaustive inquiry into the SUBJ
ject, although basing all their calculations
On the accuracy of Expert Hill.
There was not one point In the Hord
proposition to which the committee would
agree. The price was found to be excessive.
the interest rates enormous and the plan
for not reducing the cost of water to con-
sumers for twenty-five years was con-
oemned The committee could find no rea-
son for the supposition that the company
had anything but its tangible property to
selb and wound up by limiting remotely that
a counter proposition by the city to the
water company would be in order. The
committee did not attempt to fix a price.
Following is the report in full:
The information upon which our conclu-
sion is based is contained in the pamphlet
entitled Documents and Correspondence re-
lating to purchase of Indianapolis Water
Company by the City," containing Mr..
Hord,s proposal and the report Of Consult,
value of the property. 1t appears from
the latter that the plant of the water COM
spects. its supply of water from deep wells
being inadequate to the present maximum
consumption and it's pumping machinery UNI
equal to the demand upon 1t. Mr.. Hill also
considers it a necessity that the reservoir
gallery shall be reconstructed to make it
watertight, 100000 gallons be added TO its
storage capacity and that the pipe system
be reinforced by one or more large feeder
mains. He makes no estimate of the cost
of these improvements, though evidently 1t
Will be large, but says:
THE statement of the present worth of
the property financial investment car
ries with it the requirement that from the
valuation shall be deducted an amount Suff-
cient to cover the deficiencies which the re-
port has shown to exist in the water
works..
If any deduction has been made on this
account it is not apparent in the proposition
or in Mr.. HIS estimates, unless il be what
is called Improvement Fund" of which
His estimate of the cost of reproducing
the works at the present time, which should
not be COMPOUNDED with the actual cost as
that undoubtedly has been greater. is 81 .605,-
1855. This does not include tools, stock.
supplies and sundries on hand, the canal
property and the real estate, which he
places at $346 697. Is, making total of $751;
$3.50. From this he deducts for depreciation
$40, no q, making XII e. the net present value of
is that for little more than $1.6O0,000 the
present works could be duplicated
He also makes several estimates of the
value of the property upon financial basis
which he says assumes that. the valuation
must be based upon perfect and COM
plete works of it's kind, all wear and tear
of perishable property being provided for in
the annual allowance for repairs and main
tenance of the works. In the Hord prop
osition which values the property ION
financial basis we are unable to. find a
compliance with the first of these condi-
tons, as Mr.. Hill declares that the works
are neither perfect nor t G,ompietei II the the
Improvement Fund'-snall as it seems
for the purpose-that same fund cannot be
used to cover the deficiencies OF the plant,
which must be made good at once by the
city.
EVENTUAL COST OVER 100000.
The Hord proposition is as follows: The
city shall contract to pay the Water Works
Company $12O,OOO a year for twenty-five
years for hydrant rentals, an increase of
$40 900 a year over the rents of 1S97-9S for
Indianapolis and annexed suburbs. In con-
sideration of this contract the company
will turn over the works to the city for
500. 900 cash and So, $50 900 of mortgage bonds
to be paid within twenty-five years by vary
ing annual installments ranging from
$4,000 to 5000, at the end of which period
the works will be paid for and owned by
The city. Interest is computed upon these
payments at the rate of per cent upon
$5OO,OOO for thirteen years and at 5 per cent.
upon the remainder This will make the
cost at the end of twenty-five years: Cash
$780, 900, principal So, 000 interest 81 6S3 $50
increased hydrant rental $4,000 per Year,
81, 1000; total 81, 233 $50.
The entire surplus earnings, counting op-
Grating expenses at $780, 600, are estimated
at $4,000 a year. SO that in twenty-five
years the city would receive as the owner
OF OF the the property 100000 leaving deficit
any cost for 1.-The deficiencies" which must
be provided soon and paid for out of the
cityS revenues.
The detailed statement of PAYMENTS made
by Mr.. Hord does not allow for the entire
receipts of 100000 being applied upon the
debt 1t deducts for twenty-five years $751;
from $l25CO the first year to $20950 as a
maximum, or an average of $1925S. This
we presume is Mr.. Hills annual allowance
LOT repairs and maintenance of the works.
II this sum, inadequate as it manifestly
is for the Improvement of the plant under
past conditions, be added to the deficit, the
$1,215O OO
Two apparent facts in the Hord PROPOSE
tlon are the excessive valuation and the ex-
cessive rate Of interest. The valuation is pro
duced by assuming that the company has a
contract and business worth far in excess
OF the cost of Its tangible property. The
ordinance governing the company in pro-
viding for its purchase by the city through
aroitratiCn or otherwise. expressly and in
set terms excludes the consideration of any
franchise, as follows
Sec. Z. AT any time on giving six months
notice the city shall have the right to pur-
chase from the company all the buildings
machinery and pipe of said water works
and all its corporate rights and privileges
(but not including any franchise herein
to the company, nor including any esti-
mated value of this charterl at such price
as may be agreed upon, etc.
This contract has never been changed or
modified, we are informed, and in this light
II cannot be disputed that the price If
$3,5oO 600 IS grossly excessive. The public
mas always been given to understand by the
managers of the company that this invest
ment was not profitable one. though rep
resenting only fifty-five per cent. of this
valuation, their annual statement made last
April showing the capital stock to be $500 900
g. and do tie bonded indebtedness $l.45O,0OO or
$l,95O.OO, with no floating debt claimed. only
$l,Sl2 less than Engineer HilPs valuation Of
the tangible property, with no allowance
for depreciation.
The rate of interest is computed at six
being for outstanding bonds is fair despite
the possibility that the bonds might be re-
Funded at lower rate. But the rate of five
per cent. upon the remainedr is not fair
loans with such security and will be much
higher before twenty-five years or the half
of them have elapsed. Twenty-Five wears ago
elght per cent was cheaper than five is now
year money can be had at four per cent. at
the most, in all probability at three and one
half per cent.
PRICE AND INTEREST EXCESSIVE
We are asked therefore to pay an ex-
cessive price and an excessive rate of in
terest. Possibly the plant might carry the
burden on the estimate made. and admitting
for the moment that ii would. there would
be left only an inconsderable sum to be
expended upon extensions and betterments
to say nothing of providing for the de-
ficiencies of the present SYSTEM which must
involve "a large outlay in the immediate flu
ture. These expenses must be met by in
creased taxation, as we'll as the additional
hydrant rental. Possibly the revenue will