Los Angeles herald., 1907-10-22
CROWN CITY
QUESTION IN
BAD MIDDLE
ONLY "GENTLEMEN'S AGREE
MENT' BINDS COMPANIES
DILLON & HuBBARD's ADVICE
IGNORED
Rebates Originally Intended to Re-
duce Cost Of Water Go Into
the Pockets Of Few
Shareholders

L. GEO. THOMPSON

l.. GEO. THOMPSON
Can Pasadena acquire a municipal
water system under the present proceed
ings and If it can will it receive a
| reasonable return for its money!"
These two questions are being asked
by the people of the Crown city every
day and there is persistent under cur
rent of belief that there has been one of
the smoothest deals fixed up to take ad-
vantage of the city and line the pockets
of a group of men who hold stock in the
water companies. No charge of graft or
Illegal methods has been made, but sharp
practice is suspected.
When the original Indiana colony filed
on the water rights of the Arroyo Seco
at Devils Gate they intended to arrange
for water supply for tract of $500
acres and expected to deliver the water
at the cost of distribution. They found
after a time that they were unable to
| extend the system without levying as
sessment and this they were unable to
do under their charter.
The Lake Vineyard company and the
Pasadena Land and Water companies
were formed and certain share of the
water taken by each company.
| The Lake Vineyard company was or
| ganized in 1884, and took over a large
part of the water certificates of the east
side property and issued in exchange for
! each one ten shares of Lake Vineyard
| stock.
Divert Surplus Water
| This stock was assessable, but the COM
pany could not dispose of the surplus
water to those not stockholders in the
company.
| Some of the consumers diverted the
surplus water to outside tracts that they
held which were not included in the
| original district To prevent this and
allow the company to sell the surplus
water the company was reorganized and
under the new rules the stockholders
were prevented from diyerting water to
property not In the district.
Such property that had been receiving
water was included in the district
boundaries and the water became ap-
purtenant to the land. 1t was at this
stage of the proceedings that the well
laid scheme began to work.
The directors Of the water company
could fix the rates SO that there would
be surplus left in the treasury above
the expenses, and they began 10 use this
in making improvements in the shape Of
wells. reservoirs and pipe lines to out
lying districts where the surplus water
developed by the wells and stored in the
reservoirs could be sold at profit. and
this profit was used for further extern
sions of the system and occasional re-
bates. The rebate was designed original
ly to recompense the stockholders, giving
them, in effect, water rate that would
approximate cost.
Some of the stockholders, more astute
than others. began to buy up the stock
arguing with other stockholders that as
the water was appurtenant to the land
and that the company was obliged to
give them a reasonable supply of water
the stock was of no real value.
Buy Stock Cheap
A large part of the stock was obtained
at prices from $40 to $12 per share. and
the stockholders and the consumers
gradually became two separate parties,
and instead of the rebates benefting the
consumers, who were overtaxed to make
improvements and extensions, the money
went into the pockets of the stockholders
and virtually became dividends on the
stock. Stock prices advanced under the
continued buying and at present 1t Is
claimed that there is no stock in the
open market.
While the company was gradually
building up valuable property with the
profit derived from the excess water rates
the gang as a certain political faction
in Pasadena is called, was just as ener-
getic in laying political lines that would
put a favorable city charter through and
elect a city administration favorable to
municipal ownership as the gang" APP
proved 1t.
When the plum was considered ripe a
water committee was appointed and an
expert engaged. Without asking the COM
panies what they would sell for the COM
mittee had the properties that the peoples
money has paid for appraised.
The Lake Vineyard company agreed TO
sell it's property at stated price of $S5
per share If the city would agree to pay
additional for all permanent improve
ments made subsequent to the agreement.
The Pasadena Land and Water COM
pany agreed to sell If the city would
incorporate in the deed promise to sup
ply the company's customers in South
Pasadena.
The North Pasadena Water company
turned the city's offer down as too small.
No Contract Made
Although the administration had been
advised by the New York law Arm of
Dilland & Hubbard that contract of
sale was necessary and that it was es-
sential that an abstract of title be per-
fected showing the companies free and
unincumbered in every respect up to
the time that the money was paid, there
was absolutely no legal or binding con-
tract made with the companies or any
title perfected.
Things were moving very smoothly for
the gang and the Lake Vineyard COM
pany when it came time to elect new
mayor and several new councilmen. I'M
fortunately for the well laid plans the
favorite finished second and William Wa
terhouse succeeded w. III. Vedder as
mayor and a Waterhouse council went
into office whit the new executive.
At this time the bonds had been ad-
vertised and bids had been received for
part of the issue. The 'Narrows" bonds
having carried. the abstract OF title per-
fected and In escrow. Mayor Water.
house proceeded Immediately TO deliver