The Pensacola journal. (Pensacola, Fla.) 1898-1985, 1908-09-26

it is cited in this report, to show
that the designing engineer had IN his
mind the furnishing of Pensacola with
better fire protection than was sUbse-
quently done, and has some bearing
on the present value of the plant
In Section Is of the ordinance, grant
ing the said franchise. it is specified
Just what the plant shall be able to
accomplish before it is accepted by
the city, as ample for fire protection.
This test was to be- among other
things. the raising of the pressure in
the pipes to $50 pounds per square
inch. This test was undoubtedly re-
quired for fire protection. as the bal
ance of this section clearly implies
and il is presumed that when the
plant was accepted by the city the
plant met this condition Section Il
provides that the grantee will cOntin
Uously operate the said water works
keeping them in maximum state OF
repair and efficiency now If this
means anything, il means that the
maximum state of efficiency was that
specified in the original test, hence
your engineer attempted TO get this
test by cutting off the stand-pipe and
having the pumps run as rapidly as
the owners would permit, with the re
suit that 123 pounds pressure was all
that could be obtained. This inability
TO meet the requirements of the fran
chise is lack of efficiency. and has
some bearing in determining the pres
ent value Of the plant, for in order to
reach this maximum efficiency. a new
and larger pump would have to be in
stalled, which would add to the cost
Of the plant
From the company's point of view.
however. there are no immediate i'm
n
present revenue Of the plant, although
to increase this revenue to any mark
ed extent would require large extern
SiOnS to the distribution system. and
If the city determined to require the
COMPANY to give fire protection to
the whole city. as the said city has
the right at any time to do it would
require the additional investment OF
almost as much money as the pres
ent investment represents. Thest
conditions somewhat simplify the COEI
putations for arriving at the value OF
the present plant. as but little account
need be taken of increased revenue
during the life of franchise, because
to secure such increased revenue
would require as much new capital "a
the increased revenue would repre-
sent.
Basis of Appraisement-
The writer has. in making this ap-
praisement. closely followed the in
strucJion5 Of the United States Cour;
in the case of Kansas City VS. the Ma
tional Water Works Company, those
of the supreme court of the state OF
Maine. in the celebrated case of Ken
nebec vs.. Maine Water Company ct
al and his OWE experience, and has
aimed to determine a just and equit-
able value.
Il might be well to quote here brief-
IL from the instructions Of the court
in the Maine case, As they fully cover
the writer's method of considering
this valuation.
Company not having an exclusive
| franchise, rates subject TO legislative
changes, to he considered in deteTT-
| lining going value
The cost Of reproducing present
water plant BY one substantially like
| it, not conclusive, but to he considered
| in proving present value
Because the plant is a going con-
Germ the value should be Influenced
! to some extent"
Value Of franchise as emitting the
company to do business as a going
| concern. to he considered, but not con-
| trolling or conclusive"
Quantity and quality Of water and
service furnished Fitness Of pIant
and source of supply TO meet reason.
able requirements. present and future.
/ TO be considered"
| Capitalization of net income a rea-
sonable rates cannot be adopted. as
| a sufficient or satisfactory test of pres
/ e1t value but while not a test. pres
| ent and probable future earnings n.
reasonable rates are properly to be
considered in determining present
value of plant"
| In determining the going value
We consider the company is a going
concern, with a profitable business es-
! tablished. hat ii has taken % yeafs
| TO establish the present business
| that it took some time to construct
the plant and develop same with no
! revenue acCrUing; and that if the city
| came into the field. not as a competi-
/ tor, but in new field. where the peO-
pie had to be educated to the use OF
water supplied under pressure. it
/ would take some time to construct
| the plant, and several years to bring
| its plant to the level of the present
/ plant, with respect to business and in
come In the meantime the business
and income Of the present company
| would either remain stationary or ad-
vance, and the difference between
| the business of this company and that
| of the city throughout this period re-
| duced to its present worth at the time
| of appTaisement. may be considered
as fairly representing the going
| value"
| The franchise Of the Pensacola
Water Company has a special value
| beyond that usually held by water
| companies, this special value is rep
| resented by the contract it has made
with the city of Pensacola for five
| hydrants, covering the entire period
of its franchise There may be some
legal method of breaking this contract
but the write cannot imagine IL so
| long as the company continues 10
serve the city in accordance witt the
lstipulations of the franchise, and he
has therefore considered this contract