The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1911-07-24
City of Richmond Under the
Terms of Old Water Works
Franchise Can Force New
Contract from r. 6. Co.
GARDNER TELLS OF
PURCHASE FEATURE
Instead Of Issuance of Bonds
There Should Be Issuance
of Stock Which the City
Could Buy Up.

In case the city and one OF the bid
ding water works concerns fail to
close a contract, Richmond is in a po-
sition to force the Richmond City Wa
ter Works company into contract.
which will be at least as satisfactory
to the city as the franchise under
which the company now operates. On
page $50 of the city statute book. in
Section 6 of an ordinance ito repeal
section II, and amend Sections 13. Is.
81. "a, 26 and 81 of an ordinance enti-
tied. An ordinance authorizing the
Richmond City Water Works." etc.
is the following provision:
THAT at the expiration Of the con-
tract of twenty years. as herein pro-
vided, and at any and all periods
thereafter. when any subsequent cen
tract shall expire between said city
and said company. its successors or as
signs, said city shall have the option
to contract with said company. its
successors. or assigns. for the use and
privileges of water; and II the city
shall elect to further contract with
said company, said company, it's sue
cessors or assigns. shall be held to
contract with said city for the uses
and privileges of water, with all
rights connected Herewith. upon as
, favorable terms as now herein fixed
for the said period of twenty years"
| A Convenient Weapon.
Though never having mentioned this
| provision of the cid ordinance, city Of
ficials will be able to use this clause
as a Means to force the company into
satisfactory contract. The city can
not buy the water works company,
under the bid of the Richmond City
Water Works company. nor of e. NJ.
Campfield company's bid, City Attor-
ney Gardner says. The Campbell pro-
| position provides for the issuance of a
certain amount of bonds. in other
words it fixes mortgage for the
plant. On the plant Of the Richmond
City Water Works company there 10
now a bonded indebtedness In case the
city enters into 4 contract with either
company. under their proposals. Il
guarantees to back the bonded indebt-
edness, or the city evades the state
statute which provides that the city
cannot borrow money in excess of 2
per cent of its taxable valuation.
! For instance" said Mr.. Gardner.
I'VE shall say there would be a bond
issue on the Campfield plant OF $780,
600 The city takes $50. 900 in stock.
If the bonded Indebtedness is not paid
off We lose all of the $4,000. II the
company should fail. the surety COM
pany holding the bonds would sue the
city Several supreme courts have
held that the issuance OF bonds by a
company in which city is interested.
is merely an addition to the city's
debt. Therefore the city cannot con-
tract with a company il the bonded
Indebtedness of that company, plus
the present debt of the city, shall ex-
ceed two per cent of taxablcs.
Il understand that there is now
something like $500. 900 bonded indebt-
edness on the Richmond City's plant
and that the intention is to renew
those bonds when the new contract 10
entered" .
Just One Way to Buy.
There is just one way by which the
city can ever own the water works, as
/ have told the board" added Mr..
Gardner. instead of the issuance OF
bonds, there must be an equivalent
issuance of preferred stock. Thus
there would be no debt on the COM
pany. Now the city could take up
any amount of preferred stock each
year. Now we shall say there is
$500 200 preferred stock. for an ex-
ample, and $780, 900 common stock
would make the preferred stock pay
five per cent interest and non-taxabie.
This equals an investment of s per
lcent. The city takes $4,000 the first
year; perhaps the second We would
have some extra money and we'll take,
say, $4,000. Now at the end of Is
years we shall have all the preferred
stock. BY this time. let US say. the
city light plant is paid for, so that
We can borrow more money. We shall
then borrow enough money to buy all
the common stock
The city, continued the city attor-
ney, does not have TO buy all the
(Corfirr,ed on Page Eight1