The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1912-07-30
SAYS Recommendation Is Un-
worthy of Club and Should
Not Be Given Serious Con-
sideratiOn.
The water works proposal con-
tract will be reviewed again at the
meeting of the city council and
the board of works tomorrow morn
ino

In q communication 10 tHe fdlldul-
um today Alfred Bavis, who has TAX
Ell a prominent part in the discussion
of the proposals submitted to the city
for water works franchises, declares
that the recommendations made by the
public service committee of the Com
mercial Club last week is complete
surrender to the demands of the Rich
mond City Water Works company.
Mr. Bavis, in his communication, says
that the clubs report is unfair to the
consumer, inasmuch as the report bas-
es the valuation of the plant upon the
cost of reproduction. He says that the
report is not worth serious considera-
tion.
His communication is appended:
Editor Palladium:
Regardless of the possible danger of
being considered presumptious, l am
compelled to say that the recommen-
from the Public Service Committee OF
the Commercial Club is a complete
surrender to the demands of the
Richmond City Water Works company.
As To Valuation.
Section 2 of their report means that
the valuation of the plant shall be de-
termined by the cost of reproduction
and the rates to be considered salts
factory when the revenue shall yield
a fair and just per cent of profit on
the investment (or valuation).
The recommendation is unfair to
the consumer of water. The valua-
ton should not be based on the cost
of reproduction, for the obvious rea-
son, in SO doing, you are granting the
power to capitalize unearned incre,
ments to which the company is not
entitled: Land values may have ap.
preciated, the cost of material and la.
Dor may have increased, as an exam
pie, the cost of pipes and mains have
increased 80 per cent in the past 20
years and the amount of depreciation
shown in the Maury report on the
Water company pipes is just per
cent Thus it is expected the city.
by acting on the Commercial Clubs
subbestions, will concede that 43 per
cent in excess of the actual cost is
a fair valuation. To put it more
five years ago is worth SAB now, after
twenty-five years wear.
The cost of reproduction as applied
to the valuation of an old plant al
lows all these increments to be CAPT
talized and used as a basis in deter
mining what rates will be necessary
to yield fair and just per cent OF
profit on the investment as represent
ed by its valuation.
What Alvord Says.
Mr.. John W. ,Alvord, a Chicago en-
,gineer and an authority, based on a
wide experience in the appraisal OF
water works plants says:
THAT determining the valuation on
the cost of reproduction logically in
cludes, not only the cost of reproduc
ing the physical plant, but also the
cost of reproducing the income of the
plant" Could there be anything sc
manifestly unfair?
The valuation should be fixed pri
lmarily on the actual cost of the exist
ling plant, plus the subsequent addi
itions, minus depreciation. which would
eliminate large part of the capitali
cation now represented by unearned
increment. such additions as the city
and patrons have already paid for.
The trouble with you gentlemen oil
the Commercial Club Committe is, you
are not in touch with the men who
dig for living: you cannot, through
lack of experience. appreciate what il
means to look from Monday till Sat
urday and at the end of two weeks
walk up to the pay window and il
drawing your pay envelope, do so
knowing that every dollar it contains
lis mortgaged for the legitimate ex
Ipenses of living even before you ge
1t. You can not enter into the feel
ing Of what is the inevitable If sick
ness overtake you and the earnings
stopped, even for one week. You fai
to appreciate the horror of approach
ing old age when under the natura
expediency Of business requirements
younger men must take your place
III your experience had ever led yot
through such conditions, you would bs
Continued on Page Six)