The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1914-06-18

The actual cost of the Richmond
Water Works as shown by the records
of the company is as follows:
All expenditures to June 30,
1913 .............. $685. $50. a.
New work completed since
that date ........... 1888 90
Improvements contracted for
and uncompleted ...... 81, 429. 90
Material and supplies 49,. 100000
Working capital ......... 100000
Total ................ SIP, 012. A
From this, states the opinion, there
should be deducted the original cost
OF any replaced property. The eX-
tent of such replacement is not exactly
clear from the evidence.
The total capitalization is now as
follows: Common stock, $3.50, 900; pre-
ferred stock, $35O,000; preferred stock,
unissued. $4,000. Total $S5O,O00.
On this investment the company has
earned and disbursed, or has in its
treasury above taxes and operating
expenses the following amounts: Div
idends on common stock, $328,125 in
vested surplus, $296,750: surplus, June
80, 1913, S106, 25719; interest on fund
ed and floating debt, $373,712.62.
Total earnings above taxes and operat-
ing expenses, s1,104 ,S44S1.
These earnings" read the opinion,
would appear to be sufficient to salts
fly even the dreams of Avarice."
The discounts on stocks and bonds
and the original cost of replaced prop
erty probably accounts for the differ
ence between the actual investment
and the capitalization.
There appears no evidence that any
official or officials Of this company
have subverted any OF the earnings
of this property to their own purposes.
The entire transaction appears to have
been clean, honest and highly profit
able
ut is our conclusion that this com
pany has not invested in its property,
including its working capital and ma
terial and supplies, together with con-
tracts let and yet Ucompleted, more
than s712,O12.44.
Records Kept Honestly.
From the records of this company
every item of legitimate expense dur
ing the entire construction of this prop
erty is easily ascertained. The rec
ords have been kept carefully and
honestly.
The actual cost of this property is
a very important element of consider
alton. 1t establishes fair presump-
ton of the honest value of the prop
erty of the Richmond Water Works
that is used and useful for the con-
venience of the public
1T Will be observed that the amount
Of common and preferred stocks of this
company is $S50000. 1t may be fairly
assumed as established by the evil
dence that these stocks are worth not
less than the par value thereof. That
this is one element to be considered
by us in determining the present value
Of tho property used and useful for the
convenience of the public is clearly
established by the courts.
Little "Watered" Stock.
The stocks now outstanding issued
by the Richmond Water Works repre-
sent but little. if any, fictitious values.
The face value of these stocks went
into this property, less the discounts,
and is now represented in such prop
erty less the original cost of replaced
property. x x
Section IS Of our public service act
does not declare new principle of
law. This section provides in sub
ton fund may be used for new con-
struction. extensions or additions to
the property of the utility or invested
but if such fund is used for new con-
struction, extensions or additions to
the property, the money from such
fund so expended shall never be chars-
ed to the capital account Of such
utility.
LAS it was not only the right but
the duty Of the Richmond Water
Works to set aside out of its earnings
such a depreciation fund as would for
ever maintain its property in condition
to render reasonably accurate service
to the public, we cannot assume that
it did not protect it's right and per
form its duty. The presumption is
that part of this invested surplus
was taken from the depreciation fund
so required to be set aside as afore-
said. Whatever Of new constructions,
extensions or additions We're con
structed from this fund cannot be con
sidered part of the capital account.
This position Is not only sustained
by the authorities cited, the highest
court in the land, but is supported by
reason. Under the law as It was and
as it now is, when this water works
exacted a rate that yielded a sum suf-
fiCient to maintain an adequate de-
probation fund, 1t was its duty to for
ever preserve such fund for the use OF
the public. 1t had no legal right to
expend this fund for new construc
tons, extensions or additions and then
add the SUM SO expended to its capital
account The amount of tn, deprecia
ton fund SO expended is not clear
from the evidence"
Raps Engineer Alvord.
Several pages Of the commission Z
decision are devoted to a consider
alton Of the estimates made by the
commission's engineering staff head
ed by H. O. Garman; by John w. AL
word and Daniel w Mead, engineers
employed by the company. and Edwin
Watts, an engineer employed by the
city OF Richmond.
In our judgment, Mr.. Alvord. who
fixed the value OF this property. with
the additions made by the contract yet
uncompleted, at $980,000, is far above