The Hawaiian gazette. [volume] (Honolulu [Oahu, Hawaii]) 1865-1918, 1916-11-24
Non4public Utilities Enterprises
= Built At Expense Of Trans. Z
y. portatiOn Business
EXPLANATION in RECORD u
=. ( IN SPITE OF PROTESTS
Methods Have Reduced the Pro
3&ttits Made By company's
Steamers, Auditor Says

Definite statement of the fault h,
finds with the financing and accounting
methods of the Inter. Island Steam Nav
igation Company was made by H. Good
ing Field, auditor for the public utilities
commission, at the hearing yesterday
under examination by Charles r
Forbes, commission chairman.
Referring TO the, sums shown in hi
report as drawn from the insurance
find, the repairs fund and the con
struction and repairs fund as well al
surplus to make up two $4,000 stoeE
dividends, Field declared tbat'th com
pany has built up it's non-utility en-
tcrprises out of the earnings from it,
transportation business-its public util
ity enterprise-to the detriment Of tn,
public utility business and the service
rendered by this end Of the bushes,
to the public. In addition he stated
that the operating expenses Of th,
steamers have been unduly burdened
with insurance costs which have de
creased the apparent profits of tho
steamers and the apparent cash divi
dend rate paid by the company.
Field Gives Figures
According to Field s report the com
pany declared a-stock dividend Of $3.50,
900, June 30, 1909, made. up of 1925,
900 from the repairs fund, sac, 1893. II
from the insurance fund, and $l48, S06.
IS from surplus and another such divi
dend March this year made up OF
$77,O7S.7l from the insurance fund
$42,94147 from the construction Zant
repairs fund and 1923, 1889 from sur
plus.
Fields stand is that these funds
the insurance, the repairs and the con
sfruction and repairs have been bull
up out of the earnings of the com
3 steamers by being charged Il
the operating expenses of the steamers
that Withdrawals from these funds to
gcther with sums from surplus hav'
been used to make up stock dividend
to, provide increased eaTital which h
considers has been used to establish thu
parts Of the eompany's business whicl
have nothing to do with the steame
transportation system and are not par
OF the public utility end of the com
pany. In this connection he said:
Benefits Shifted
"My contention is that had thes
charges not been made, the profits o
the steamers would have been large
Ii the accumulations had been kept il
the utility end Of the business il woul
n,,k
or the greater part of these aecumuls
tons have been invested in 'non-publi
utility ends of the business.
Instead of the public utility en-
of the business Of the Inter Island bein
improved by these stock dividends, the
are invested in nOR.public utility entel
prises.
"If this method of appropriatin
funds, built up from charges on tn
operating expenses of the transports
ton business, were continued, in tim
all the earnings of the public utilit
end of the business of the compan
would be put into non.public utility er
terprises to the detriment of the uti
ity end of the business.
Most certainly this procedure wOul
effect rates.
eff the surplus earnings of the tram
portatiop business are invested int
something to better the public utilit
end Of the company and better the SCI
vice of the utility to the public ther
would be no objection to the stOc
dividends because they would inereas
the service Of the company as utilit
TO the public.
FroWn On Stock Dividends
.,"Modern accounting aud standar
finance authorities frOwn on stoc
dividends as they have tendency I
increase the watered stock of a corpo
alton. There is, however, no objectio
TO stock dividends by public utilit
corporation If the assets into whic
they are Invested are directly contro
liable by the company.
"a In this case the dividends haV
been taken out Of the public utilit
end of the business and invested i
n6n.publie Utility y enterprises owe
which, it has been claimed here b
company officials, the utility has n
control and has no connection"
Forbes then asked a question q
Field In which he referred to Field
statements Ms eharaeterizing the con
papy's procedure as "a irregular"
H. Warren, attorney for the compan,
objected. Field stated that the teri
."irregular' did not apply, and tn
word was stricken out Forbes ne,
question and Fields answer precip
tattd d heated argument.
|'rIn establishing the non public uti
lily bhsifess Of the Tnter:IslanA con
pany's operations, what should haV
been the proper procedure in organi
Ing these other interests of the con
panyY" Forbes asked,
"1n my opinion" Field replie'
Hinstead of these earnings and this a
cumlilated, surplus going into the estaI
Iishment of hon.public utility cute
Prises, the pphlic Dtiitv end Of N
COMPANY business should have bee
hattered bv increasing the hoatin
nrnrertv Of the company or! by bette
.pg. rhe present steamers ~ give th
tta~elihg public the benefit of in
proved aerviee,"