The Wrangell sentinel., 1955-01-14
COUNCIL OK'S PHONE RATE INCREASE ON
 ATTORNEYS ADVICE

On advice of it's city attorney
 and city accountant, the Wrangell lCity Council, meeting as a rate
 making body, Tuesday night ap- proved the $2 across-the-board rate Increase which had been put into
 effect by the Alaska Telephone
 Corporation here last September 1. 1 The Council expressed the view
 that it was not solution to Arcs
 current problems in Wrangell but
 that under ordinance No. 149,
 passed in March of 1852, guaran-
 teeing the phone company six
 per cent return on it's investment before taxes, it had no alternative. The complete report of City At torney Howard Stabler and City l Accountant c. J. Ehrendreich to the Council follows:
 The Hon. Mayor and Common Council
 Town of Wrangell
 Wrangell, Alaska
 Gentlemen:
 As requested in your letter of November 10 the City Attorney and l have reviewed the report of the Alaska Telephone Corp. which they submitted under date of November i5, 1854.
 1 In addition we held an extended conference with Mir. A. J. Proctor. president of the corporation, in Juneau on November 10 with res pect to those items which we felt should be more fully explained That data has now been received from the corporations accountant, and our report, attached hereto, is as follows:
 Ordinance Mo- 149, passed and approved March IS, 1852, in Sec. 5 permitted the corporation to adopt new rate schedule as of April 1, 1852 superseding the rates in effect under Ordinance No. 113, and establishing a rate base as of March IS, 1852 in the a. mount of 5,O00.00, which amount includes an allowance for Working Capital in the amount of $3,5O000 Prior to the passing of Ordinance No. 149 the corporations Wrangell operations were governed under Ordinance No 113; as they were the successors in interest to Wran- gell Telephone Company and there fore subject to all of the provisions of that Ordinance.
 It should be noted that Ordin- ance No. 113 did NOT establish rate base and did NOT fix any rate of return on invested capital Con- |sequently, under No. 113 the cor poration was permitted to make any return they desired as long as they adhered to the established rate schedule. In other words, the Ordinance did not require them to account for their invested capital or earnings.
 Ordinance No. 149 changed all of that, because it DID establish a base and it DID fix the allowable rate of return thereon at 6%.
 It therefore follows that any thing transpiring prior to March IS, 1852 has no bearing on the present situation.
 On the foregoing basis we have computed the present rate base as of September 30, 1854. This is shown on Exhibit and amounts to $26,0SS.52. A 6% return there on before taxes would be $2,3O531 and after taxes, $1,565.31.
 On Exhibit B we nave computed what the net profit or loss would be for 1854 after allowing the in crease in rates put into effect with out Common Council approval on September 1, 1854. This amounts to loss of $5,92S.27 as compared to their computed net loss of $6,404.2S.
 Apparently the minimum person nel required under the present type of operation is at least one man for maintenance and supervision and , operators Der day for A hour duty, and this is all we have allowed for The other direct expenses appear to be moderate with the exception l of Office Expenses of $1,13119, but even if this were cut in haIf | it would have but little effect on the overall picture.
 With respect to the pro-rated ex- Ipenses we discussed this in consid- erable detail with MT. Proctor, and in view of the fact that the Seattle office does all of the billing and overall system administration, we do not consider an allowance of l$12O.00 per month excessive. Recommendations After considering all of the var | ious factors involved in this mat ter, and discussing them with Mr.
 Proctor, and in view of the fact
 that our analysis indicates that the Wrangell operations would still show a loss for 1854 even if the entire amount of direct office ex-
 penses and the pro-rated expenses ! (Continued on Page Two)