Omaha Daily Bee Newspaper, September 19, 1916, Page 7

S AL Ak i e s et bS] prwren o i s A b AR 2 7 | | established at Omaha. The committec | met at noon with Commissioners Best 19186. THE BEE: OMAHA, TUESDAY, SEPTEMBER 19, business training that he received commercial club w°u|d at the Rees Printing company, from |stone Type foundry. He called Mr. | 3 : | delphia. The Keystone concern is 0 f which place he went as sales man-|Rowley to Philadelphia and made him | the largest in the business and has Qmaha Man Now Manager here. 0f Keystone Type Foundry branch houses in all the principal ager for the George H. Lee company sales manager, later to be assistant Sick Headache Due to Constipation. Revise Workhouse Law [aml Jardine of the city and county, H respectively, present to talk over the Word comes to Omaha that Harry | cities of the country. of this city. It was while with the [manager, and now Mr. Rowley has TR ; & J = Rowley, formerly of this city, hl);‘, Mr. Rowley started as an office boy | Lee company that he became ac-|[risen to be general manager. These | oOne dose Dr. King's New Lite Pills and 1 ‘v“,m‘\_ rl‘\mktu' of 't‘"l :";:‘h“"“ |law. What the suggested amend- heen appointed general manager of | in an Omaha printing office and later | auainted with N. W. Ayer of the|advancements have all come within |your sick headache s gone. Get a 26-cent | '4W 1N Nebraska is wanted by e mu-| ments will be is not yet determined, the Keystone Type foundry of Penn-|becime a journeyman printer. While | Ayer Advertising agency. Mr. Ayer | five years and Mr. Rowley gives the | bottle and be convinced. Al druggiats.— | nicipal affairs committee of the Com- | but there is a feeling that the law as is also principal owner of the Key-|city of Omaha due credit for all the | Advertisement mercial club before a workhouse is| it stands is hardly workable. sylvania, with headquarters at Phila- yet a young man he became foreman Omaha, Nebraska. September 18th, 1916 To the Honorable City Council of the City of Omaha and to l The Omaha Electric Light and Pow- of the City to the purposes mentioned in the communication of said Commit- tee and under the conditions and terms of said communication. But realizing the good purposes of sa.d Committee and the desirable objec.s to be attained by it Repori of Special Committee of Co mmercial Club of Omah from the knowledge and considera- tion of the Committee. As expert advisers, the Committee selected Mr, Blon J. Arnold of Chi- cago, consulting engineer in private practice, who has served municipali- ties and private interests in some of and also financed the company during its initial period, and has supervised its financing up to the present time. We have been furnished with all the information in the possession of the present company, and the ac- countants and engineers have made, 'The amount of this reserve which is found in the assets of the company as (of June 30, 1916, and which should be added to the foregoing items to ascertain the total investment, s (E. N. 8. p. 136), $583,628.00. JFrom the foregoing items we have e a on Electric Light and Power Rates \ rate of return on the investment, and we consider it here. It is apparent that in a plant of this character depreciation would be greater at the beginning of the de velopment. When the plant was started in 1889 electric lighting was actment of the Butler ordinance, and prior to the new schedule of rates adopted by the company on August 10th, 1915. We find the total revenue derived by the company during the vear ending June 30th, 1915, under the schedule of rates then in force to ? er Company:— !thIt l;f m?fl?.sfndfiso‘hfigi the greatest engineering undertakings [from various angles, independent es- made up the total investment in the|in its infancy, and extraordinary ad- be: L At the time of the last session Of tniy Cduncil to forward the efforts of|Of Our time, and Mr. Edward N, Strait, | timates of the condition of the plant plant, business and working capital,|vances in the art have been made From sale of current the legislature, the matter of securing sajd Committee as much as is within|engineer in the statistical department (and its business during the initial as of June 30th, 1915, as follows: since that time, These necessarily| (36,824,200 kilowatt wore favorable electric light rates for its power to do and that the City|of the Wisconsin Railyay Commis-|period, from 1889 to 1903. We are Physical value of plant involve the rejection of machinery' .hours) ............... $1,372,011.15 the City of Omaha was brought to the Council and the various departments|sion. Mr. Strait has been connected |satisfied that during a considerable . (A) .................$3,194,680.58 [and equipment when a more ad- Sale of Steam ......... . 81,784.44 attention of the Commercial Club of Of the City are more than ready, anx | with the Wisconsin Railway Commis-|portion of that period the revenues Working capital (B)..... 241,298.80 vanced type has been developed. As ERSRCRE Y, ' this city. A general discussion oh‘"‘i‘; and willing to co-operate ;"-‘h slon during many years of its active|of the company were not sufficient to | Development Expense the methods grow more stable, the, Total operating rev- 1 same was carried on among the mem-‘::rn"(;":'t‘“":;‘::""nr ;;' ..:":: d.:wln: service, in which many of the rela- |enable it to meet its expenses, pro- (O isicmiinns S 750,000.00 | percentage of depreciation will be lann.l enue ,403,795.59 bers of the club, ‘and the citizens of which may be in their power 8o to do. tions between public service corpora-|vide for the depreciation, and pay & |Amount in depreciation We have become satisfied, from the Income from securities ' Omaha generally became deeply in-| "By w S Jardine, tions and municipalitles have been|reasonable return on the capital in-| regerve (D) .......... 583,528.00 | calculation made by the experts, that| owned ......., voreees 36,640.00 terested in the subject. James C. Dahlman, |determined by it. The Wisconsin |vested. — |during the period from 1903 to 1915 e TR On the sixth day of April, 1915, an| Mayor and President of City Council. Rallway Commission’s decisions have| But by the year 1903 the business| Total, ..........:.... $4,769,606.88|the actual depreciation of the plant! Total income .........$1,440,435.59 - suspended by a temporary injunction ordinance was passed by the City! Council requiring the electric light company to reduce ifs rates and the snforcement of this ordinance was in the Federal Court at the suit of the Omaha Electric Light and Power Company. (This suit is still pending at the time of making this report.) At this juncture, when it seemed that several years of litigation would probably ensue before the controver- sy should wend its way through a series of courts until the highest court in the land should render a decision in the case that would be final, the Executive Committee of the Commer- clal Club, after due consideration, de- cided that, if its good offices should be acceptable to the City Council and to the :Flectric Light Company, and Adopted July 27, 1915. Attest: Thomas J. Flynn, City Clerk. By H. M. Primeau, Deputy.” After this action by the City Coun- cll, and in response to the request of our Committee, the Omaha Elec- tric Light and Power Company ac- cepted the good offices of the Com mittee in the following communica- tion: J. A. Sunderland, Chairma.i, Special Committee on Electric Light and Power Rates, Commercial Club, My dear Mr. Sunderland: Responding to your verbal request of yesterday that I put in writing the Company’s acceptance of the good of- fices tendered by the Commercial Club through its President and your- self I sumbit the following as my un- been followed quite generally - by courts and the commissions of other etates. The selection of these ex- perts was approved before their em- ployment by the City Council and the Electric Light Company. These con: sulting engineers spent several days in consultation with the Committee, considering the many phases and de- tails of its work, and each of them has rendered to the Committee a vol- uminous report made up independent- ly, stating their conclusions and re- commendations from the facts pre- sented by the audit of Haskins and Sells and such matters as the Com- mittee presented to them. It has been the purpose of the Com- mittee to secure from all available sources, including the auditors, con- sulting engineers, technical works had reached a point where it was profitable. At that time there was a re-organigation to the extent that the present Omaha Electric Light & Power Company, a corporation organ- ized under the laws of the state of Maine, received a formal transfer of all the assets of the old company, and took over the management of its business. From 1903 until the present time the business has been profitable, and during at least a part of that time has produced an excess above a rea sonable return on the capital invest- ed, sufficient to reduce somewhat the deficits incurred during the early period. N In endeavoring to arrive at the amount of development expense which should be allowed, we have We conclude that this sum, last named, {s the amount of the com- pany’s investment, which constitutes the investment in the plant, business and property upon which it is enti- tled to receive a falr return. It we had accepted the of Messrs. Haskins & Sells added $3,718,210.91 as the ment expense, to the other items of the investment, the total valuation for rate making purposes at the pres- ent time would be $7,787,71779 (H. & S. Special). The estimates of B. J. Arnold re- sulted in finding a total investment ‘o( $6,282,672.00 (B. J. A. p. 17),, this {including a development expense of $1,682,112.00, (B. J. A. Add. p. 14.). It was Mr. Strait's conclusion, af- ter comparing various calculations estimate and had develop- was substantially 6 per cent annunllyl on the amount invested in the plant. But we believe that from now on the depreciation will be less, and, aver- aging the matter by periods, we think that while 5 per cent for the preced- Ing twelve years was a fair allow- ance for depreciation, for any similar period, beginning in June, 1915, an allowance of 4 per cent per annum would be sufficient. G. In determining what schedule of rates a company should be al- lowed, in order to produce a given net revenue to cover depreciation on the plant and a return to the stock- holders, it is necessary to ascertain the volume of the company’s business and the revenue derived therefrom It is also necessary to ascertain the ex- penses incurred in the operation of This exceeds the amount of a fair revenue, according to our estimate as shown above of ..$1,282,004.27 $ 158,431.32 10th, 1915, the company put into effect a new sched- ule of rates, making a substantial re- duction. We have had a detailed calculation made by the auditors as to the indome this pew schedule would have produced during the pe- riod ending June 30th, 1915, and we find that for the same volume of cur- rent, the gross revenue would have been $1,290,168.22 This, however, is the net billing, and would not show the actual re- sults, as it cannot be calculated what amount the company will actually al- low in discounts for prompt pay- ment, and how much it will collect derstanding of the plan and procedure| . 4 oyrrent publicatt 1l the In- the business. benefits might be enjoyed by hich will termined, Publications, al e In-\had the benefit of various calcula:| which he made for wus, that the . a8 penalty for delay in payments, that the ben g e e, tually| {ormation posstble bearing upon its| tions by the experts employed. {amount of development expense to| We find that for the year ending However, o comparison sufficient for our people within® a comparatively short period of time, in undertaking to ascertain the feets as to the invested in the property of this, Com- pany upon which it is entitled to earn a fair return. work. The Committee has spent much time in its work. It has held several all-day sessions, many half- Messrs, . Haskins & Sells, thé ac- countants, submitted a report show- ing that the amount of the accumu- be allowed was $1,234,993.00 (E. N. 8. p. 63), and the total investment in the plant and business as of June June 30th, 1915, the company’'s ex- penses were as follows: Manufacturing ... ++.$268,246.70 present purposes can be made be- tween the net billing for current, under the old rate, and the estimated the investment of the : :)l::;‘;: ;:ec:lflc Light and Power| 2. The amount of profit to which|day sessions and many more shorter|lated. losses of the company, that s, 3otn, 1915, should be $5,400,000.00 | TTA"smisslon ... - 837860 revenue on the basis of the net billing Company, the amount of its revenues we are entitled as & falr return upon|sessions of two or three hours each.!the amount by which its revenues ( E. N, §. p. 72), lj!stribunun 65,155.02 for the same perlod, under the new pany, the investment. It has held conference with the City |fel] below a fair return on its invest- Utilization ..... 98.989.05 rqate: and expenses, the determination of fair rate of return on its invest- ment, and a study of rates to con- 3. The rate which"will produce the fair return in question, Our proposition {s that your com- -Commissioners and the representa- tives of the Electric Light Company, ment, from 1889 to 1915, would amount, at the end of that period, to | In the injunction sult brought by the Electric Light Company in the United States Court, to enjoin the General expense . 202,916.32 Q RIS T Total operating expense $09%.684.69 $1,379,390.67 . 1,290,168.23 Under the old rate .... Under the new rate .. . d one general hearing of all of the|$3,718,21091. (H. & 8. Special Re-| Byt 3 sumers that would produce such rea-| mittee shall engage the services of 3D 1718, 3 utler ordinance, we construe the fig sonable return, to the end that the|an audit firm of the highest charac- Diltrl;eu 'ttohwm:h th:h publllic wz: ':1- port.) uces there asserted by the company g.‘f;v;f:n:‘h:::osot 1 'r.e. 98,088.63 Reduct'on ............$ 8$9,222.45 nable | ter (whose report will be accepted|viled. as been the policy €| The experts in the employ of Mr.|to mean that it claimed an Invest- v 5 K 1 controversy might with reasol Cotiolttee ' Rot ol KGlat cortobenices ves TR 32,400.15 n order to determine whether promptness be brought to a con- without question by financiers at home and abroad) which company with either the City 'Commissioners B.. J. Arnold calculated the accumu- lated deficit at the end of the same ment of $5,538,083.97, and it appears from the figures obtained for us from the rates now in effect are falr rates |for the purpose of yielding the rev- clusion, it would offer fits ser ( vices to the partles, and the chairman [ Shall Broceed as promptly s way bo B eprenentatives O (ol¢ Blectrc period to amount to $1.68311200- s books by the acconntants, that ts| oI, nerating enNen o oTe7 $2U0 WhICh we have. mcealned. 10 ‘ tive Committee was in- ¥ y_separately, i (B.J. A. p. 9) outstanding capltalization, consisting rrertiet RN be a fair return on the capital invest: ¢ of the Executive books from the beginning of the Com- ., ¢ both of the parties should be| Mr. Edward N. Strait, of the Wis- of the following: The foregoing amounts include ed, it is necessary to c:mribre the (ri rany, resulting in fa-|return?” On this we would like to be|pPhysical value of the plant at that ; ; \'::nb[;:aggt:ticozmby both of the parties| heard, time was, (H. & S. p. 4)..$794,373.73 | cent, per annum, up to $1,496,606.00 ;;:;‘ t‘::“‘“‘r'n“c“:mg:;:':; ;’Y t'}: “nd |ing_ whether any adjustment should fi?é‘::'&fu::"":',.’.;"";;‘ 417647 1 Thereupon, the chairman of the| When the audit is complete and the| From that date until the 30th day|(St. Table 16. p. 62), based on a cal- Sarta b foster talde ’umcye w‘ the | D¢ made. ek apti i;m- Executive Committee appointed the|Percentage of fair return has been|of June, 1915, the company made ad-|culation of 9 per cent revenue from cunto.meru it ihe com’nn' In the first place, the expenses dur- §68.14) b ) 158.!“ 2 following committee to take the mat.|28reed upon we would have the com-|gitions to the physical plant amoupt- (1889 to 1903 and thereafter & per pany. Ing . that period include Installation . b Lt AL E = ; mittee secure the service of a rate|. .,y g § Ex E)....4441,74727) cent, with deficiency or excess of| F- The committee' has made &|and remewal of Iucandescent lamps. Return on capital invest- i A h"g’ ‘Xz‘]‘}rogan expert of the highest txnd '; ";o 'hm: zeh revenue calculated on the same Careful study of the question of the Under the present rule of the com:| ©1 (8 per cent on 84 F. J;Farrlnélon. ‘:epr?é t:c;g;uf:m:llltc;o'": ,‘:.';'.’,1“30 Total ..... .+. $5,236,121.00 [ basis and compounded. rate of return which ought to be al-| pany lamps are no longer supplied| 76%506:88) .iieeiiii 38156048 Geo. H. Kelly, the agreed-upon fair return upon our| And withdrew from the plant the| The commitiee has seen fit to re- danad for‘lnveltments of this char|but are purchased and paid for by the Total gross revenue,,,$1,282,004.27 ¥ F. S. Knapp, | investment. This expert should not|completed depreciation during that|ject entirely the calculations of Has- acter. It Is obvious that capital can-|customer. We find that this will re- 14954 el T. J. Mahoney, be one who is engaged in privat |period, amounting to (H. & S. Ex. C) | kins & Sells on this item as being not be employed on terms fixed by |aylt in a saving in the annual ex- To ascertaln what portion of this W F. H. Myers, practice or has any affliation which| =~ ' MY $1,320,462.86 based on data not accepted by the the municipality seeking the services, | pense, based on the volume of busi- 8ross return should be received from i H, A. Thompson would prevent his being entirely ju-| g "y a1 (e "30(h day of June, |committee, and has concluded that DOT. by any rule of law. The employ- nass for the year ending June 30th, the sale of current, it s necessary 1. L. McCague, dl.chl in his study and final op'nion 1915, the amount Invested in the phy.|the recommendations of Mr. Arnold ment of private elpltll.‘llke the pro-| 1915, of about (E. N, 8. p. 823).... [to ‘deduct from it the following V. S lght, Weawonldepreterithnts hopwauld by ' and Mr. Strait were excessive, for the curement of any other' commodity, | $20,000.00 items: W. S. Wright, one of the experts of the Wisconsinjsical plant was.......... $3,906,658.14 and Mr. 3 Mraital o vt ARL Al The Executive Committee added 10| Rajiroad Commission for the reason| On the estimated depreciation of |S3Me reason. e APATE THAR et ot Hladame munt I hres L ey SRl NN h “:e ) ";"“e"“ securi- A\ this committee the name of that the Wisconsin Commission is the(5 per cent per annum during the' pe- After consideration of the entire e “"M'"d o g n'!r;ct e 1915, the legal expense of the com-| tles owned ..$36,640.00 k J. A. Sunderland. only regulatory body in the country|risq from August 1st, 1903, to June matter we have concluded to recom- 4 4 Papital | pany amounted to $75,63102 (H. & 8. |Steam sold by The Committee organized at a|that has made a complete and sclen-|ayy, 1915 we deduct from this plant mend iangaddidona ighllowaN0giROL :10 ; G InvelntmonL o'h"‘:'“ the | Speclal). Without attempting to ana-| company .... 31,7844 ting held ai the Commercial Club | tific study of the true basis of & rate|; to o b By % 0™ o0l 0 5| $760,000 to the Company's fnvest- business could not be established in |lvze fn detail all the items entering|Non - operating g s e schedule. reciation re.|MeNt as development expense, based the first instance, and a going busl- into this exp-nee, we find it sufficient| revenue ..... 6950.75 75,384.19 hfl.nught proper and necessary by the cmmittee that neither the com-any structed that if the offer was ac- ceptable to the City Council and to the Electric Light Company, he should ‘appoint a committee to take charge of the investigation and to make its findings in the premises. The President of the club, John L. McCague and the chairman of the Executive Committee, J. A. Sunder- land, presented the matter verbally o the City Council and to the Elec rooms on June 24th, 1915, by the elec- tion of J. A. Sunderland, chairman, ahd the designation of R H. Manley, Commissioner of the Commercial Club, to act as Secretary, The Com- imittee decided to ask the City Coun- cil and the Electric Light Company to share in the expense of the investi- pany’s existence down to the present time for the purpose of showing con- clusively the total amount of invest- ment upon which this Company is en- titled to a fair return. While the se- lection of the audit firm is left entire- ly to your committee this Company will pay for the audit and all business incidental thereto. / While the audit is being made we would like to have the committee take up the question “What is a fair The costs of this rate investigation —and all other costs in the case—w.1l be paid by this company. Grateful to the Commercial Club and to yourself and your associates for the fine public spirit shown in this| important matter and assuring you of complete co-operative willingness I am, with great respect, present at any conference where the interests of either of them were to be specially inquired into. From an examination of the infor- mation obtained by the committee as above set forth, the committee finds as follows: A. When the present Flectric Light Company took over the plant and property, August 1st, 1903, the (being the accrued depreciation re. maining after the compléted depre- ciation shown above) Leaving invested in the physical plant after deducting accrued depre clation, as of June 30th, 1916 $3,194,680.58 the six B. We find that during consin Railway Commission, submit- ted a caluculation based on different rates of income during the perfods in question of $1,234,993.00, At the re- quest of the committee he made computations ranging from $562,634 (St. Table D 1, p. 136) based on an income of 8 per cent from August 81, 1889, at the beginning of the busi- ness, to June 30th, 1915, with inter- est on deficits compounded at 7 per on the calculations made by Mr. Strait, this amount to cover all allow- ances that might be made or claimed in such cases on account of over- head engineering and also what Is usually denominated “going value.” D. In addition to the physical plant property and the legitimate al- 6 per cent bonds. 2,149,000 00 5 per cent preferred stoc 424,200 00 Common stock...ves.s.. 3,365,400 00 would be Total........$5938,600.00 But we have concluded that the valuation of $4,769,506.88 which we have fixed as above, is not unfair to |the company and its etockholders, 'and constitutes a necessary reduction ness could not obtain the needed capital to permit of its enlargement and development for a growing com- munity, The entire capital necessary to fi- nance such an enterprise and pro- vide for its enlargement and develop- ment, cannot be obtained upon the every elemefit which should be con- sidered in determining the gross rev- enue which the company ought to re- celve, except the annual charge for depreciation, and the return on the capital invested. But before using this expense amount as a basis for rate making, we have had a careful study made of the elements entering into the 'ex- pense, for the purpose of determin- to say that while the revenue of the period end!~g June 30th, 1915, under the rates then in force, was sufficlent to meet these extraordinary expenses, ~nd still leave a sufficic~t sum to pay a return on the capital invested, and while no doubt these expenses were necessary on account of the import- estimated revenue under the present rates for the perlod ending June 30th, 1015, with the amount of revenue which we have estimated would be a fair return on the capital invested. We have seen, in paragraph (H), that the company should be entitled to recelve from the total returns on its investment, an amount sufficlent to cover the following items: Revenue required to be produced by sales of current ........0....$1,206,620.08 We have geen that the rate now in effect, if applied to the perfod in question, would have produced a total return from current sold of........ muw.‘ Iufrenponsed o lhl;., ;eq;l::;. Sincerely yours, months ending June 30th, 1915, the jowance for developing the same, and same rate of return as the interest|ant litigation in which the company R, $1,290,168.22 the City Councll on Julyl il Rl Geo, H. Harrles, |average working capital invested by |the current working capital, the|upon & well-secured bond. Such en-|was engaged with the City of Omaha, Deducti " lh.t el b 4t passed the following "9‘:" “'r""' L President.”| the company in the operation of the company has an additional Invest:|terprises are usr-lly financed, partly |involving its right to do business and rvl:'en:'; P'l ";’“l" 4'0;‘:::’;‘11:111 (n‘.?u; %(;mt':lgl”m:;m h-: In the discussion between repre- business was, (H. & 8. Ex. C).... ment in the depreciation reserve, set |by money provided by stockholders, |continue to operate its plant, and the saleh :f :u‘::e;i Aot 1,206,620.08 communicated with this Council its|Sentatives of our Committee and the| . $ 241,298.30 aside out of the annual earnings, td|and partly by an issue of bonds con-|other controversies growing out that bt L b L ) desire for the City to particinate in carrying half of whatever costs may be incurred In the necessary and pro- per investigation' of the books and the value of the property of the local Rlectric Light and Power Comrany, in an endeavor amicable to a'rive at fair and equitab'e rates, to the vari- ous class of consvmers of ®a‘d Com- pany and to sai1 Company fer current supplied by the Company, and, Inasmuch as it seemed to be nor the City have further voice or d'- rection in such investigation, to the City Council, it developed that the City Council did not feel free to bind itself in advance to adopt the report and recommendation of the Commit- tee, being without legal power so to do, but that it would welcome the re- sults of the Committee’s investiga- tions. While the Electric Light Company, in accordance with the original agree- ment made by it, and acquiesced in by the City Council, has furnished all of the funds necessary to carry on the work of the Committee, the dis- position of such funds has been C. The Committee has given care- ful consideration to the question of development expenses, consisting of accumulated deficits from early loss- | es, during the period while the busi- ness was being built up. A some- what similar claim Is sometimes made in investigations of this charac- ter, under the head of what is called “going value,” that s the valve which a plant has after being many years in successful operation, over the value which it would have if but recently constructed. In this case also, it has been pointed out to us by meet the cost of replacing the plant, resulting from wear, obsolescence, or other causes. 4 We find that during the period from 1903 to 1915 the revenue of the company had been sufficlent to set aside an annual sum to meet such depreciation, amounting to 5 per cent of the investment in the plant from time to time (H. & S, p. 4). The total amount set aside for ‘deprecia- tion during this twelve-year period is $2,041,440.42. Of this amount $1,329, 462.86 was withdrawn from the in- vestment as completed depreciation, stituting a first llen upon the proper- ty. From the examination we have glven the question, we are =satisfied that to obtain sufficient capital for the establishment and development of a business of this charalter, it has been, up to the present time at least, necessary to fleure on a return on the total capital Invested at a rate which I8 abont 2 per cent or 2% per cent higher than the rate at which an issve of first mortrare b nds'can be placed on the market. This high- er rate for the total capital is of conrge to compensate for the risk in- dispute, yet these expenses are not to be regarded as the normal basis for fixing rates. On the advice of the experts, Mr. Strait and Mr. Ar- nold, we have concluded that there <hould be a deduction made frem th~ expenses, on the basis of the business for the year ending June 80th, 1915, of (E. N, 8. p. 83) (B. J. A. Table 12 d) $50.000 00 As tha actnal expenses incurred by the compenv for the year ending June 30th, 1915, including these extra- ord'nary legal expenses and the in-| stal'ation and renewal of lamns, Excess ......¢00000.8 _83,5648.14 We conclude, therefore, that in or- der to produce a fair return on the actual investment, there should be a reduction from the rates put into effect on August 10th, 1915, sufficlent \ to reduce the total revenues about $80,000, or one-sixteenth of the whole gross revenue from sales of current. L. It must be said, however, that the company cannot afford to do busi- ness on the basls we are now sug- gesting, If there is to be a continu- ance of the litigation over the right to carry on all classes of business in end that whatever findings and deter-| who11y within the power of the Com- the experts who have examined the as appears under paragraph (A) |Volved in the investment, which is ~mornted to the sum of (H & S. mination the Committee might "’p"g"'mmee and no suggestions have been accounts of the company, that no sub- herein. And we have deducted the |thus made subject to a prior lien,and |Suppl) ................. $824,176.47the City of Omaha, nor, it the com- the same would have, fa!t ll“iz' ;nS‘ofl""d by or received from the Elec- |stantial charge has been made for remaining amount from the invest-|llable to total loss if the enterprise | Deducting: ' [pany is to be compelled to meet the eiality, and. . O one®® #1% o Light Company, as to the expen-|overhead engineering management, ment In the plant, so as to reduce it|is ot snccesstnl. It also appears| For lamp re- competition of any other plant estab- Inasmuch as it is the advice of the|diture of any part of same. furnished in the planning and con- to its'present physical value. But|that at the present time bonds on newals ..... $30,000.00 lished within the city of Omaha and The Committee secured an analyti- |structing of the plant by the "engin- this does not mean that the amount |Properties of this kind ean be floated | For extraordi- eecking the same business. Our re- aw department of the City that the} City 18 without lawful authority to -xpend the public money for such pur- cal audit of the Electric Light Com- pany’s books and accounts covering eers of the parent company which comtrols the stock of the company of the depreciation reserve has been withdrawn from the investment, un- at a net rate of abont 5% per cent, allowing for commissions, discounts nary expenses 50,000.00 $80,000.00 commendation is based on the sup- st position that both parties to the con- poses without retaining definite control| ¢ha period from August 31, 1889 to |although such an allowance Is fre-[less it has actually been paid out to|and other expenses of the issue. Leaves adjusted expenses troversy will accept the recommenda- and ‘“’emi"" hovsl' the lnlvieatlnt:;n June 30, 1915. Haskins and Sells,|frequently made in such cases. the stockholders in dividends, or has, We find that, beginning with June| for a similar period ....$744,176.47 |tlon which we have made, and that ind work in hand as well as the|, *.. 4iiors selected by the Commit- In pur conclusions, however, we'been reinvested in the plant, and an [30th, 1915, and fqr a reasonable pe-| H. Assuming, therefore, a volume all disputes which have existed up to m+ney to be expended, the manner, he methods and the objects -for vhich it is expended, and, WHEREAS, it may be feasible and ossible for the Committee from the| ‘*mmercial Club, working in con usction with various officers and de- tee, have an unimpeachable standing throughout the United States and other countries. Their selection was formally approved by the City Coun- cil and by the Electric Light Com- pany. The auditors had access not have confined ourselves solely to con- ! sidering what additional allowance should be made on account of the de- velopment expepse incurred by the company in building up its business, It appears that this franchise |was additional allowance made for it as new investment there. An analysis of the accounts of the company and its assets has led to the conclusion that this reserve in the preceding amount which has ac- fod following that date, until condi- tions shall have ‘changed, as may be hereafter determined, a reasonable rate of return to be allowed this com- pany on the amount of its investment is 8 per cent per annum on the in- of business equal to that of the year ending June 30th, 1915, the gross rev- enue which the company ought to re- celve from its entire business should be sufficlent to cover the following ftems: date will be thereupon terminated, so that the company may be able to re- duce its expenses to the basis of the adjusted expemses mpon which we have based our report. Respectfully submitted, ariments of the City, assuming ‘“ch‘nmy to the books and accounts of the |obtained in 1885 bv onme J. C.[tually accumulated out of the earn-|vested capital, as found in para- Av'vsted expense ...... $ 744,176.47 J. A. Sunderiand, Chairman, ,““‘T"‘il $ l“’ :’ed:’s:ee“l_:|°er'°h;£z1Company. but also to its minutes, Regan, and his asscciates, and that|ings of the eothpany, has not b-en|graph (D) herein, that fs to say, 8 Denreclation choarea (4 Francis A. Brogan, S fr:lr ‘;n‘d gq;l':hle m:’"'ppmv,d.d‘vouchers and all other records that|a small amount of development work | wholly kept intact and preserved in|per cent on $4,769,505.88, amounting De* cent on $3,905,658, F. J. Flrrlnxlo?u, were necessary to make clear and in- had been done bv him and the gom- assets under the control of the man-|to an annual return of $381,560.48. 14) ... ceveniens coee, 156,267.2 Geo. H. Kelly, he Electric Light and Power Com- rany will furnish certain desivable [telligible all items entering into its pany which he organized to take over |agement. Some of it has either been| F. In determining what rates Retern en ennital inrest. F. 8. Knapp, an? needed data and facts withou |accounting. From time to time the‘!he business, ‘up to 1889, at which paid out directly or indirectly in divi [should be charged by this company, @' (% nar cent on $4, T. J. Mahoney, cost and expense to the Committee, |Committee called for special informa- |time the stock of his company was dends, or has been reinvested fn the |it is necessary to ascertain what sum 769,506.88) ........... 8815048 F. H. Myers, N NOW THEREF(CRE, BE IT RESOLVED BY THE CITY tlon, some of which required an enor- mous amount of work. This work nnrchased bv the Thompson-Houston plant and there treated as new capi- Flectric Light Company, and this tal. We do find, however, that the should be set apart as a deprecla- tion allowance, This is indeed a part Total gross income ...$1292.004.27 Henry A. Thompson, John L. McCague, (:OI'N(E‘I_L OF THE CITY OF| .o gone and the information was holding company, subsequently -con-|company has assets on hand repre-|of the current expense of the busi- I We have had an analysis made W. 8. Wright. q‘gx’:};n -lhe clireumstances; theseald furnished promptly and to the entlre‘solldalpd with the General Elec- senting a part of this accumulated re-[ness, the other items of which are to of the actual revenue obtained by the Special Committee of the Committee he ‘adv{sed thnt'(he City |satisfaction of the Committee. l!‘ is|tric Company, has ever since serve, consisting of its own bonds,|be hereafter considered. But the company during the year ending June | Commercial Club of Council does not feel itself free and |our belief that nothing has been with- | controlled the stock and “direc- purchased and held in a sinking fund,|amount to be allowed for deprecia- 30th, 1915, under the schedule of Omaha on Electric Light at liberty to devote any of the moneys held by the Electric Light Compnnyhed the management of th e business, and the stocks of other companies. tlon 18 closely connected with the rates then in force, prior to the en- and Power Rates.