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We respectfully call your attention to the position of the City Water Company of Sedalia in the matter of the application to the Public Service Commission for an in crease of rates. Extracts from the unanimous opinion and order of the Public Service Commission of the State of Missouri in the matter of the application for an increase of rates oy the City Water Company of Sedalia: “Sedalia, the county seat of Pettis county, is a city of the third class, with a population of about twenty-four thousand. It is situated on high ground and not near any large body of water, thereby making it rather difficult to procure an adequate supply. “It is admitted by counsel for the city that since the installation of the filter and improvements ordered in cases Nos. 180 and 131, the quality of the water and the character of the service are entirely satisfactory. “The present value of applicant’s property as esti mated by its engineers on the basis of reproduction now less depreciation, including tangible and intangible prop erty values, is the sum of $696,949.07. * ~ ~ “In ascertaining the value of a grant such as that un der consideration, we recognize the fact that property used in a business, established, permanent in character and in successful operation, has and should have a value in excess of its actual cost less depreciation, and that such facts should be considered in determining fair present value. While this property has not been a financial suc cess in recent years, and therefore has not been inviting as an investment, yet there can be no doubt that such a utility is a public necessity, and will so continue to be in the future. Sedalia is one of the large and growing cities of this state. A water works 'plant in such a city is en titled to such rates as will pay a reasonable return on the investment after paying operating expenses and the cost of maintaining the property. The rate of return should always be somewhat above the current rate of interest on money, and this property, when operated under such rates will command a value substantially above that of its mere physical value. Without discussing the many theories and authorities upon this subject, our conclusion is, and we so find, that on the 20th day of October, 1915, the fair present value of the property of the Sedalia Water Company used and useful in the public service, in cluding the improvements then under construction and every element of value, tangible and intangible, and taking into consideration every fact and circumstance bearing upon such value, was the sum of $500,000. “As there is no evidence tending to prove that the plant was not economically managed, or that there were improper charges to operating expenses, it follows, and we so find, that the existing rates are unreasonable and unjust to the company. “As ordinance 717 was not ratified by the qualified voters of the city, it could not become effective as a con tract as to any rates prescribed, except the rates for fire hydrants and public fountains, which, under the last pro viso of said section 9239 and the facts of this case, the city council was authorized to contract for without the same being submitted to a vote. The jurisdiction of the com mission to fix rates for water service generally, in the absence of a contract, is not questioned by the City, and therefore the objection to our jurisdiction will be consid ered only as to the rates for fire hydrants and public foun tains. “In order that applicant may receive the reasonable return on its investment and to provide a sum for depre ciation, surplus and contingencies, which we think it is entitled to under the law, it becomes necessary to increase the annual gross earnings in the sum of $16,624.88, and this can be done only by an increase in rates. “The amount paid by the City for fire service for 1914 was $6,938.75, and applying the general rule as to the proportion of the burden that should be borne by the City for fire service, it is at once apparent that the amount thus paid by the City, even without considering the oper ating expenses properly chargeable thereto, is far below a reasonable rate for the service rendered. While we rec ognize the fact that the basis of apportionment of the property for the two classes of service is more or less arbi trary, and that no hard and fast rule can be made appli cable to all cases, yet the rates paid for fire service in this case are much lower than the average in cities of this state in which an abundance of water is obtained at the door of the city. In fact, wothwithstanding the difficulty and expense of securing an adequate supply of wholesome water at Sedalia, the rates both for domestic and public service are substantially lower than the average through out the state. ~ * *” Capt. T. M. Bradbury, Secretary, Public Service Commission, Jefferson City, Mo. April 20, 1916. Dear Sir . I have discussed with the directors here your opinion and order in the matter of the application of this com pany for an increase in rates (case No. 539) and in the matter of ascertaining the value of the property of the City Water Company of Sedalia (case No. 546) and I beg to state the position of the company, which is as follows: We consider that your valuation of $500,000 for the property, for rate making purposes, is too low, but in a spirit of compromise we are prepared to accept the same, provided the City does likewise. If, however, the City proposes to ask for a rehearing we shall not only endeavor to secure a valuation more in keeping with the opinion of our engineers, but we will also ask for an increased allowance for operating expenses for the following reasons: 1. No allowance was made in the commission’s order for interest during the period of the construction of the filtration system. 2. No allowance has been made for legal, engineer ing and traveling expenses incidental to these proceedings. These and the previous item should be capitalized, or, if amortized, a specific sum should be added to the operat ing expenses for a period of years. . 3. The allowance for the operation of the filter plant is in our opinion but half of what experience seems to show will be its actual cost. 4. The allowance for administration expenses is ex ceptionally low. 5. As the company’s taxes are to be increased an allowance should be made for increased operating ex penses under this heading. 6. The award was based on the operations of the company for the year 1914. The actual figures for 1915 show a considerable increase in expense due to the en hanced cost of supplies and fuel, which is likely to increase rather than decrease. The results of 1915 would have to be used as a basis in the event of a reopening of the case. 7. If the hearing is to be reopened, the City must understand that an allowance would probably be made for the added legal expenses incident to the cost of the hear ing. We believe that you would, in the event of a rehear ing, recognize the merit of all these points, but we wish to avoid the long delay which would result if the case were not closed at the present time and the added burden of work upon all parties concerned. We hope, however, that the city authorities will, after careful consideration, come to the conclusion that it is better to accept the findings of the commission. I have requested the local manager of our company to prepare an advertisement to be inserted in all the local newspapers frankly setting forth the position of the com pany, and I suggest the publication of this letter, as well as extracts from the opinion and order of the Public Ser vice Commission. I presume that you have no objection to this course, but have instructed our manager to be guided by your wishes. I am, Yours very truly, CITY WATER COMPANY OF SEDALIA, By Hunter Wykes, President. To prevent further delay and expense to all parties, the directors of this company, after consultation with the owners of a majority of the stock of the company, have agreed to accept the figures of the Commission, although we believe that they do not afford us a proper amount of relief. Our valuation of about $700,000 was cut down to $500,000, and our request for an increase of at least $33,426.10 was reduced to $16,600. We wish also to emphasize the fact that since the in corporation of this company in 1907, there has not been one cent of dividends paid upon either the preferred or common stock of the company. The action of the Public Service Commission in order ing the installation of a filtration system was most bur densome on the company, and had it not been for the assurances given at the hearings, and the expressed atti tude of the representatives of the City and the Boosters’ Club indicating their approval of an increase in rates for water and for fire hydrant service it would have been impossible to have raised the money to pay for the im provements. If the City officials refuse to recognize the authority of the Public Service Commission and refuse to accept the order of the Commission for a joint effort to frame a new schedule of rates for water and for fire hydrant service, to be submitted to the Commission for its approval, then the water company alone will present its proposed new schedule of rates and a new schedule would finally be fixed and enforced without the acquiescence of the City. And if the city officials continue to oppose any increase in fire hydrant rentals to be paid to the company, making long delays—even failure, perhaps—in an increase of in come from fire hydrant rentals, then the private con sumers would suffer great loss by reason of all the in creased income of the company being raised from con sumers of water. By increasing the fire hydrant rentals the taxpayers—including railway companies, banks and large real estate owners, would pay that part of the in crease of revenue. We believe that prompt acquiescence by the city offi cials in the order of the Commission will be of distinct advantage in the growth and development of Sedalia. It will enhance its credit, as it will show the balance of the state and outside communities that it willingly co-oper ates with the legally constituted authority of the state in the management of its public utilities. Among the Public Service Commissions of the differ ent States of the Union, that of the State of Missouri in its short official existence has made a record for fairness in its decisions which is being generally quoted.. By order of the Board of Directors. CITY WATER COMPANY OF SEDALIA. By L. P. Andrews, Manager. April 27, 1916. Wanted—Girls to work on overalls and pants. J. A. Lamy Mfg. Co. Call 770, Both Phones, for the best service, clearest ice.’
Newspaper Details
Sedalia Democrat
Sedalia, Missouri, US
Fri, Apr 28, 1916
Page 14
Full Page
Clipped by
Charity W.
USA 24 Jun 2026
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