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176
loans obtained for the new machinery, or (b) to achieve the
gradual purchase of the Undertaking, and after a certain length
of time provide for further expenditure of a Capital nature out
of current revenue instead of burdening the department with
further loans ? Schedule No. 2 shows what has been done in
this respect during the past ten years.
In my report dated Ist May, I903, I pointed out that I
did not consider the then rate of repayment, made sufficient
provision for the physical deterioration of the Plant, and
advocated the formation of a Depreciation Account, as well as
the repayment of Capital from the annual surplus. At that
time the bulk of the loans were on a 42 years basis, and the
annual repayment was only 2½ per cent.
Owing to the fact that most of the recent loans are for
very short periods, the rate of repayment is now much increased,
and an amount equivalent to the present balance, viz. £229,497
will be repaid in about 29 years if the present rate is maintained.
I would specially draw attention to the fact that although a
further loan of £11,145 is t0 be taken up this year, we have,
according to the Annual Estimates, to repay £10,383, so the nett
Capital liability at March, I908, will only be increased about
£762
It appears to me that this will more than provide for
the physical deterioration of the Plant, and will ultimately
achieve the gradual purchase of the Undertaking for the Ratepayers
if this policy is gradually extended, as the amounts now
paid annually in interest will be automatically reduced, and may
be used to provide fresh Capital.
ORIGINAL PLANT IN GOOD WORKING ORDER.
An amount equivalent to the Capital spent upon the
original Plant has already been repaid, and we still have the
land, and the residual value of the buildings and machinery
purchased with that money as a valuable asset. The whole of
the machinery is still in good working order, the only part which
is not now in regular commission being the first Engines and
Dynamos which cost some £6,000. They, however, act as
standby and run on special occasions when it is convenient to
use them in place of or to assist the larger and more economical
sets. To this also must be added the goodwill of the business,
which is now a very valuable asset.
LOAN CURVE.
The attached diagram No. I shows the yearly loans,the
total liability at any period on the present Capital expenditure,
the aggregate Capital expenditure to date, and the actual
annual and total repayments.