HomeMy Public PortalAbout07-19-1948 189
MEETING OF THE COMMON COUNCIL, SERVING AS A COMMITTEE
IN CHARGE OF THE OPERATION OF THE MUNICIPAL ELECTRIC.
LIGHTING AND POWER PLANT OF THE CITY OF RICHMOND, INDIANA.
The Gommon Council of the City of Richmond, Indiana, serving as a. com-
mittee in charge of the operation of the Municipal Electric Lighting and Power
Plant, met in regular session in the office of the Mayor, on Monday,July 19th,
19)4- , at S:30 oeclock P.M. , Councilman Tracy presiding with the following
members being present, Messrs. Baldwin, Chambers, Eastman, Harris, Marino,
Myers, 'Russell and Tracy. The following business was had, to-wit:
The minutes of the previous meeting were dispensed with.
Mr. Stevens reported that the ornamental lights in Peacock Terrace had
been turned on, Saturday night, July 17th, 194S.
Mr. Stevens reported that he and several members of Council, together
with Mr. Coleman, representing the Civil City, Mr. Allen and Mr. Frame, re-
presenting the Tax Research Bureau and Mr. Ensile, representing the Palladium-
Item, met with Mr. Busby and Mr. Witherspoon of the Public Service Commission
of Indiana, in the Light Plant office, on July 15th, 194S. This meeting,was
held to study the possibilities of rate increases and the "coal clause". Mr.
,:. Busby did not throw much light on the subject of increases in rates, but did
give the formalities the Plant would have to follow to secure a possible rate
increase.
Councilman Eastman made a motion that Chairman Tracy appoint three members
of the Light Plant committee to assist Mr. Stevens in a further investigation
• with the Public Service Commission of Indiana in securing a temporary rate in-
crease. This motion was seconded by Councilman Russell and carried unanimously
by the committee. Chairman Tracy appointed Councilmen Harris and Chambers,
with Mr. Haworth, City Attorney, assisting,to serve as a committee to assist Mr.
Stevens.
Councilman Harris made a motion that the Light Plant send to all members
of the Light Plant committee, a complete monthly report of the operation of
the Plant. This motion was seconded by Councilman Myers and carried unanimous-
ly by the committee.
Mr. Stevens presented the following report on estimated price of labor
and material that would be needed to finish the new work under construction at
the Plant; Engineering, $25,000; turbine stage heaters and installation,
$33,700; 0 turbine stairs and catwalks, $10,000; #4 circulating pipe installa-
tion, 4,000; boiler feed pump and installation, $14,400; making a total of
$S7,100; • Heavy maintenance and replacement work, replacing #1 stoker - to com-
plete, $32,000; boiler room roof - to complete, $20,000; tile in mill race,
$5,000; #4 boiler overhaul - to complete, $10,000; #1 turbine overhaul, $15,000;
#2 and 03 boilers, $10,000; new coal elevator and crusher, $1S,000. Mr.
Stevens also gave the committee a report on electrical improvements and replace-
ments which will be required in the Plant and on the transmission and distribu-
tion system, in the next five years, at an estimated cost of 043,000. He also
advised that we are faced with installation of a new boiler at a cost of
$300,000; a new cooling tower in 1950 at a cost of $100,000, and generating
equipment, in 1951, at a cost of $600,000 to keep the system in good operating
condition. Mr. Stevens also referred to the possibility of installing a Diesel
unit in the northeast section of the City to take care of future generating
capacity; however, he stated this should be incorporated in a survey by an en-
gineering company to determine our future requirements.
The committee heard the report of the Tax Research Bureau of Richmond Board
of Realtors,as follows:
TAX RESEARCH BUREAU
of the
RICHMOND BOARD OF REALTORS
July 19, 194S
To The Members
of the City Council,
of Richmond, Indiana:
The Committee selected by the Tax Research Bureau to review the operations
of the Municipal Light & Power Company has had three meetings. The Committee
190
•
is not yet ready to submit a final report, but in view of the limited time,
a preliminary report is being made, containing several suggestions for the
Councills consideration.
The problem presented to the committee has reference to the apparent
inability of the Light Plant to pay the usual dividend to the Civil City in
1949. This is brought about by the decrease in net earnings and income for
the first six months of 1948.
As a matter of comparison, for the year 1947 net income for the Light
Plant, after depreciation charges, amounted 'to $421,370.00. $300,000.00 of
this income was transferred to the Civil City and the balance of $121,370.00
to plant surplus. For the first six months of 194g, the earnings, after de-
preciation charges, amounted to $152,276.00. However, the Light Plant
is pledged to pay the Civil City $300,000.00 out of earnings for 194S. On
the basis of the first six months operations, the dividend already authoriz-
ed will barely be earned during 194S, and it is apparent if this dividend is
continued during 1949, operating revenues will have to be increased, or
.operating expenses decreased.
The Committee does not feel that it is qualified to offer any construct-
ive suggestions as to operating expenses. - It has been advised though, that
some savings may- be effected when the new equipment now being installed is
placed in operation. The committee is of the opinion that if the Council
decides to continue the policy of depending on the Light Plant for dividends,
operating revenues will have to be increased and this can probably only be
done by application to the Public Service Commission for an increase in rates.
The accounting procedure of the Light Plant in handling the dividend to
the City requires some explanation. In the past, it has been the practice
of the Light Plant to pay to the City a dividend on January 1st of each year.
In the year 1947, the amount was $300,000.00. This was paid on the first day
of the year and then charged against operating expenses each month at the rate
of $25,000.00 per month. In other words, the dividend was paid to- the Civil
City before it was earned, which, in the opinion of the committee,' is con- -
trary to good practice. At the same time, it has been the practice of the
Light Plant, on instructions from the Council to set aside a separate cash
fund of $100,000.00 each four months in anticipation of dividend to be paid
the following year and out of the following year's earnings. By handling in
this manner, the Light Plant always had the cash available on January 1st.
During the year 194+g, the latter procedure has not been followed, due
principally to the fact that the cash was not available. The cash in the
General Light Plant Fund has been depleted through capital expenditures.
It is the recommendation of the committee that the Council consider the
advisability of:
1. Taking out of the Cash Depreciation Fund all monies
• needed for capital expenditures.
2. Placing into the Cash Depreciation Fund each month
the actual amount of depreciation taken on the books
on capital assets.
By handling the depreciation fund in this manner, operating cash will not .
be reduced due to capital expenditures. The depreciation fund will be reim-
bursed each month to the extent of approximately $20,000.00, which is the
amount of iaonthly depreciation now being taken, and capital outlays in the
future could be budgeted and scheduled on the basis of the funds available
in the depreciation fund. It is this latter point that the committee feels
needs further study.
Increased income from higher rates and lower costs due to the placing
into production of new equipment may produce a satisfactory profit in 1949.
However, the cash to pay a dividend to the Civil City in 1949 out of Light
Plant earnings may not be available. This is dependent upon the amount of
capital commitments already made and to be made during this period.
Respectfully submitted,
Light Plant Committee of the
Tax Research Bureau.
G. Willard Frame, Chr.
Ben F. Harris
George H. Cottrell
William M. Homey
Robert H. Wiechman
191
CONDENSED OPERATING STATEMENTS
of the
MUNICIPAL LIGHT PLANT
1940. 1.947 1/2 19118
Operating Revenues 91E2,679.23 1,5314,618.81E 81E7,692.03
Operating Expenses 317,002.23 886,085.74 571,260.52
Operating Net 625,677.00 61E8,533.10 276,1E31.51
Ton-Op. Revenues 9,1148.11E 8,141.71 4,298.99
631E,825.11E 656,674.81 280,730.50
Less:
. Income .Tax 8,828.88 . •
11E,576.88 8,087.46
City Expense 4,975.64 . 5,536.614 1,793.48
. Reid Hospital none 4,000.00 1,999.98
i
Interest 401E.29 . 0 484.05 285.23
114.209.5 1 . 214,5951_ 12,166.15
Net Cash Gain 620,615.63 632,077.21E 268,5614.35
Depreciation Charge. . 166,3142.75 210,706.37 116,287.69
Net Profit 1E51E,272.88 • 1421,370.87 152,276.66
Dividend to City 275,000.00 300,000.00 150,000.00
IIITo Surplus Account 179,272.88 121,370.87 2,276.66
. 1940 Operating Expenses were 33% of Operating Revenues
19147 Operating Expenses were 58% of Operating Revenues
. 19148 Operating Expenses were 68% of Operating Revenues
It would .seem that a consideration ,of a rate adjustment is now clearly in-
dicated.
• CONDENSED BALANCE SHEETS
of the
MUNICIPAL LIGHT PLANT.
ASSETS Dec. 31, 19147 June 30,191E8
Property and Plant 6,596,880.01E 6,922,1425.72
Stores and Stocks . . 255,4+32..66 248,053.94+
IIIDepreciation Fund 535,914.16 493,94+7.41
General Cash 332,766.53 59,718.18
Consumer s t Deposits 24,994.7g 25,772.63
Accounts Receivable 111,1E23.07 105,979.00
Prepaid Insurance 22,025.1E2 11E,175.16
Prepaid to Civil City none 150,000.00
7,879,436.66 8,020,072.04 •
192
LIABILITIES
Accounts Payable 54,258.07 103,134.69
Miscellaneous Reserves 35,096.96 35,75S.75
Depreciation Reserve 2,247,340.14 2,360,452. 82
Surplus Accounts 5.542,739.47 5,520,725.78
7,879,436.66 8,020,072.04 t
III
. PROPERTY AND PLANT ACCOUNT
Additions during the year Total Value
December 31, 1939 - 169,942.26 - 4,797,365.92
December 31, 1940 103,217.36 4,900,583.28
December 31, 1941 . 124,178.77 • • 5,024,762.05
December 31, 1942 89,491,93 5,114,253.98 .
December 31, 1943 . 120,503.57 5,234,757.55
December 31, 1944 56,003.53 5,290,761.08
December 31, 1945 . 131,718.48 - 5,422,479.56
December 31, 1946 246,646.49 5,671,126.05
December 31, 1947 . 925,753.99 - 6,596,6g0.04
June 30, 1948 325,545.68 6,922,425.72
a
. . . . . . . . . .. . . . . . .
DEPRECIATION. FUND
Increases or Decreases Depreciation
During the year Cash Reserve
III
December 31, 1939 555.93 332,878•21
December 31, 1940 180,609.29 - . - - 513,487.50
December 31, 1941 217,737.50 731,225.00
December 31, 1942 242,537.00 973,762.00 •
December 31, 1943 152,317.61 1,126,079.61
December 31, 1944 771.38 1,126,850.99
December 31, 1945 3,412.25 1,130,263.24
December 31, 1946 5,153.83- 1,135,417.07
December 31, 1947 -599,502.91 535,914.16
June 30, 1948 - 41,966.75 _ 493,947.41
PUBLIC SERVICE STATUTE
"The governing body (city council) shall semi-annually set aside
from net earnings, sufficient funds to pay interest and principal on revenue
bonds" . ."Such governing body shall set aside sufficient of the- re-
mainder of the earnings of such utility, into a separate and special fund to
be itemi-zed as a. special utility fund .(depreciation cash reserve), to be used
and applied in the maintenance, extension, replacement, in whole or in part,
repair and operation of such utility" . "After the foregoing funds
are provided for, such municipality may pay into its general fund such part
of the remaining profits of the operations. of such utility as the municipal •
council may determine".
Councilman Harris moved that the Tax Research Bureau of Richmond Board
of Realtors continue its study of possible means of setting up the $300,000
dividend...or the year 1949. This motion was seconded by Councilman Eastman
and carried unanimously by the Committee.
Councilman Harris moved that the committee accept the two recommendations of
the Tax Research Bureau that were listed on page #2 of their report, as follows:
1. Taking out of Cash Depreciation Fund all monies needed for capital ex-
penditures; 2. Placing into the Cash Depreciation Fund each month the actual
193
amount of depreciation taken on capital assets. This motion was seconded
by Councilman-Eastman 'and carried unanimously by the committee.
Councilman Marino moved that the claims in the amount of $ •2,716.03 be
allowed and paid, seconded by Councilman Myers and carried unanimously by
the committee.
There being no further business to be brought to the attention of the
committee, Councilman Russell moved to adjourn. This motion was seconded
by Councilman Chambers and carried unanimously by the committee.
Chairman •
Attest:
Cler