DETERMINATION OF THE VALUE OF FIRE PROTECTION AFFORDED BY A WATER COMPANY

DETERMINATION OF THE VALUE OF FIRE PROTECTION AFFORDED BY A WATER COMPANY

There are several private water companies operating within the city limits of Greater New York, supplying an average of 38 in. g. d., to a population, of about 400,000. An investigation is now being made by the Department of Water Supply, Gas and Electricity of the entire plants of these companies with a view of determining their adequacy. Appraisal of companies’ properties necessary and useful in the supply of water for domestic and public purposes and inquiries into the proper allowances for current depreciation, operating expenses and taxes are being made for the purpose of establishing fair rates to private consumers; also for determining the fair cost of fire service to be paid by the city, and for ultimate acquisition of the distribution system by the city. Rates for water used for domestic and public purposes and for fire protection, based upon this appraisal, in the case of the Queens County Water Co., were recently established and put into force. It is the purpose of this paper to outline in a general way the methods pursued in determining one of the problems involved in the investigation of this property, viz: The determination of the value of fire protection afforded by it.

Area and Population Served.

The Queens County Water Co. supplies the Rockaway peninsula, constituting the Fifth Ward, Borough of Queens, New York City, (including the former incorporated villages of Far Rockaway, Arverne, Rockaway Beach and the more recent developments of Belle Harbor, Neponsit and Edgemere), as well as a very considerable portion of the Town of Hempstead, Nassau County. The Queens district now served by the company is about 7 miles long, with an average width of one mile. About 70 per cent, of the company’s business is done in Queens, while the bulk of the water supply, lands, wells and mechanical equipment, also a portion of the distribution system, lie within the County of Nassau. According to the last State census, the Fifth Ward in Queens has a permanent population of 21,000; this is more than doubled in the summer months. There is also a great influx of week-end visitors who crowd the hotels and beaches merely for a day, or a few days at most. These conditions result in a comparatively very high peak load of water consumed during the summer months, especially on certain days in July and August. That part of Hempstead which the company now serves comprises roughly an area of about 30 square miles with a population of approximately 20,000. While there is an influx of summer population, it is relatively less than in Queens, and the peak load is less marked.

Brief Description of the Company’s Plant.

The main source of supply is from a system of driven wells with an estimated capacity. as at present developed, of about 12 m. g. d., at the site of the Fenhurst Pumping Station, near Valley Stream, Nassau County. Water is pumped from the wells into three slow sand filter beds, of a total area of 1 ½ acres, to remove the iron; it is then re-pumped into the distribution system. The pumping equipment consists of 9 pumps of a total rated capacity of 42 m. g. d. At Rockaway Beach there is a small auxiliary station, deriving its supply from three deep wells; it is operated during the hours of peak load on days of heavy draft at a rate of approximately ½ m. g. d. From the Fenhurst Pumping Station two 15-inch and one 24-inch trunk mains, each 4 miles in length, extend to Queens. The Queens distribution mains consist of 84 miles of mains ranging in size from 1 1/2-inch to 24-inch; 7 per cent, are 10-inch, 6 per cent. 12-inch, 12 per cent. 8-inch, 57 per cent. 6-inch and 17 per cent. 4-inch or smaller. Standpipe at Far Rockaway 20 ft. by 140 ft. and one at Rockaway Beach, 18 ft. by 130 ft. are maintained on the system.

Fire Hydrant Rental.

Under a contract which expired in 1902, the company was paid a fire hydrant rental of $20 per hydrant per annum, which sum also included the furnishing of water for certain public purposes; this price was based upon previous contracts with the villages and was fixed in 1898 by the Board of Public Improvements of the City of New York, for all private companies operating within the city limits, without adequate consideration of the cost of fire service or allowance for differcent of conditions in different parts of the city. Since 1902 the company has continued to render service and has been paid therefor the rates previously prevailing.

Apportionment Between Queens and Nassau County.

Since the jurisdiction of the Commissioner as to rates extends only to the portion of the company’s territory lying within the city limits, it was necessary to determine the relation between the company’s earnings in Queens and the portion of its investment properly chargeable to it. The latter was determined as follows. All domestic services are metered; the actual metered consumption during the summer months of June, July and August was 2,766,000 g. d., in Queens and 802,000 g. d., in Nassau; the sum of these was 77.3 of the pumpage figured. The pumpage was apportioned in the foregoing metered ratio of 77.5 per cent, to 22,5 per cent. The average maximum hourly rates during the summer months were found from the pumping records to be 75 per cent, greater than the average daily rates for the same period. The average peak load of pumpage during the hours of maximum use was thus established at 6,200,000 g. d. (2,766,000 + 77.3 per cent. X 1.75) for Queens and 1,800,000 g. d. (802,000 + 77.3X1.75). To these average peak loads for the two areas was added a maximum fire rate of 7 in. g. d. for Queens and 3 m. g. d. for Nassau, resulting in a ratio of 73.4 per cent, of the total capacity chargeable to Queens and 26.6 per cent, to Nassau. This ratio was applied to the investment in the pumping plant, buildings and general equipment. To distribute the investment in the trunk mains in Nassau serving both Queens and Nassau, a further adjustment was made on account of the fact that the Queens supply was all delivered at the city line, while the Nassau supply was taken off at different points and partly through a separate main; a ratio of 76.8 per cent, to 23.2 per cent, was established for these trunk mains. For the well system, suction lines, filters and lands, a ratio of 72.4 per cent, and 27.6 per cent, was established, based upon the total pumpage during the summer months plus fire reserve, it having been assumed that the reserve in the filter beds and standpipe would take care of the hourly peak. The allocation of investment as between Queens and Nassau services may be summarized as follows:

General Procedure Adopted to Determine Compensation for Fire Protection.

To determine the compensation for the fire protection furnished by the company in Queens the following procedure, which is also being used in cases of other private companies operating within the city limits, was adopted: The investment in various portions of the existing plant as actually constructed for both domestic service and fire protection was ascertained; an estimate was then made of the investment in the various portions of the plant necessary to make them fully adequate for domestic service without reference to fire protection. The difference between the two figures was regarded as the portion of the investment chargeable to fire service. This proportion was applied to the total investment chargeable to the Queens service and the cost of fire protection properly chargeable to the city for the Queens area was estimated upon the basis of a fair return upon the extra capital invested in this service, together with a proper allowance for depreciation, taxes, maintenance and operation. Since the major portion of the investment chargeable to fire service would remain the same irrespective of the number of fire hydrants in use, the cost of fire service was divided into two parts; First, the cost attributable to the general fixed investment, which would be measured as a lump sum per annum, and second, the cost attributable to the particular investment in, and maintenance of, fire hydrants, which would be measured in the form of a fixed sum per hydrant per annum.

Capacity of the System for Fire Protection.

Preliminary to the work of valuation and incidental to it, an investigation was made of th entire plant as to its adequacy for providing domestic service and fire protection. The capacity of the trunk mains in Nassau was computed from the delivery head at the pumps and elevation of the Far Rockaway standpipe. The capacities and gradients at different points in the Queens distribution system were computed and the available fire service in excess of the maximum domestic consumption determined. On a Monday at the end of July, when the domestic draft was close to a maximum, tests were made of the flow from groups of hydrants at representative locations in the distribution system; these locations were selected according to the character and occupancy of the buildings where good fire protection was deemed necessary. J he hydrants in each group were opened simultaneously and allowed to flow freely for a period of about two minutes, the discharge from each hydrant being found by a Pitot tube gauge. At the same time static pressures were taken in the mains above and below the hyrant group, starting about 10 minutes before and continuing for the same period after the hydrants were shut down. The pumping records, pressure gauge charts and elevations of water in standpipe during thetests were obtained and supplementary tests were made on dead end mains, especially 4-inch. It was considered by members of the Fire Department that for the development in Neponsit, Belle Harbor and Rockaway Park, consisting mostly of detached cottages, six fire streams (of 250 g. p. m. each) would furnish ample protection; for Seaside, Holland and Arverne, as well as for sections of Far Rockaway and Edgemere, consisting of closely built up areas of two and three-story buildings, twelve streams woud be sufficient: and for Lawrence, Cedarhurst, Woodmere and Hewlett, in Nassau, from six to eight streams. The fire engine companies in the Fifth Ward with the arrangement for emergency help from the mainland via the Long Island Kailroad, could furnish 18 fire streams of 250 g. p. m. each. It was conceded that a conflagration in the Fifth Ward requiring a rate of delivery of between 6 and 7 m. g. d. was possible.

Allocation of Queens Investment Between Domestic Service and Fire Protection.

The proportion of the value of the mains and appurtenances in the Fifth Ward chargeable to fire protection was obtained by laying out a distribution system that would give adequate service for domestic consumption only, and obtaining the difference in cost between such a system and the existing one. This gave 26.2 per cent, as the proportion chargeable to fire protection. With the strengthening of the distribution system recommended, the proportion of the mains and appurtenances in the Fifth Ward chargeable to fire protection, figured in this manner, would be increased from 26.2 per cent, to 36 per cent. The distribution of the investment in the trunk mains in Nassau County was arrived at by similar methods. In regard to water bearing lands, wells and suction lines, it was estimated from the records of suction lift and purnpage that the maximum capacity of wells as at present developed, was 12 m. g. d. The average peak load for domestic service during the summer months is approximately 8 in. g. d., and it was assumed that any peak load in excess of this, for a brief period, could be readily taken care of without a well capacity in excess of 8 m. g. and that the storage of 1 ½ m. g. in the filters would furnish the balance of water required for fire protection, the raw water being pumped directly into the system in case of emergency. It was therefore estimated that 2-3 of the developed well capacity, and 2-3 of the investment in wells, suction lines and water bearing lands was attributable to domestic service, leaving 1-3 as the extra investment made necessary on account of fire service. In determining the distribution of cost between domestic and fire service of the buildings, mechanical equipment, coal storage and railroad siding, it was assumed that 1—-For all buildings not directly contributory to the pumping of water, 100 per cent, shall be charged to domestic service. 2—For all buildings contributory to the pumping of water, 75 per cent, of the cost shall be charged to domestic service and 25 per cent, to fire; this was based upon the estimated cost of housing an equipment with a capacity of 8 nt. g. d. 3—For all apparatus, equipment and plant contributory to the pumping of water, the distribution of cost shall be 50 per cent, against domestic service and an equal amount against fire service. This proportion was based upon the ratio of the safe continuous capacity of the pumping plant to capacity for average domestic peak load. The investment attributable to the Queens service is attributable to domestic service, 76.8 per cent.; attributable to fire protection, 23.2 per cent.

Operating Expenses.

It was decided to distribute administration expenses, including salaries, office supplies and office expenses, meter reading, inspection and collection on the basis of gross revenues in the two districts. The expense of operating the pumping station and filters at Fenlmrst, the maintenance of boilers, machinery and wells, of brooks and streams, was distributed on the basis of the total amount of water consumed in the two areas. The expense of maintaining the mains was distributed on the basis of the investment in mains attributed to the two services. The expense of maintaining the meters and hydrants was distributed according to their respective numbers. The expenses of the Rockaway Park Auxiliary Station were all assigned to Queens. Fire insurance and maintenance of buildings were distributed according to investment in buildings, maintenance of standpipe at Rockaway Park was assigned to Queens and that at Far Rockaway was divided equally between Queens and Nassau. The expense of permits and tapping was distributed according to the number of new taps placed during the preceding years, respectively. The distribution of the operating expense attributable to fire service was gone into with similar detail. The company showed that it kept certain employes and certain extra telephone equipment solely as a protection in case of fire emergency. Accordingly, 6 per cent, of salaries, 40 per cent, of office expenses (mainly telephone), and 10 per cent, of pumping station wages were charged to fire protection. It was estimated that the expense of the Rockaway Park auxiliary station should be divided half and half between fire protection and domestic service. Of the cost of maintaining mains, 10 per cent, was attributed to fire protection and the cost of cleaning pipes was distributed between domestic service and fire protection on the same basis that the investment in mains had been distributed, namely, 74 per cent, for domestic service and 26 per cent, for fire protection. Of the cost of mainatining the boilers, pumping machinery and buildings, 25 per cent, was attributed to fire protection. The cost of maintaining standpipes was divided half and half. The cost of maintaining wells was divided in proportion to the the distribution of the investment in wells, namely, 67 per cent, to domestic service, and 33 per cent, to fire protection. Taxes were distributed in proportion to the investment, that is to say 74 per cent, to domestic service and 26 per cent, to fire protection. The cost of fire insurance was distributed on the same basis as the capital investment in bui’dings, boilers and pumps, namely, 62 per cent, for domestic service and 38 for fire protection. Stable and garage expenses were analyzed with the result that 20 per cent, was attributed to fire protection and 80 per cent, to domestic service. An examination of the bills of counsel led to the conclusion that about 20 per cent, of the legal expenses should be attributed to fire protection. The distribution of operating expenses attributable to the Queens area between domestic service and fire protection was, percentage attributable to domestic service, 85 per cent.; percentage attributable to fire protection, 15 per cent.

Final Result.

The net result of the method outlined, applied to conditions existing at the time of the appraisal, was a finding that 23 per cent, of the total Queens investment and 15 per cent, of the operating expenses and taxes were attributable to fire protection. With the allowance for depreciation and interest on investment, the cost of fire protection was found to be approximately 21 per cent, of the total. The rates for “fire hydrant rental and fire protection,” were fixed as follows: “For each fire hydrant, set and maintained at the request of the City of New York, as a proper return on the special investment devoted exclusively to public purposes, and to cover maintenance thereof and depreciation and taxes thereon, $8.70 per annum. As a proper return on that portion of the general investment made necessary by the need for fire protection, and to cover maintenance thereof and depreciation and taxes thereon, and for water reasonably necessary for sprinkling streets and for flushing streets and sewers, where such water is taken from fire hydrants, $30,000 per annum.” Water for public purposes, except such as obtained from hydrants, is to be paid for at the established meter rates. Under the old system the company would have been paid by the city $12,460 fire hydrant rental for the 632 hydrants on the company’s mains against the new rate of $35,498. This increase was offset by a corresponding reduction in domestic rates. The new rate was equivalent to $56 per hydrant, which unit cost, however, will be reduced as the number of hydrants will he increased. The gross earnings of the company on the Queens business during the year ending May 31, 1914, was, in round figures, $173,000. Assuming a fair return of 7 per cent, on the company’s investment, the gross earnings to cover operating expenses and taxes, depreciation and return on investment was found to be $167,000. The difference of $6,000 plus the increased payment by the city for fire protection of $23,000 gave a total deduction of $29,000 from the revenue obtained from domestic consumers and the rates were correspondingly reduced.

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