PORTLAND TAKES OVER WATER PLANT
The matter of condemnation and taking over of the property of the Portland, Me., water companies by the trustees of the water district, exercising the right of eminent domain, is set forth in their first annual report. All the steps taken to accomplish the end are stated, including the problem which confronted the engineer in arriving at the physical valuation of the property.
The charter of the Portland water district was approved by the Governor on March 27, 1907. By the provisions of section 18 the act was not to take effect until the city of Portland should have .approved the same by a majority vote at a special election to be held for the pur pose. This election was held on the 13th day of May, 1907, and resulted in the acceptance of the charter by a vote of 2,619 yeas and 880 nays. The act was not to take effect so far as it included the territory of the cities of Westbrook and South Portland, unless it should be accepted by the city of Portland and also by the cities of Westbrook and South Portland at special elections to be held in said cities for the purpose. South Portland voted in favor of accepting the charter, and Westbrook was adverse to the acceptance of the charter. The city of Westbrook having failed to accept the act. four of the five trustees provided for the management of the district were to be elected by the city of Portland. and one by the city of South Portland.
‘Following the election of water district trustees Lindsay B. Griffin was chosen president, and Millard F. Hicks, temporary clerk. The term of office of the trustees was determined by lot. as follows: To serve one year, Lindsay B. Griffin; two years, Albert D. Boyd: three years. John W. Deering : four years, William L. Blake, and five years, Millard F. Hicks.
On June 5 the trustees appointed a committee to confer with the president of the Portland Water company, for the purpose of agreeing, if possible, upon a price for the property of the water companies, and on June 6, a conference was had between the trustees and the president of the Portland Water company, at which time he refused to make a price on the properties, but said he would consider what he regarded a reasonable proposition from the board, should one be made. Inasmuch as the trustees had not the necessary information as to the extent of the properties and their conditions, requisite to make an offer, and had been unable to obtain it. further negotiations were deemed useless, and condemnation of the property necessary. The trustees engaged counsel to take legal steps to acquire the property under the charter. Allen Hazen, C. E„ of New York, was chosen as consulting engineer.
On June 28, the trustees having been advised by counsel that it was necessary that some offer be made to the water companies, in order to protect the legal interests of the district made an offer of $2 -160,000 for the property of the Portland Water company and an offer of $570,000 for the property of the Standish Water and Construction company. These offers expressely stated that they were made as a legal prerequisite to the condemnation of the plants, a n d that the prices named were made upon limited information and without prejudice to the rights of the district to show that the property was worth less, and that full and complete investigation might show the offers to be too high or too low.
On June 29 a communication was received from both companies declining the propositions submitted and making no counter proposition.
On July 5 the trustees, finding themselves unable to make further progress towards purchasing the works, voted to exercise the right of eminent domain and take all the plants.’ properties and franchises of the Portland Water company and of the Standish Water and Construction company as for public uses, and directed their attorneys to take the necessary legal steps to accomplish the same.A petition was filed for that purpose tn the Supreme Judicial Court, and after several preliminary hearings appraisers were appointed.
The task confronting the trustees, their engineers and attorneys was gigantic. By the terms of the taking act it was necessary to appraise. not only the plant and franchises of the Portland Water company and Standish Water and Construction company, but also their entire assets, including stock, which they owned in other companies. This embraced the entire capital stock of the horeside Water company, the Munjoy Land company, and the Saccarappa Aqueduct company. It also included the majority of the stock of the Gorham Water company and large holdings in the Presumpscit Water Power company.
The situation was complicated by the existence of charter and contract obligations of the Portland Water company to furnish water to the city of Portland for municipal purposes free of charge, and to the Standish Water and Construction company for all but manufacturing purposes and to the Foreside Water company for all purposes.
Parts of the supply system used by the Portland Water company were owned by the Standish company. The water revenue from manufacturers in the Standish system belonged to the Portland Water company.
The cities and towns throughout the system were supplied under different contracts with varying conditions as to hydrant rentals, providing eventually for free water for municipal purposes under various conditions and contingencies. Many of the hydrants were supplied free and those producing a revenue were for terms varying from one to twenty years.
An independent valuation of the plant, property and franchises of both the Gorham and Foreside systems was made necessary by the reason of the ownership of the capital stock of these companies. These required the same attention as to detail of original cost, reproduction value, depreciation. income, disbursements, future prospects and franchise values as in the parent companies, and rivalled in importance and amount of work the valuation cases heretofore tried in the State of Maine.
The financial history of the Portland Water company called for an investigation of forty years’ business, tbe examination of over 40,000 different vouchers, and the study of most intricate financial operations involved in the original incorporation and subsequent management of the company.
For the purpose of ascertaining the capacity of the supply mains and adequacy of the distribution system for fire protection, the trustees requested permission of the water company to make certain practical tests of the system under various conditions. This privilege was denied by the companies, and the desired information could only be obtained by technical methods and estimates requiring a vast amount of detail work, and for weeks before the date set for the hearing, engineers for the district were at work accumulating data for the purpose.
Pitometers were installed with the consent of the company on the supply mains and the pipes supplying Westbrook, Deering and South Portland for the purpose of measuring the amount of water used and required.
The water pressure and other conditions at the city hall and the Milliken-Cousins fires were fully tabulated, and everything done that was possible to determine the condition of the system.
On June 10. the appraisers filed their report fixing the valuation of the Portland Water company, its property and franchises, including its stocks in other companies, at $2,539,235.50, at the valuation of the Standish Water and Construction company at $1,313,798.76. making a total of $3,853,034.26 for the two properties, from which sum there was ultimatelyto he deducted the mortgages, liens and encumbrances assumed by the district, amounting to $2,129.459.59, leaving ; equity of $1,723,574.67 due the water companit
The charter provided that interest on tl amount of the award should be paid the wat companies from January 1, 1908, at the rate of 6 per cent, per annum.
The water companies claimed that they were entitled to 6 per cent, on the entire amount of the award, and the district that they were entitled only to interes on heir equity in excess of the encumbrances assumed by the district.
The settlement of this question was delaying the final decree, and inasmuch as the district could hire money at 4 per cent, and until settlement was obliged to pay the water companies 6 per cent., the delay was costing the district nearly $100 per day.
It had been found that no provision was made in the charter for the purchase or condemnation of the accumulated sinking funds which the water companies had set aside for the ultimate payment of the mortgages which had been assumed by the water district, and the face value of these mortgages had to be deducted from the amount of the award without any allowance for the sinking funds accumulated for their payment.
The water companies desired the district to purchase these funds, but the trustees had no authority to do so.
A compromise was finally agreed upon, wherby the water companies agreed to waive their contention as to interest upon condition that the trustees would ask for legislation permitting the purchase of the sinking funds, and agree to take said funds at an appraisal if authorzed so to do.
A contract to that effect was entered into, by the terms of which it was agreed that the award of the appraisers should be immediately accepted, the final decree as prepared by the water district assented to, and that legislation should be asked for on behalf of the district to enable it to purchase the sinking funds of the respective companies.
In accordance with this agreement, a hearing was had before Justice Spear on August 1, at which time the report of the appraisers was confirmed by consent of all the parties and the final decree entered.
This decree provided that before the properties were transferred in accordance therewith, an accounting should be had of the net rents and profits of the two water companies subsequent to January 1, 1908, and that the amount of such rents and profits received by the companies should be deducted from the the sum ordered to be paid them.
On August 10, 1908, the final accounting provided for in the decree was had and a balance of $803,183.66 found to be due the Portland Water company and a balance of $875,938.32 found to be due the Standish Water and Construction company, which sums were immediately paid and the district put in possession of the waterworks of both companies.
Mr. Eben R. Dyer, who had been employed for many years as superitendent by the old companies, was retained in the same capacity, together with his entire force of assistants, and has continued in charge of the physical properties as heretofore.
No change was made in the rates and the old rules and regulations of the water companies were adopted, it being the idea of the trustees that no new departure should be attempted until they had more experience in the management of the property and more knowledge of its income. In some instances, however, it was found that water was being furnished at less than regular rates, and in these cases the prices were made uniform with others, and so far as the trustees know all water takers are now charged alike.
To accommodate many water takers who find it a burden to pay rates six months in advance, the plan has been adopted of sending out bills quarterly instead of semi-annually, and this privilege of making smaller advance payments is generally appreciated by the public.
The examination of the waters of lake Sebago, made at the time of the appraisal, showed conclusively that the water is of exceptional purity, and in its natural state has all the elements of an ideal water for domestic and manufacturing purposes. To discover and prevent possible chances of pollution, the trustees have caused frequent inspections to be made of the shores of the lake, and to that end employed Dr. William S. Thompson, of Standish. local inspector.
The financial statement for the first year is gratifying. Although, by the terms of the charter, the district was obliged to pay interest to the charter companies at 6 per cent, on the award, thereby creating an extraordinary interest charge of $21,000, the net income for the year, after payment of all operating expenses and interest charges on bonds and notes, was over $79,000. Next year, without the extraordinary interest charge, a like revenue should show a net income of $100,000 above all expenses. Much of this profit must, of course, be set aside as a sinking fund for the payment of the bonds of the district. Last year, $60,000 of the $79,000 profit was so applied, but each payment so made brings us that much nearer an ultimate payment of the property and reduces the annual interest charges.
The great problem now confronting the district is that of a new main to lake Sebago. Although there was a great difference of opinion expressed by the engineers, at the appraisal, regarding the best method of bringing more water to the city, it was generally admitted that something must be done to that end.
Under the direction of the trustees, surveys have been made of a proposed new route to the lake, and careful consideration is being given the matter by engineers employed by the district. As soon as some definite plan is agreed upon by the trustees, it will be presented for the consideration of the public, who are most vitally interested in the question.
The present income of the property is suffi cient to pay interest on the amount of bonds required to build a main large enough to meet the wants of the district for years to come, and it may be found in the interests of economy to build such a one at this time.