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M r . J . 0 . A l l a r d - 2 - M a rch 1 3 , 1 9 5 1 March 30, 1929. In hilling the Water Department under this contract the Railroad Company had not attempted to make a detailed analysis of all services performed by the Railroad Company in connection with the production of water at las Vegas. Only the obvious directly assignable expenses of maintenance and operation were included in the bill. In addition, there was included in the bill interest on investment at the rate of 6$, taxes, and depreciation at the rate of last year we undertook to make a detailed study of the cost to the Eailroad of producing water* This study revealed that the depreciation charge contained in the bill should be reduced* It also revealed that there was a large amount of expense incurred by the Railroad for accounting, legal, executive, engineering and tax services performed in connection with the production of water which had not been charged as an expense of water production. It was deter- mined that a new contract should be entered into between the Eailroad and the Water Company which would set forth accurately and in detail the elements of expense which should be includable in bills made by the Eailroad upon the water Company for water furnished to the Water Company from the Eailroad wells at Las Vegas. This new contract is dated November 30, 1950 and was made effective as of January 1, 195©* The charges made by the Eailroad Company upon the Water Company for the year 1950 as reflected in the Annual Report of the Water Department of the Las Vegas land and water Company to the Nevada public Service Commission are based upon the new contract dated November 30, 1950. These charges are shown under Account 412 - Joint Facility Rents - on page 9 of the Annual Report. In addition to the management expenses above mentioned incurred by the Railroad in the production of water there are substan­tial services of like character performed, by Eailroad officers directly for the Water Department which have not heretofore been charged to the Las Vegas Land and Water Company. The Water Company must rely upon the Railroad officers for management services because the Water Company Itself does not employ a complete executive staff. The new contract provides that the Water Department of the Las Vegas Land and Water Company shall pay the Railroad a reasonable charge for these services. The operating expenses of the Water Department for the year 1950, _ shown on page 12 of its Annual Report to the Commission, include these management expenses. I am enclosing to you and to Mr. Cannon copies of theM former agreement dated March 30, 1929 and the present agreement dated |j November 30, 1950* „Ve ry t. ru_ly yours, Ends. bccec -- MMrr.. HWomw.a rRde iCnahnanrodnt Mr. Roy A. Weh© E. 1. Bennett