upr000279 56

Mr, ¥ra* Reinhardt 3 of which comprises approximately of the total investment ac­count. A review of the monthly charges for this job discloses that the elapsed time between date of the first charge and the date turned over, to operation was 21 months while the average interest period based on the monthly charges was 12 months. From the foregoing it would seem that a construc­tion period of 2l\. months for the production facilities and 12 months for the distribution facilities would be ample. ^Perhaps it would be possible to have some contractor who is familiar with the layout at Las Vegas make an estimate of the time in which the facilities could be reproduced economically under a single contin­uous impulse. In any event I believe the interest rate used should be not less than 6% and possibly the rate of 6-| should bemused which is the rate of return used by Mr. Wehe in his exhibit. This rate should be computed fpr l/2 the construction period plus 3 months and applied to the base cost plus engineering and general expenditures. Depreciation: It was thought that the depreciation rates used in Mr. Maag‘s reproduction estimate were those approved by the Bureau of Internal Revenue, as shown, on our Statements "A" and ’'B'1. The following tabulation shows the deductions made for depreciation on the basis of reproduction cost, present day cost - Statements "A” and "B” and present day cost - Mr. Wehe’s exhibit: Production Distribution Facilities Facilities Reproduction costs Present day costs (Stmts. A & B) Present day costs (Wehe) ll±.9% 12.7% 1$.$% 11$0*3% . 6% 13.$% It would seem that the depreciation rates to be used should not be greater than those approved by the Bureau of Internal Revenue. These are the rates used in accruing depreciation in the accounts of the Water Company. If we can be of any further assistance in connection with these reproduction costs, please let us know.