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R ? Y A . W E H E C O N S U L T I N G E N G I N E E R O N E E L E V E N S U T T E R B U I L D I N G S A N F R A N C I S C O 4 , C A L I F O R N I A October I4., 1950 Mr. Edward C. Renwick, Assistant General Solicitor, Union Pacific Railroad Gompany, ii22 West Sixth Street, Los Angeles, California. Subject: Las Vegas Land and Water Company _________________Water Agreement__________ Dear Ed: I think your proposals are sound and the most appropriate under the conditions obtaining. First, in reference to the desirability of having a new contract that will reflect present-day facts and Company and Management thinking, it should certainly be set up and made effective as of January 1, 1950, so that at the hearing, as you suggest, there will be less embarrassment because of differences in charges, as shown in our report and those currently being made. It appears that the Water Right matter cannot be handled entirely satisfactorily, though your proposal is probably the best. With an appropriation of 2j cu. ft. per second to the L.A.&S.L. Railway Company, that necessarily will leave but approximately 12j cu. ft. per second for the L.V.L.&W. Company. This latter at the rate of $2000 per cu. ft. will equal $25,000 rather than the $30,000 we are claiming. The other $5,000 will thus technically be with the water producing company. However, insofar as our showing before the Commission is concerned, the full amount can be shown with the L.V.L.&W. Company. Insofar as the payments are involved,under the agreement, the inclusion of the Water Rights with -the distributing company will, of course, reduce payments to the production company. Since such Water Right values are not set up on the books, it may be better that no claim be included on which annual payments would be made under the agreement. In other words, handle it as you suggest. (Please check the $ 7 ,03k at the top of page 5 in the proposed draft of the agreement. I get $U0 more). In reference to utilizing an Original Cost figure, as opposed to an Investment Cost, there is no reason why your proposal will not work out satisfactorily. In order to make such use of Original Cost more authentic upon any review by outside parties, an adjusting entry might be made on the books of the Company. I sippose such would require an authorization by the Interstate Commerce Commission and such would not be forthcoming because it deviates from Betterment Accounting.