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? 0 Los A n g e le s , December 4 , 1951 Mr. Wm. R e in h a rd t: (o o - M r. W. R. R ouse) f o r some tim e I have bean g i v i n g th o u gh t t o th e advan­ta g e s w h ich would r e s u l t from th e t r a n s f e r o f th e w a te r p ro ­d u c tio n f a c i l i t i e s o f th e R a ilr o a d Company t o th e d i s t r i b u ­t io n company a t Las V e g a s . I t ap p ears t o me th a t t h e r e a re some d e c id e d ad va n tages in making th e t r a n s f e r . T h ere a re a ls o some p rob lem s. The most s e r io u s problem th e W ater Company and th e R a i l ­road f a c e i s th e c o n tin u a l demand f o r exp an sion o f t h e i r f a ­c i l i t i e s . The R a ilr o a d Company, e i t h e r d i r e c t l y w ith r e s p e c t t o i t s own f a c i l i t i e s o r th rou gh n o n - in t e r e s t b e a r in g lo a n s t o th e W ater Company, has expended a v e r y la r g e amount o f money in expan din g th e w a te r p ro d u c tio n and d i s t r i b u t i o n f a ­c i l i t i e s a t Las V egas in th e l a s t s e v e r a l y e a r s . At th e same tim e i t i s a p p a r e n tly f a c i n g a p o l i t i c a l l y minded Com­m is s io n w hich i s r e lu c t a n t t o p e rm it th e W ater Company to make r a t e s h ig h enough t o pay a f a i r r e tu r n on th e combined in v e s tm e n t. I am c e r t a in t h a t no In d ep en d en t company co u ld have borrow ed money in th e S t a t e o f Nevada o r e ls e w h e re to make th e c a p i t a l e x p e n d itu re s w hich have been made by th e R a ilr o a d Company and th e W ater Company in th e fa c e o f th e e a r n in g s , o r r a t h e r d e f i c i t s , w hich th e W ater Company has s u ffe r e d in th e p a s t two o r th r e e y e a r s . I f an in d ep en d en t company had been o p e r a t in g th e w a te r system in Las V ega s, I am c e r t a in t h a t by th e v a r y f o r c e o f circu m sta n ces th e Com­m is s io n would have been com p elle d to g r a n t i t r a t e s w hich would have made th e le n d in g o f money t o th e Company a t t r a c ­t i v e t o I n v e s t o r s . I th in k th e W ater Company would be in a much b e t t e r b a r­g a in in g p o s it io n in d e a lin g w it h th e Commission w it h r e s p e c t to r a t e s i f th e R a ilr o a d Company w ere d is a s s o c ia t e d e n t i r e l y from w a te r p ro d u c tio n and d i s t r i b u t i o n e x c e p t as th e owner o f th e W ater Company. I n such e v e n t th e R a ilr o a d co u ld r e fu s e to lo a n money t o th e w a te r Company f o r ex p a n sio n o f p la n t un­t i l th e e a rn in g s o f th e W ater Company w ere b rou gh t up t o th e p o in t w h ich would J u s t i f y a lo a n from o u ts id e s o u r c e s . W ith a p r o p e r c a p i t a l s t r u c t u r e f o r th e w a te r d i s t r i b u t i o n company th e R a ilr o a d Company would be n o t o n ly th e owner o f th e e q u it y c a p i t a l but a ls o o f a lo a n la r g e enough to make im p o s s ib le th e p r o c u r in g o f o u ts id e c a p i t a l b y th e W ater Company u n les s prop ­e r e a rn in g s w ere b e in g r e a l i z e d .