upr000278 308

/ ? ? UNION PACIFIC RAILROAD COMPANY u n io n p a c i f i c r a i l r o a d R E C E I V E D APR 17 1950 presidents office 120 BROADWAY,NEW YO RK S.N.Y. F . W . C H A R S K E C h a ir m a n E x e c u t iv e . C om APR 1 4 1950 Mr, A. E, Stoddard, President, Omaha, Nebraska. Dear Mr* Stoddard; Last year, prompted by A.F.E. requests fov additions sad betterments to the water facilities of the Railroad Company and the Las Vegas Land and Water Company, I requested Mr* Tracy to prepare for me a memorandum oovering the relations between the Railroad Company and the Water Company, a statement of the water used by each company, and a statement of the operations of the Water Company, bringing out the percentage of return on the net average investment in its water facilities* I am enclosing a copy of the memorandum and the two statements referred to - the first statement showing figures for the years 1939 to 19A9, inclusive, and the second statement figure* for the years 1929 to 1949, inclusive. You will note that the second statement shows that in the aggregate the Water Company did not earn any return for the five year periods 1939 to 1943, inclusive, and 1944 to 1949, inclusive. On reviewing statement No* 2 it occurred to me that in any effort to get authority from the Public Servioe Commission to increase water rates the Commission would require figures showing the results of the combined operations of the Railroad Company the Water Company so far as they relate to the Water business of the Water Company and might question among other things; (1) the 6# on gross investment of the Railroad in water facilities allowed in "rent for pipe lines"; (2) the charges for amortisation in the years 1942-3-4—5 of certain facilities of the Water Company (the Railroad did not charge amortisation to the Water Company on its facilities amortised in those years, but charged only normal depreciation); and (3) the inclusion in the investment figures of the Water Compeer of the cost of properties represented by donations subject to complete or partial refund. I, therefore, requested Mr* Tracy to compile pro forma figures for the years 1947-8 and 9, revising the figures for those years as shown on statement 2 by making adjustments for the items above enumerated, and I enoloee statement 3 shewing the fig­ures as adjusted and memorandum setting forth in detail the bases for adjustments* You will note that the figure for "revised net income after Federal income taxes* was for the year 1947 a defioit of #11,189, and the net inocme for the years 194# sad 1949 was #11,397 >nd #8,844, respectively, and that the "per eent return on average net in­vestment ef Water Company" as recomputed was only 3*2£ for 1948 and 2*3# far 1949* an average for the three years of *88* The statement indicates that allowing the Railroad Company rental at 6ft, after income taxes, on its as* investment produces a greater rental the* <8 on its gross investment before incceus taxes* The Water Company would