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Mr. V. R. Rouse 5 November 11, 1952 District bonds fail of authorization and sale. I believe his recommendation is based entirely upon the tax disad­vantages which he mentions. My recommendation for an im­mediate transfer to the LVL&W Company was based upon the fear that we would be faced with a demand for substantial capital expenditures prior to the time the bonds were put to a vote. At the time I wrote my letter of September 30, 1952, we anticipated going into a hearing in November be­fore the Public Service Commission in Case No. 1207 with a demand on the part of the District and the City that we drill additional wells and spend substantial sums of money for storage. As explained in my letter to Mr, Reinhardt of September 30, 1952, it is my opinion that our ability to resist such a demand, both before the Commission and in the courts, would be greatly improved if the Railroad Company were not in the water production business. In my opinion it is not enough to say that we can meet a situation by re­sisting an unfavorable order of the Commission in the courts. We should get our affairs in such a position that we can reasonably be assured of being successful in our attempts to resist an unfavorable order in the courts. Since I wrote my letter of September 30, 1952, there has been some change in the situation confronting us in Case 1207, as reported to you in my letter of October 23, 1952. The tests mentioned in that letter are now being made, and it is possible that the results may satisfy the City, the District and the Commission that additional wa­ter can be obtained which will tide the City over the next summer. In fact the District has already released newspa­per publicity, taking eredit for suggestions which it says will enable the Water Company to provide an additional five million gallons of water per day next summer. Whether we can do this will be determined only after our tests are complete. The situation at Las Vegas changes from time to time, and no one can predict just what the final outcome will be. Aside from possible tax disadvantages there is no doubt in my mind that we would be in a better position than we are in today if the Railroad were out of the water production business. My underlying thought has been that the Rail­road should get out of this business prior to the time something happens which might prevent us from getting out of the business. The thing which might happen is that some group might decide to have the Public Service Commission de­