BASIS OF ESTIMATES.

INTEREST-DEPRECIATION-TAXES AND SINKING FUND.

Interest.

Various issues of New York and Brooklyn long term bonds on or about March 1, 1900, were quoted to net 3.00 per cent. interest; so this rate may be accepted as a proper basis for interest on such bonds as would be required for an extension of the water supply and the same rate may also be taken as the basis of the sinking fund requirement.

Sinking Fund-In the estimate of the cost of the water per million. gallons delivered it will be assumed that a part of this cost is the providing each year of a contribution to a sinking fund which shall at the end of forty years be sufficient to pay off all bonds or return all expenditure incurred in the construction of the works. The sinking fund requirement each year to do this, at 3 per cent. interest, is 1.326 per cent.

Taxation-Almost the entire value of the new construction proposed for all the projects of additional water supply now under consideration lies outside the municipal limits of New York.

Taxes upon the property of one municipality used for public purposes and located within another municipality are assessed under different methods in different localities, the most common rule apparently being to tax only on land values, with no appraisal of or levy upon the cost or value of the structures.

The Brooklyn Water Works are taxed in the several Long Island towns in which their collecting reservoirs, aqueducts, wells and pumping stations lie; but only upon the cost or fair value of the land. New York City now pays to other municipalities about $32,000 annually in taxes upon the Croton Aqueducts, storage reservoirs and works connected therewith.

Section 480 of the Greater New York Charter provides that such property shall be assessed and taxed in the counties in which the same is located at the value of the lands, exclusive of the values of the aqueducts and structures, and provides that this assessed value shall not exceed the assessed valuation of other similar lands in the immediate neighborhood.

In reply to inquiry about taxation upon the Hemlock Lake conduit supplying Rochester, New York, the Commissioner of Public Works called my attention to chapter 908 of the Laws of the State of New York, passed 1896, providing for the full taxation of all property owned by a municipality outside of its corporate limits, and stated that a decision has been sustained in

the Court of Appeals to the effect that the city must pay a tax upon its conduit lines and other property, and that taxes are now paid at a rate approximately of $3 per $1,000 of an assessed valuation, which is about half the actual cost.

In Massachusetts, chapter 352 of the Acts of 1893 makes a provision somewhat similar to that which obtains for the Croton and the Brooklyn supplies, and takes only the land, excluding all structures like dams and aqueducts, but fixes the valuation once for all at the average assessed value of the land for the three years next preceding the taking. The amount paid each year while thus reckoned on a constant value is a varying percentage according to the tax rate in the several towns.

In the case of the works under construction by the Metropolitan Water Board, in which a large tract of country is to be submerged and many houses and factories destroyed, similar to the work herein proposed at Dover Plains, a special provision is made for an annual payment to the town in which this property is located, in lieu of taxes assessed in the ordinary manner, thus making recognition of the fact that the town was losing a large amount of taxable property.

While taxation on basis of cost of tunnels and underground masonry would be utterly absurd, there is an element of fairness in liberal compensation to a community for the loss of income caused by reducing the quantity of taxable real estate within the limits of the town or through loss of taxes on the personal property of those who will move to other towns when they sell their homes to the Department of Water Supply. Moreover, the water works, although providing their own sanitary patrol, will share in the general benefits of police protection and the service of the local courts, and its property will receive the benefits of the town's highways and public works probably in larger measure than compensated for merely by a tax on the vacant land. Our estimate should err, if at all, in being too large, and in any such new and comprehensive projects as those now proposed, it will be safe to provide some small margin for special assessments in recognition of the feeling which sometimes obtains in the small town against the large city, and to provide for liberal and generous treatment of this question.

Therefore, in all the estimates on storage reservoirs, an annual allowance of 0.4 per cent. over entire cost will be included to cover taxes and special

assessments.

On aqueduct lines there is no such loss to the towns by the removal of taxable personal property and no interference with its business or markets,

and that the several projects may be put on the same basis for comparison, the allowance for taxation and special assessments on aqueduct lines will be made 0.2 per cent. of cost for each aqueduct line as a whole.

It will be noted that in the final summary these percentages give sums that are not unreasonable, and while they are proportionally greater than are now paid by New York City and the Massachusetts cities, are much smaller than that which the City of Rochester has to pay under the law and decision above quoted.

Depreciation.

As a matter of accurate computation of annual cost of the works, or for computing the cost per million gallons of water delivered, it may appear illogical to add depreciation for items which, like underground masonry, do not depreciate noticeably within a half century and which would never require renewal because of wear or decay, but there are general contingencies of abandonment of any one branch of the works, of the possibility of injury through incompetence or mismanagement, together with the remote possibility of injury from earthquakes, cloudbursts or lightning which should not be dismissed without leaving some mark upon annual cost. The Fortysecond Street Reservoir and the Old Croton Aqueduct are imperfect illustrations; Boston's expensive Mystic supply, and perhaps Boston's Chestnut Hill Reservoir, are other illustrations; the new danger of electrolysis to water pipes is another; extra work required on Springfield's bad-tasting Ludlow Reservoir after its completion is another illustration that no mistake, in the long run and on the broad view, will be made in providing for even more than can be clearly foreseen.

The current expense and, ultimately, the water rates, as a whole, should be figured to leave as light a burden on posterity as practicable, for even with all these annual charges reckoned against it, a generous supply of good water is wonderfully cheap. And so in all these estimates of cost to the city per million gallons, the yearly expense will be figured with the intention of paying off the bonds and leaving the city in full possession of the works in excellent repair and free of cost at the end of forty years.

Land-On land values, no depreciation will be reckoned, and no depreciation will be figured on cost of extinguishing water rights.

Dams-Masonry dams like those proposed near Merwinsville and Webatuck will be considered permanent. The Essex Company's granite dam across the Merrimack, 35 feet high, 900 feet length of overfall, has in fifty-two years not cost one dollar for repairs, and to-day after the

floods and frosts and summer heat of half a century shows practically no depreciation whatever.

Tunnels-The excavation will be considered permanent. The masonry linings will be considered to require occasional extraordinary repairs and possibly extensions, if, in time, rock over unlined roof shows disintegration. This outlay will be considered equivalent to an annual charge of one-half of one per cent. per year on the masonry. If these renewals happened to be deferred to end of term, the annuity of 0.5 per cent. per year at 3 per cent. interest would amount to the original cost of the masonry at end of about forty-five years, but an accident earlier may come, so the figure of 0.5 per cent. appears safe and conservative. Considering the proportion assumed lined, the cost of lining is found to be 40 per cent. of entire cost of tunnels. We thus figure depreciation on 40 per cent. of the entire estimated cost of the tunnels. At 0.5 per cent. per year on 40 per cent., is equivalent to an allowance of 0.2 per cent. per year on entire estimated cost of tunnels.

For Cut and Cover Aqueduct--The grading is considered permanent and amounts to about 35 per cent. of entire cost of this type of aqueduct. The maintenance charge will keep the earth covering in good form and will repair all petty leaks. The masonry of the aqueduct itself it is assumed may require occasional extraordinary repairs equivalent to an annual charge of 1/3 of 1 per cent. If it happens that these extraordinary repairs could be deferred to end of term, this annuity of 1/3 of 1 per cent. would, at 3 per cent. interest, renew the entire masonry at the end of about seventy-five years. The masonry amounts to 65 per cent. of the entire cost of the aqueduct, so we figure depreciation on 65 per cent. of cost of the cut-and-cover aqueducts at 1/3 of 1 per cent. per year, which is equivalent to an annual charge of 0.20 per cent. on entire cost of the cut-and-cover aqueducts.

Steel Pipe Conduits-As elswhere stated, there are plate iron conduits along the Merrimack river that have been in daily service for fifty years, and which, from my careful inspection, appear good for twenty-five years more, and which were not nearly so well protected against rust as is proposed for these steel pipes, but in a line many miles long, accident from storm or flood, from corrosion, from electrolysis, or injury from causes not now foreseen, may possibly come, and it is well to have the figure safe. Therefore, the life of steel pipes will be called fifty years. On whole value at 3 per cent. interest, the annuity is 0.00887. The occasional repainting of interior of steel pipes is provided for in the estimate for annual maintenance. The extraordinary repairs and depreciation on steel pipes will in round numbers, therefore, be reckoned at I per cent. per annum.