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HomeMy WebLinkAboutOrdinances Book 11, Page 606, No Resolution Number606 A RESOLUTION RECEIVING AND FILING THE REPORT OF APPRAISAL IOF THE ELECTRIC UTILITIES SYSTEM OF THE KENTUCKY UTILITIES COMPANY IN PADUCAH, KENTUCKY, MADE EY L. R. HOWSON AND J. SAMUEL HARTT, THE APPRAISERS APPOINTED TO EVALUATE SAID SYSTEM, AND AUTHORIZING STUART JOHNSTON, THE MAYOR PRO TEM, TO TRANSMIT TO R. M. WATT, PRESIDENT O THE KENTUCKY UTILITIES COMPANY A LETTER REQUESTING HIS ADVICES AS TO WHETHER THE KENTUCKY UTILITIES COMPANY IS IN AGREEMENT WITH THE CI OF PADUCAH THAT THE PRICING PERIOD OF 1945-46 IS APPLICABLE FOR THE PURCHASE OF SAID UTILITIES SYSTEM WHEREAS, Under a notice given to the Kentucky Utilities Company as provided in Section 7 of an ordinance entitled: "Aid ORDINANCE CREATING A FRANCHISE OR PRIVILEGE TO FURNISH ELECTRICITY FOR LIGHT, POWER, HEAT AND ANY OTHER PURPOSE FOR 14iICH ELECTRICITY IS USED IN THE CITY OF PADUCAH, KENTUCKY, AND PROVIDING FOR THE SALE OF SAID FRANCHISE OR PRIVILEGE" which was adopted by the Board of Commissio ers of the City of Paducah on August 20, 1940, and under a notice given said company by the Electric Plant Board of the City of Paducah, Kentucky, as provided in a resolution adopted by said board, the @i y of Paducah caused to be appointed a board of appraisers to make a survey of, appraise and submit to the City of Paducah its valuation of said electric utilities system; and, WHEREAS, it was further provided under Section 7 of the afore- said ordinance that after the filing of said report of appraisal, the city may proceed to purchase said electric utilities system as provided under Section 3480 d-3 6f the Kentucky Statutes and under such other Acts of the legislature which regulate the acquisition by purchase of electric light, heat and power plants by cities of the second class; and WHEREAS, Under date of December 7, 1948 the said L. R. Howson and J. Samuel Hartt submitted to Victor C. Hobday, the City Manager their written report of appraisal which is in words and figures as follows, to -wit: recember 7, 1948 "Mr. Victor C. Hobday, City Manager City of Paducah Paducah, Kentucky Mr. Robert M. Watt, President Kentucky Utilities Company 159 S. Main Street Lexington, Kentucky Dpar Sirs: For the past three years, more or less, the undersigned have been intermittently working on the appraisal of the Paducah elect properties. The intermittency arose from litigation between the principals, over which the engineers had no control. These condi have result8d in lapse of time which is turn affected the work of the engineers. 607 Initially the inventory was prices out using prices prevailing during the summer of 1946. Before that work was completed there we an interruption and work was resumed during the latter part of 1947 A new pricing out was then made as of the latter part of 1947. While conferences on those two price level basos were going o and all items other than severance and going value had been agreed upon, there was a further interruption in the Spring of 1948 and further litigation. This has resulted in a further lapse of some ten months, more or less, during which time there have been furthe. changes in price levels. The agreed cost of reproduction less depreciation using 1945 - prices and before going value and severance was $1,548,082. If, f example, we add the maximum ordinance provision for going value and severance of 33-1/3 per cent, the total as of that date become .$2,064,109. Similarly the agreed total of :1,971,871. using late 1947 increased by 33-1/3 per cent for going value and severance, wo be $2,629,151. 1.7hile neither of us has made a reproduction less depreciation estimate based upon prices prevailing as of December 1948, recogni cost indicios..show in the neighborhood of a ten per cent increase as between the 1947 date referred to above and December 1948. From our association in this study we are of the opinion that this stage much would be gained by a conference in which the print and their engineers discuss the above and their relation to such allied questions as the possible acquisition of the gas property, the source from which the City would purchase power if it acquires the property, and the cost of such power services and other factor which either party may think affects the matter of acquisition. We accordingly recommend that such a conference be held. 'Ile believe it is the most constructive method of terminating this proceeding. In view of the elements of time and cost involved in making further reproduction estimates and that appears to us to be the obvious advantage of the procedure herein recommended, vie will postpone further work until we receive your specific instructions. Please advise us either individually or jointly of a date and place convenient for such a meeting. Yours very truly, L. R. Howson Jay Samuel Hartt" AND WHEREAS, For the purpose of obtaining more specific in- formation which would serve to confirm the agreements of said appraisers which are contained in the aforesaid letter of December 7, 1948, the City Manager transmitted to them under date of Decemb 13, 1948, a letter which reads as follows: December 13, 1948 "Mr. L. R. Howson Alvord, Burdick and Howson 1401 Civic Opera Building Chicago, Illinois J. Samuel Hartt 327 South LaSalle Street Chicago, Illinois Gentlemen: This acknowledges receipt of your letter of December 7, 1948, with reference to your valuation of the local electric utilities system of the Kentucky Utilities Company. I have noted in par- ticular the following paragraphs: "The agrees cost of reproduction less depreciation usin 1945-x.946 prices and before going value and severance was 1,548,082. If, for example, we add the maximum ordinanc provision for going value and severance of 33-1/3 percent, th total as of that date becomes $2,064,109. "Similarly the agreed total of :1,971,871, using late 1947 t 608 prices increased by 33-1/3 percent for going value and severance, would be $2,629,161." Will you please make your report more specific by stating whether 33-1/3 percent is the percentage agreed upon for going value and severange for each of the pricing periods you have mentioned. I infer that you have agreed upon the fair and reasonavle value of the system as of the prices prevailing during two different periods mentioned in your letter, and that the only matter about which you are not in agreement is whether -the prices of one or the other of those periods or present prevailing prices should be used. I will thank you to confirm my understanding of your letter on this point. If possible, please let me have a reply by return mail". ;Very truly yours, Victor C. Hobday City Manager." AND WHEREAS, Under date of December 15, 1948, the said L. R. Howson and J. Samuel Hartt confirmed their previous report of appraisal dated December 7, 1948, and said letter of December 15, 1948, is in words and figures as follows, to -wit: Dec. 15, 1948 "Pdr. Victor C. Hobday City Manager Paducah, Ky Dear Mr. Hobday: This is in reply to your letter of December 13th addressed jointly to the undersigned, requesting a clarification of wording in our letter of December 7th. Relative to the provisions for going value and severance, Mr. Howson taked the position that this is a dollar item rather than a percentage. He feels that the application of the maximum percenti age allowed under the ordinance to the agreed figure of $1,548,082 at 1945-46 prices which results in the amount of $516,027 is a fair and reasonable allowance for going value and severance and accird= ingly agrees to that amount. Mr. Howson also feels that the maximum percentage application to the agreed physical value as of 1947 period, namely, $1,971,871 amounting to $657,290 is a very liberal allowance for this item, bu one which under the conditions surrounding the Paducah property and its earnings he agrees to concede. These two allowances being the maximum allowable under the prdinance, Mr. Hartt also agrees. Going val}xe and severance allow- ance on the value computed at present day prices (end of 1948) has not been computed. The inference in the last paragraph of your letter of December 13th is correct. We are in agreement as to the fair and reasonable value of the system for the two respective periods of 1945-46 and 1947 but have made no computations based upon the 1948 present day prices. We are not in agreement as to what price levels should prevail, i.e. whether - (a) 1945-46 (b) 1947, on ( c) late 1948. "We trust this will clarify our letter of December 7, 1948. We again suggest that much might be gained by a conference such as suggested in our letter of December 7th." Yours very truly L. R. Howson CC Mr. Robt. M. Watt" J. S. Hartt 609 AND WHEREAS, It appears from the aforesaid report of apprais that the said L. R. Howson and J. Samuel Hartt jave agreed upon a fair and reasonable value of said electric system for the two respective periods of 1945-46 and 1947; and, WHEREAS, It further appears that the valuation placed upon said properties for the 1945-46 period are applicable under the provisions of Section 7 of the aforesaid franchise ordinance; NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF COPfiMISSIONERS OF THE CITY OF PADUCAH, KENTUCKY: SECTION 1. That the aforesaid reports of appraisal of the Kentucky Utilities System in Paducah, Kentucky, made by L. R. How and J. Samuel Hartt be received and filed, and that their valuati of said utilities system as of the period of 1945-1946 in the tota sum of 6w2,064,109, be accepted as and for their report of appraisa and their agreement of the fair and reasonable price to be paid to the Kentucky Utilities Company for said electric system. SECTION 2. That Stuart Johnston, the Mayor Pro Tem, be and is hereby authorized to transmit to R. M. Watt, President of the Kentucky Utilities Company, Lexington, Kentucky, a letter which shall reas as follows: - Decenber 21, 1948 Mr. R. 14. Watt President, Kentucky Utilities Company 159 West Main Street Lexington, Kentucky Dear Mr. Watt: "I am herewith transmitting to you a certified copy of a resolution which the Board of Commissioners adopted tonight in connection with the proceeding of the City of Paducah to acquire the electric utilities system of your company. This resolution speaks for itself. We would like to receive from you an expression as to whether you concede that the valuation fixed by the appraisers, L. R. Howso and J. Samuel Hartt, as of the 1945-46 pricing period, the. same amounting to $2,064,109 as shown in their appraisal report, is the valuation by which the parties are bound under the provisions of Section 7 of the franchise ordinance. If at all possible, we will ask you to let us have a reply before the next meeting of the board which is to be held on Tuesday, December 28 at 7:30 P.M." Respectfully yours, Stuart Johnston Mayor Pro Tem SECTION 3. This resolution shall be full fore and effect from an a er its adoption. �� Mayor \P-ro em Commiss onor tUeo E. Arlen Passed by the Board of Commissioners, December 21, 1948 Recorded by Sarah Thurman, City Clerk, December 21, 1048