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Water Company Obtains An Injunction Against City

Water Company Obtains An Injunction Against City image
Parent Issue
Day
31
Month
January
Year
1902
Copyright
Public Domain
OCR Text

WATER COMPANY OBTAINS AN INJUNCTION AGAINST CITY

To Restrain Ann Arbor from Enforcing the New Ordinance--Bill Filed To Have The Ordinance Declared Void--Long Litigation Has Commenced At Last

A bill of complaint was filed yesterday in the circuit court by the Water Company against the city of Ann Arbor and a preliminary injunction was granted by Judge Kinne restraining the enforcement of the ordinance passed by the Common Council on the 16th day of December for the purpose of reducing water rates in this city. the bill of complaint is the first public statement of the position occupied by the Water Company in the controversy over the subject of rates which has been going on for some time.

It appears from the bill that the act of the legislature under which the company was organized made it the duty of the common council of the city by ordinance to grant to such company the right to lay its pipes in the streets of the city and permitted the city in such ordinance to impose certain restrictions in relation to the rates to protect the inhabitants of the city from undue or excessive rates, but it was provided in the act that no such restriction should be imposed which would prevent the company from realizing upon its capital stock an annual income or dividend of ten per cent after paying the cost of all necessary repairs and expenses, interest on all moneys borrowed and five per cent per annum into sinking funds for the extinguishment of funded debts.

The city passed such an ordinance that the rates should be reasonable and not exceeding in amount the average sums paid by the inhabitants of other cities of Michigan similarly situated and of like population and supplied by private companies.

It has been contended by the city that by accepting this ordinance the company waived its rights under the statute, but it is claimed in the bill that the statute fixes a minimum below which the company cannot be compelled to go in fixing rates and that the ordinance fixes a maximum above which they are prohibited from going in fixing rates. The act of the legislature is a conclusive determination that any schedule of rates which prevents the company from realizing 10 per cent upon its capital stock is unreasonably low and it is contended that until it can be shown that the revenue of the company is more than sufficient to pay operating expenses, interest and a five per cent contribution to a sinking fund the city has no right whatever to interfere. The bill shows that for the year 1901 the operating expenses were $16,357.69, the interest on borrowed money was $11,765, making a total of fixed charges of $28,122.69, five per cent upon the capital stock amounts to $4,375, and a ten per cent dividend to $8,750, making a total revenue which the company claims it is entitled to under the statute of $41,247.69. It is stated that in the year 1901 the gross receipts from all sources was only $39,220.44 or more than $2,000 less than the statute authorizes. It is also pointed out that under the ordinance adopted by the city in December the revenue would not exceed $27,000, which would not be sufficient to pay operating expenses and interest, to say nothing of any sinking fund or dividend whatever. It is contended, therefore, that the ordinance of 1885 constitutes a contract between the city and the company which the legislature authorized the city to make, but which the legislature has not authorized the city to change in any respect and that therefore the ordinance of December 16th impairs the obligation of this contract within the meaning of the constitution of Michigan and of the United States and is therefore void.

A portion of Sherman's report is set up in the affidavit attached to the bill wherein the engineer claimed that the average rate in other cities within the meaning of the ordinance was as follows:

Family rate, 8 rooms, 6 people . . . . $7.75

Water Closet . . . . $3.42

Bath Tub . . . . $3.00

Hose . . . . $6.18

Meters, maximum . . . . $0.25

Meters, minimum . . . . $0.117

And it is alleged in the bill that the average rates charged in the City of Ann Arbor are as follows:

528 families pay for domestic use . . . . $5

1129 families pay for domestic use . . . . $8

33 families pay for domestic use . . . . $6

making an average of $7.20 in place of $7.75 in other cities.

1164 water closets are charged for at . . . . $3.50

212 water closets are charged for at $2.00

7 water closets are charged for at $6.00

making an average if $3.28 in pace of $3.42 in other cities.

702 bath tubs are charged for at . . . . $3.00

39 bath tubs are charged for at . . . . $1.00

making an average of $2.90 in place of $3.00 in other cities.

1160 sprinkling privileges are charged for at . . . . $5.00

17 sprinkling privileges are charged for at . . . . $10.00

making an average of $5.07 in place of $6.18 in other cities, while the maximum charged for meters is sown .20 as against .25 in other cities, and a minimum .08 as against .117 in other cities, and it is further shown that whereas the average rate in other cities is computed by Sherman upon the basis of an 8-room house with 5 people, the average number of rooms in the houses supplied with water in this city is a fraction less than 10 and that the average number of people in the houses supplied with water in Ann Arbor is 5 1/2.

The peculiarities of the situation of the city of Ann Arbor with reference to this water supply are pointed out and it is claimed that there is no city in Michigan similarly situated in all respects. In anticipation of the defense that the stock of the company is partly water it is alleged in the bill that in 1893 it was discovered that A. W. Hamilton was indebted to the company to the extent of $40,050,, the greater portion of which was on account of stock which he had issued to himself and never paid for; that during the receivership $23,050 of this stock was surrendered and cancelled and that the balance of Hamilton's obligation of $17,000 was charged to profit and loss and that the plant has actually cost more than $317,200, exclusive of any losses resulting from the mismanagement or defalcation of Mr. Hamilton. It appears that the original contract price for the construction of the plant was $190,000 at which time there was one pump, one boiler and 18 miles of mains, whereas at the present time there are four pumps, four boilers and more than 36 miles of mains; that the company was compelled to construct an auxiliary station on Washington street where 35 wells were sunk at a cost in all of upwards of $15,000 and that the necessity of operating two pumping stations increases the operating expenses of the company more than $2,500 a year above what would be the case in a city so situated that the entire supply could be drawn from one locality.

The bill prays for a decree declaring the ordinance void and a perpetual injunction against its enforcement. Lawrence & Butterfield appear as solicitors for the company, with Ashley Pond, of Detroit, of cousel.