City Challenges Tram Depreciation Figures

Special counsel for Winnipeg Electric, C. S. Thorvaldson, K.C., today challenged the Winnipeg Electric Company's depreciation figures on the ground that the street railway had built up reserve funds.

He made this allegation before the Municipal and Public Utility Board during a hearing of the company's application for increased fares.

Mr. Thorvaldson also submitted that the company had obtained exclusive contracts for power and light in St. Boniface and St. James in a tie-up with the provision of transportation facilities.

The Winnipeg counsel made these suggestions during cross-examination of C. H. Dahl, manager of transportation of the Winnipeg Electric Co.

Mr. Dahl would not agree with the contention the company had built up reserve funds which served as depreciation.

He admitted the company had exclusive contracts in St. Boniface and St. James but would not admit the light and power agreements were conditional to transportation.

Mr. Thorvaldson noted that the company had on its books $653,000 for depreciation of street cars. It had set down $110,000 a year for this depreciation which W. C. MacDonnell, consultant accountant, would not admit in his work.

Mr. Thorvaldson suggested that the company was now asking for deprecation for street cars because it had not set up such a fund between 1911 and 1917.

During that time, Mr. Thorvaldson suggested, a reserve fund had been built up.

"There were no reserves unless they were recorded," said Mr. Dahl.

"I suggest," continued Mr. Thorvaldson, "that the main reason why the company did not begin depreciation until 1917, was that the Canadian Income Tax Act was then introduced and it became necessary to segregate depreciation."

"You're just guessing," countered Mr. Dahl.

"No I am suggesting," replied Mr. Thorvaldson.

"I don't agree with that," said Mr. Dahl.

Mr. Thorvaldson submitted "it was wholly essential for income tax calculation to set up a fund for depreciation."

He quoted the report by Mr. MacDonnell showing that no depreciation had been set up from 1911 to 1916 inclusive.

"But in 1911, a profit of $659,147 was recorded before bond interest and income taxes were paid," said Mr. Thorvaldson.

Profit figures for the other years before depreciation are (before bond interest and income tax deduction):

"I suggest that out of these large profits, the company set up certain reserves, said Mr. Thorvaldson.

"I don't think it is true," answered Mr. Dahl, stating he did not believe the financial history of the company allowed any reserves.

"When you make the statement there were not sufficient funds set up for reserve or depreciation funds that statement is not true," continued Mr. Thorvaldson.

"That may be, but we never found any reserves except for injuries or damages," replied Mr. Dahl.

"It seem to me that the onus is on the company to prove there were no reserves set up out of a large income if you suggest $653,000 is not a proper deduction," stated Mr. Thorvaldson.

"I won't agree," replied Mr Dahl. "I think that this is a question for the legal and accounting departments to determine. I'm in operations."

Mr. Thorvaldson then referred to the contracts the company had signed with St. Boniface and St. James.

He noted that ton October 16, 1939 the Winnipeg Electric Co. signed two agreements with St. Boniface, one for light and power, the other for transportation. Agreements run to December 31, 1950.

Mr. Thorvaldson suggested that the company once having obtained a "monopoly" on transportation in St. Boniface as well as for electricity and power established there a "de facto monopoly."

"I wouldn't say to that," said Mr. Dahl.

"You own the street lighting equipment," asked Mr. Thorvaldson.

"Yes," replied Mr. Dahl.

"It is a complete monopoly by facts of the agreements," suggested Mr. Thorvaldson.

"Yes," replied Mr. Dahl.

Mr. Thorvaldson then referred to the contracts in transportation and electric power made by the Suburban Rapid Transit Co. (a subsidiary of the Winnipeg Electric) and St. James on March 1, 1937.

Mr. Thorvaldson read a clause of the contract on light and power with St. James which carried a reference to the transportation agreement.

He suggested that the contract for electricity was obtained through the prevision of transportation.

Mr. Dahl mentioned that the City Hydro had been invading their territory.

"We did check it in some municipalities."

W. D. Lawrence, K.C., representing Charleswood suggested that there was also a "de facto monopoly" by the company there. Mr. Dahl agreed.

Mr. Dahl, before cross examination, said he was &convinced" that the company should be allowed depreciation of $653,000 on street cars.