upr000064 89

S®® few the Production Company, Wh a* oleotrle poviTi which almoat doubled in 1980, need analysis, and if. Johnson is going to look into that aa well &a to submit wSaat basis figures bo can on fagp^I and other coats that relata to, tbs operations of the Distribution Company* Likewise, Omaha haa been asked for a HetlnSom. We have made our revenue estimate for 1931, so tiast is ©Qmpletod. Similarly, fined capital, rata base figures and depreciation estimates hare been completed* This means that the work yet to be dons relates essentially to operating expenses, including the management fee aaelgsomikta* With these basis figures, it will than be necessary to eat than up in .proper for® and sake the necessary eomputation*, Including Federal income tax* Xa reference to the latter, it may be pointed oat that sinea the Initial report was prepared, there has bean a change In the Federal income tax law* The peasant revenue Aet is somewhat more favorable to the small eorporatlon in that the surtax rate does not become Off active until after Mss first $83,000 of net taxable income. This means a lesser Federal Income tax because of the $83,000 exemption, ineameah ae the sum of both the normal and surtax at the present time is etlll the 40 used in the initial report as mis of the bases of emgputatloh, and, as stated, the surtax portion, Which originally applied on the total taxable income, now does not apply until after the first $83,000* The tea adjustment ie one of the principal reasons why the gross revenue deficiency as tentatively cow* piled for 1931 is lass then thst confuted for i960 andsr the 40 Income tax leval, 8 * 1 had planned to work op some material that would be helpful in supporting the 60 rate of return requested* in doing this, 1 did not have in mind attempting te make an extensive study* Such a study and/or presentation sdgjht take and be dependent upon two avenues, of approach! (a) ? The setting up of a typical financial structure that a water utility each as the iVS^SGs* might have if it were operated as an Independent corporation with bonds and preferred and common stock outstanding* The cost in money from such a set-up would then be developed;