upr000342 32

4v> In installing the service connection is not capitalises hut is treated as an operating expense* A change at this time, i, e* for the rate case, would not he advantageous to the Company unless the 4809 service con­nections now in service were capitalized and included in the rate base. Uhe other important items in this revenue classification represent penalties in the amount of #1044.25 for failure to pay-water bills on time. Operating Expenses x Only limited discussion will be given at this time* The most important item is of course the purchase price of water. Some of the more important points may be set down as follows: Cost of water to LVL&avco.: The summary results of operation as set forth on page 2 reflects important changes in the billings as now rendered. Such changes include: 1 - Use of a depreciated capital base. 2 * Reduction in the annual depreciation percentage from 4# to approximately 1.5# on the Original Cost and 1.0# on the reproduction cost. 5 - The elimination of the ad valorem tax charge at the #1.75 rate on the ^investment in the properties and the sub­stitution therefor of a proportionate part of the tax paid on the land to the city. 4 - The Inclusion of a federal income tax, conforming to a 6,0 and 6-5/4# rate of return, 9