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DEC, 11982 <br />franchise to the Moorings, Section 14 provided that such charges <br />and rates "shall be fair and reasonable and designed to meet all <br />necessary costs of the service, including a fair rate of return <br />.on the net valuation of its properties devoted thereto under <br />efficient and economical management". In this case, since <br />Hutchinson apparently does not own any of the "properties", they <br />are not entitled to any rate of return on the net valuation of <br />such properties. Moreover, they should not be entitled to <br />impose connection charges whose sole purpose can only be to re- <br />cover their investment in such properties; in this case zero. <br />The "official" minutes (Secretary's) of the August 19, 1991 <br />public hearing indicated that the only justification for the <br />aforesaid increases in connection charges and rates was a repre- <br />sentation by a principal of Hutchinson that "the current rate <br />structure is based upon a direct operating cost of $130,000.00 <br />per year; it has nothing to do with capital value". A C.P.A. for <br />Hutchinson informed the Board "that a 9% to 10% profit is also <br />built into the rate structure". There is ilio indication in the <br />"official" minutes of what was included in the "direct operating" <br />costs nor on what the 9% to 10% profit was based. <br />However, if you will review the tapes (or unofficial minutes) <br />of that public hearing, you will find that any attempt to bre;-'_Y <br />down and identify the so-called "direct operating" costs was <br />avoided, and further that the "9% to 10% profit" was based on <br />such direct operating costs. In fact, you will find that the <br />Hutchinson C.P.A. contended that based on figures from the original <br />franchise (The Moorings)', the direct -operating cost was on the <br />order of $110,000.00 plus; that Hutchinson estimated an increase <br />in such costs to $130,000.00; that it based its profit on 9% to <br />10% of original direct operating cost and added that to the esti- <br />mated increased cast; with an expectation of collections on the <br />order of $40,000.00 to cover the foregoing:' In other words, the <br />rate increase was designed to cover the estimated increased direct <br />operating cost plus their profit based on such cost. <br />4 <br />Y <br />