In the correspondence, a reference is also made to alleged authority for expenditures under a letter of Sir William Hearst, then Premier.
If our view, as to the inadvisability of the Province endorsing the bonds for the construction of the project is given effect to, then the question of these expenditures so made will probably arise for consideration. The rights-of-way could, no doubt, be sold for substantial sums or otherwise dealt with, and the sum of $335,048.23 for ties, said to have been contracted for before July 21st, could no doubt be repaid by sale thereof.
The Government would have to deal with the question of any deficiency or loss in the whole matter, and also with the disposition to be made of the balance of the bonds, namely $10,160,360, which are said to be in the vaults of the Hydro Electric Power Commission unsigned and unsealed, and according to the present Government not at present available for expenditure unless it decides to proceed with the work. If, on the other hand, the municipalities, after full consideration of the facts as now disclosed, were to decide to go on with the project themselves, and at their own financial cost and risk, the entire amount of the expenditures could be recouped by them.
II PRELIMINARY CONSIDERATIONS
A fundamental error was, in our opinion, made by the Hydro Electric Power Com-mission of Ontario, when the original estimates were prepared. It was repeated when the supplementary estimates were prepared. It consisted in not seeking and securing assistance of experienced operating men, at all events insofar as operating costs and possible revenues were concerned.
In a general way, Mr. Gaby had oversight of the preparation of the entire estimates. The Hydro Electric Power Commission had had some experience in construction costs in connection with the London & Port Stanley Railway. Clearly, Mr. Gaby had little practical experience to qualify him to undertake or supervise the preparation of estimates of probable operating costs and anticipated revenues in connection with a system of electric railways. The construction estimates were turned over to Mr. T. U. Fairlie, Departmental Head of Railway Engineering on the Hydro staff. He seems to be a man of experience. His estimates were prepared with care and detail and have not been very seriously called in question. The road is designed to be of a high class and one criticism of it is that the cost of construction per mile is greater than needed or warranted.
With reference to the estimates for construction costs, some questions arose on the one hand with reference to the possible failure to make proper allowance for sinking fund, depreciation and the like, and on the other as to whether in the light of changed conditions their total estimated cost might not be cut down by say fifteen per cent. A great deal of controversy, however, centred around the estimates for operating expenses and for revenues. The preparation of the estimates for these was entrusted to Mr. W. G. Hewson, a young electrical engineer on the Hydro staff, with considerable knowledge in electrical engineering matters, but without the experience, which, in our opinion, was necessary to qualify him for the work thus laid on him.
The proposed radial railways are singular in certain respects. The cost of construction per mile is admittedly high; the operating costs, upon the evidence as a whole, are low; the anticipated revenues are higher than experience has found to be attainable elsewhere except under unusual conditions. The per mile cost of operation is low. The operating ratio is low. Operating men of experience, we were told, could go over a territory, observe the number and location of the population, the character of the industries, and the like, and arrive at a fairly reasonable and reliable estimate of the business which might be expected to be done and the cost of operation of a road of a particular type.
The Hydro-Electric Power Commission, in fact, seems to have consulted no man of operating experience but relied mainly on their own officials, who were inexperienced in this particular kind of work. It would appear to us that in setting out to obtain information on which to make estimates for projected electric railways, the natural and proper course would be to obtain the actual business done and revenue derived from the roads in the territory in question. It is said, and probably with some truth, that they could not obtain from the existing steam and electric railways operating in the territory anything like full details of the
