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(iv) Any small surplus which may arise after meeting all the charges referred to above should be transferred to a Water Department Reserve Fund which would be available to meet (a) any deficit on the working of the Depart- ment in subsequent years; (b) capital renewals; (c) new capital expendi- ture. For the reasons explained in paragraph 5 (b), however, the building up of a large Reserve Fund of any kind is not desirable and if surpluses are found to occur regularly charges should be reduced.
II. Cost of Water.
3. The following are considered to be the charges which should be met by the revenue of the Water Department :-
(i) Staff Charges.
*
(a) Salaries of Water Department maintenance staff, including salaries
while on leave, and overtime;
(b) Passages;
(c) Transport;
(d) Rent allowances and cost of Government quarters occupied by Water
Department staff;
(e) Cost of part of Treasury staff engaged on collection of water accounts; (f) Contribution to General Revenue to cover liability for Pensions and
Widows' and Orphans' Pensions.
(ii) Maintenance Charges.
(a) Expenditure on works, as provided in P.W.R.;
(b) Office rent, stationery, incidentals;
(c) Typhoon damage (at present charged to general "Typhoon Damage
vote);
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(d) Expenditure on new work of recurrent nature (e.g., new meters and extension of service pipes) now charged to Public Works Extra- ordinary.
(e) Recurrent cost of Waste prevention-see paragraph 16 below.
(iii) Capital Charges.
(a) Expenditure met from loan; interest and sinking fund actually payable
on the loan until redeemed.
(b) Past expenditure met from revenue (including "loan" expenditure temporarily advanced from revenue); to be repaid by an annual charge of 2 per cent., ceasing after fifty years.
(c) Future expenditure from revenue; interest and sinking fund contribu- tions at current market rate of interest (to be fixed annually, at present 31 per cent.).
4. Some of these items cannot be exactly calculated until the water accounts are fully separated, but the attached table (Appendix I) shows the best possible estimate of the above charges, based generally on 1937. The net revenue for that year is shown for comparison.
5. Two matters call for special comment.
(a) Repayment of past expenditure from revenue.
It may be argued that as this is over and done with there is no justification for making consumers pay for it now. On the other hand if the water
*Salaries, etc., of Construction Staff to be charged to Capital, i.e., at present to Loan Account.