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Show Serials Order Department WESTERN AMERICAN University of Utah 84113 Salt Lake City, Utah iiiAktfaUit Qusaranft m r. imifimmmmi" :v::':::'.-:- : . ': '. uiiiiiiwiiiiiiiiiwwwwMWwa SALT LAKE CITY, UTAH VOLUME 1. NUMBER 16 74 Financial Developments Did Not Follow Script Financial developments in the first half of 1974 did not follow the accepted script for a period of economic slowdown. Hit by rampant inflation and record credit demand, financial markets behaved as if the nation were in boom. the midst of a Money-markrates moved onto an escalator with no apparent terminus, and banks were caught in a maelstrom of seemingly unending business-loa- n demand. In some respects this was a repeat of the early 1973 experience, but many of the ingredients were quite different indeed. full-fledg- et MONDAY, JULY 29, 1974 Utah Foundation Reports: Healthy Mass Transit Operation Affects Welfare of All Citizens commercial paper. The prime rate was very volatile in the first half of 1974. In line with the ' abortive decline.in money-markrates Voters of Salt Lake, Weber, and in late January and February, banks Davis Counties will decide the imlowered their prime rate from 9V to mediate future of mass transit fundet 8 percent in four steps. Then, as price expectations worsened and money rates began their steep ascent, banks quickly reversed themselves and moved the prime up in 13 steps to a record 11 percent at (The level was reached in early July.) mid-yea- r. nt Cosily Search for Funds Much of the credit demand was either inflation-induce- d or else the reThroughout the nation, banks ensult of shortages in supplies, energy countered increasing difficulties in and capital facilities. In long-tertheir search for funds to fuel the masmarkets, investors held out for higher sive asset explosion. Private demand and higher yields as an end to the in- deposits rose about $1 billion over 1973. However, this gain was flation spiral became more, illusory, year-enwhile pressures on short-termore markets than offset by a reduction in U.S. were even more intense. The monetary Government deposits, which remained authorities maintained a restrictive ' at unusually low levels throughout stance because the first-hal- f decline in most of the period. Time real GNP was largely induced by spec- deposits (Other than large CD's) rose ial supply problems rather than by a more than $16 billion. deficiency in demand. Even so, the Nonetheless, the bulk of deposit narrowly defined money supply rose at more than a annual rate, funds came from while bank credit expanded at a CD's, which increased by $21 billion in n the January-Jun- e in elsewhere period to an the West as rate, . contrib-total Western banks in the nation. uted disproportionately, accounting h Banks accommodated huge business for about of the total indemands for credit, including demand crease. Rates for CD's moved in step diverted from, the commercial paper with other money-markrates, dipand capital markets. But e high ping below 8 percent in February and asset holdings at record rates of return rising to a record 12 percent at the end did not necessarily produce record of June. Despite this cost upsurge, earnings. Many banks saw their profit some major Western banks maintainmargins narrow as their own costs for ed an overall cost advantage on time g funds rose in tandem with other money deposits by continuing to pay a market rates and as the spread berate of 4.5 percent on passbook tween their borrowing and lending savings, which represent a large segrates narrowed. Those institutions ment of their total time deposits. which were heavily dependent on large Troubled Outlook CD's, Federal funds and other borrowvulnerbecame ed funds Unease prevailed in money and particularly able. In addition, net income declined credit markets as the third quarter at some banks because of capital loss- began, highlighted by the unsettled es on their security portfolios and conditions in the capital, commercial transactions. With paper and acceptance markets which liquidity problems' increasing, loan followed the Con Edison, Franklin losses rose and potential problem situNational and Herstatt Bank situaations multiplied. Overall, it was not tions. With the development of two-tie- r an entirely happy period for banks. financial markets, some borrowers have been paying premium rates and Business Loans Dominant some have had serious trouble finding Total loans increased by $35 billion accommodation. Aa a result, borrowers from other markets are turning inin the first half of the year, with business loans accounting for over one-hacreasingly to banks to meet their of the total gain. Banks in the San credit needs. These demands have conn Francisco District recorded verged upon banks at a time when share loan financing requests were already high, increase, with the business when the "bite" of monetary, and d reof that coming to over seasonalare data increase. policy was already becoming uncom(All gional fortable. businthe ly adjusted.) Borrowing by ess sector got off to a fast start in JanSince the demise of price controls in uary, slowed in February and then late April, banks have made upward anspurted to more than a in mortgage, consumer adjustments nual growth rate in March and April. and loan rates, which The torrid borrowing pace decelerated for two had been years kept artificially somewhat in the following months, low in relation to other rates. As time luckily so because of the trouble the goes on, these adjustments should imbanks had obtaining funds. pact favorably on net operating inBy the second quarter, banks began come, and should also help banks in r to get a from the capital controlling their loan demand. costlier as markets, financing and inIn addition to higher costs for vestor selectivity made long-teroffunds, banks are faced with increasing ferings more difficult to arrange. delinquencies on consumer and mort-- . a Bank loan demand surged further gage loans, and also with growing because of the narrowing differential liquidity problems of some major customers. A return to more stable capital which developed, especially in the perand money-markconditions will iod from late March through May, berelieve current but banks pressures, tween the prime business-loa- n rate nonetheless will have to emphasize commercial-pape- r and the dealer-placerate. The development of a two-tie- r loan monitoring and improved liability management during the remainder paper market contributed to this of the year. shift, as many corporations and bank holding companies had trouble selling Ruth Wilson m ing in their areas at the November .election, but interest in the transit vote extends across the entire state, according to Utah Foundation, the private, nonprofit, public service agency. A healthy mass transit operation is important to the welfare of every metropolitan area, it is pointed out in a Foundation research report released this week, and "planners and economists in many communities elsewhere in the state believe the need for public transportation will spread to other Utah communities in the reasonably near future." Operation of the Utah Transit now confined to Salt Authority Lake County but scheduled to expand into Davis and Weber Counties on the basis of recent voter approval is substantially ahead of national averages in terms of patronage gains, the Foundation notes, but the transit operation still has to be subsidized. Public subsidy of mass transit has become widely accepted, and many operations are more dependent on public support than is Utah's: "Denver, whose transit system, is composed entirely of buses as is Salt Lake's, has a projected operating deficit of $2.5 million in 1974," the d m six-mon- th large-denominati- $85-bfllio- . one-fift- et all-tim- below-ceilin- foreig- n-currency lf a$6-billio- one-thir- 40-perc- small-busine- ss spill-ove- m et d UP&L Adds 430,000 Kilowatts of Power The $129 million initial unit of Utah Power & Light Co.'s Huntington Plant that began commercial operation in Jury adds an additional 430,000 kilowatts to the company's generating capability to meet the increasing demand for electricity. Just so that one may grasp the imthat's pact of 430,000 kilowatts, to two cities enough electricity supply the size of Ogden, Utah, or two heavy industrial loads like Kennecott Copper's Utah operation. With the addition of the Huntington unit, the uti- lity's generating capability totals an increase of 1,795,000 kilowatts 124 percent over that of ten years ago. "You don't just press a button and expect $129 million worth of technical equipment to start right off the bat," says Gordon Newbold, plant superintendent. "There are, for instance, 190 control systems which have to be thoroughly checked before the turbine-generatunit is even rolled." Actually, testing some of the systems began one year ago while construction was at its height, Mr. New-bol- d or said. Huntington Plant is located northwest of the community of Huntington and 28 miles from Price. The plant site In This Issue: Legato Probate Court Suits Births Bankruptcies Building Permits Murray Power Murray City Court New Corporations Uniform Commercial Code Filings 2 3 3 & 16 ; 6 6 7 7 & 13 7&13 8 & 16 8 10 Marriages.... 11 & 15 Warranty Deeds Attorney General Opinion . 11 12 Bountiful Power : 12 WaterService 14 Third District Court Trust Deeds , . . 14 . 14 New Partnerships 15 Business Licenses 15 Deeds Claim Quit 15 Liens 15 Mortgages : 16 Tax Liens 16 Divorces post-Worl- d was selected because of the availability of two essential ingredients: coal and water. that fuels the UP&L unit is The coal very desirable for burning in a power plant having low sulphur content (0.5 percent), relatively low in ash content and high in Btu content. The mine supplying coal to the plant is underground and located in Deer Creek' Canyon approximately two miles from the plant site. The coal is transported via a covered conveyor to a coal pile, the active portion of which is covered with a roof to control dust. Water sprays are used at all transfer points, also part of dust control, and the coal pile and conveyor are hidden from the road passing the plant. The coal is supplied by Peabody Coal Co. The plant's first unit will require 1.2 million tons of coal during normal operation. Water is supplied from the Huntington Creek and from Cottonwood Creek by water rights exchange. To provide water in dry years, unused water is stored in Electric Lake, formed by a UP&L dam 18 miles upstream from the plant. In addition to supplying makeup and service water for the plant, the $9 million dam will ultimatelake ofly back up a resito fering recreational facilities dents and visitors to the area. Company officials emphasized that no major step was taken in the design and construction of the Huntington Plant without considering environmental impact. The initial unit incorporates an electrostatic precipitator designed to remove 99.5 percent of the particulates. Huntington Plant will utilize cooling towers, thus avoiding the return of any heated water to the stream, but rather utilized on the site or evaporated from ponds. The company further explained that ash is taken from the plant to a remote draw and covered with earth. The draw is diked to prevent leaching from the ash to the surrounding area. UP&L envisions the plant to eventually have four units, each unit in the 400,000-kiIowaclass. The company has already announced plans to construct the second unit for completion . 30,000-acre-fo- ot tt in 1977. The plant has, and will continue to provide, important economic benefits to the area. In addition to payrolls and local purchases, the plant's first unit alone doubles the current proper- ty assessed County. Foundation reports. "Among larger cities, public subsidies run enormously higher, as might be expected. Last year, the Utah Transit Authority had operating expenditures of about $1.5 million arid an operating deficit of less than $400,000. However, the Utah Transit Authority is seeking additional funds to expand its service and operations. ' Salt Lake, Davis, and Weber County commissioners have legal authorization to place on the November ballot proposals to impose a levy on property andor a sales tax to finance the transit operation. Commissioners are not legally required to place either or both propositions before' the voters, but may do so at their discretion. Public subsidy of mass transit has Heroine accepted across the nation in War II period because the the need for public transportation has been recognized as applying to the entire community. As highway congestion and air pollution have increased to alarming proportions in many places, public officials, lay citizens, and environmentalist groups "got behind the movement to increase mass transit as one obvious partial solution. One bus can carry as many people as are usually transported in 20 to 40 private automobiles, while occupying only a fraction of the highway space and emitting only a fraction of the exhaust fumes generated by the fleet of private vehicles." These considerations led to the. Federal Government's modification of its traditional policy concerning the Highway Trust Fund, to recognize the broader problem of "transportation" rather than that confined to "highways". The Trust Fund, derived from excise taxes on petroleum, rubber, and other products used was in automotive transportation long strictly reserved for highway construction, but has been opened to appropriation for mass transit developments in recent years. Gasoline shortages associated with the energy crisis last winter led to significant increase in the use of mass transit. Nationally, there was a gain of nearly 6 in the first three months of 1974 over the comparable period in 1973. The Salt Lake operation was considerably ahead of the national figures, and registered an 18.5 gain for the first five, months of 1974 over the same months in 197:). "It is widely believed that if major gains in public transportation are not made under existing favorable conditions, they may be more difficult of realization later," the Foundation reports. If Salt Lake, Davis, and Weber County voters approve the quarter-cen- t sales tax increase, transit' service in Salt Lake County would be approximately doubled and service in Davis and Weber Counties considerably more than doubled. The proposed sales tax would return about 2.3 times as much as a property levy. The sales tax proposal for mass transit funding was first approved by the Utah Legislature in January, " and tied to a requirement for a the Subsequently, operation. special legislative session in June " amended the law to remove the requirement, although leaving " the way open for operation if it is desired. valuation in Emery "no-fare- "no-fare- "no-fare- . |
