The Sunday tatler and Jersey City express. (Jersey City, N.J.) 1883-1886, 1885-08-16
VALUING THE RAIL ROADS.
SHALL VALUES BE BASED ON EARN-
ING CAPACITY ONLYs

SHALL VALUES BE BASED ON EARN
ING CAPACITY ONLYs
| A witness I'm the Great Central Rail
Road Certiorari cases who argues
strongly an support Of that View.
| The Central Railroad on Friday pro-
duced an important witness on their side
for examination in the fight they are wag-
| ing against the State for reduction of
their tax assessment under the railroad law
of 1884. The gentleman referred to is Mr..
Joseph S. Harris, President of the Lehigh
Coal and Navigation Company. Mr.. Har-
ris is wonderfully shrewd and well-in-
formed civil engineer-having been engaged
in numerous large enterprises and having
been at one time Chief Engineer of the
Morris and Essex Railroad, and, from 1880
to 1882, General Manager of the New Jer-
sey Central. He testified that all his ex-
perience goes to demonstrate that the
value of railroad cannot be estimated
from any other basis than that of earning
capacity; that the earning capacity of a
railroad does not depend directly in any re-
spect upon cost; he admitted that net earn
ing capacity does, in some cases, bear some
relation to cost, in SO far that cost may have
been enlarged in making most perfect
road possible. Being asked to illustrate
how the earning capacity of railorad
would be affected by causes entirely out
side of its cost of construction, the witness
stated that the replacing of the business of
the Lehigh Valley Railroad and the coal
traffic of the Delaware. Lackawanna
and Western Railroad, which once
passed over the Central Railroad.
on the Central would add at least so per
cent. to its present earnings, and the with
drawal of the business which comes to the
Central over the Lehigh and Susquehanna
would reduce the formers present earn
ings, he thought, one-third. Mr. De Forest
asked the witness if his attention had been
especially called to the question of the
proper method of valuing such properties
as railroad or mining interests. He replied
that in 1880 he was called upon by the Re-
ceivers of the Philadelphia and Reading
Coal and Iron Company to make a valua-
ton of very large coal estate belonging
to that company. In that case he found
that there could be no valuation based on
the sale of the property, because such
property practically could not be sold.
there being scarcely possibility of pur-
chaser of it as a whole, and, if the attempt
were made to divert it, the sale of it would
take so long time, and the value from
year to year would huctuate so greatly,
that it would be a mere matter of guess
work what a property disposed of in that
way would bring. 81 therefore concluded"
continued the witness, that the only
basis of valuation was the earning capacity
of the property, and I am persuaded that
that principle applies as strictly to the
property Of railroad company as it does
70 ruoc o. l,ak
interested in valuing. ] have frequently
been called upon since to make such valu-
atoms, and have found the principle very
generally absolute that value can only
fairly be based on earning capacity"
ssCan you illustrate" asked Mr.. De
Forest, sstnis proposition that cost or en-
gineering value furnishes no criterion or
basis of true value, particularly with re-
gard to railroads, both recently constructed
and of long existence?"
Gas to railroads of remote construction"
replied Mr.. Harris, ssperhaps as good an
illustration as any is the case of what is
known as the Main Line of Public Works
of the State of Pennsylvania; that original
ly consisted of two or three miles of track
on the east side of the SchuylkilI through
Philadelphia; of an incline plane ascend
ing the hills Immediately west of the river;
of locomotive road. thence. to Columbia,
Pa; of an incline plane descending to the
Susquehanna river at Columbia; CT a canal
running along close to the Sllsquehanna
and Juniata rivers; of system of incline
planes ascending and descending the Allie
gheny mountains; of tunnel through
the summit of the mountains, and a canal
descending the Conemaugh river at Pitts
burgh, costing, possibly, $4,000, 000 A
great part of that system, owing to the
changed practice of engineering construc-
ton, has been absolutely abandoned years
ago. The Pennsylvania Railroad Company
bought it some years ago for mere triie
of its cost, but can utilize but very small
portion of the system.
The witness stated several other instances
of the kind, notably an immense system of
gravity roads and planes, constructed
many years ago by the company of which
he is now president, of which the only USE
full portion now remaining is the famous
Switch-back Railroad at Mauch Chunk,
which to-day realizes to its owner
q revenue of but from $1,000
to $1,000 per annum. Sand it is
doubtful" he continued, sswhether it will
pay to maintain it at all after its present
equipment is worn out" Mr.. Harris also
testified that it was impossible to estimate
the value of railroad separated into its
component parts, but that it must be valued
as whole machine capable of earning 80
much money. He said that earning ca
pacity is contingent on the traffic road
can command and control, and gave as an
instance the Morris Canal, which cost to
construct many millions Of dollars, yet to-
day does not more than pay its expenses,
outside of the advantage Of control Of a
water region. The witness gave many
striking instances of why the value of q
railroad can only be estimated by its earn
ing capacity, and of properties that had
cost extravagant sums of money years ago
could not be sold to-day for song as COM
pared to their cost on account of their in
capacity to earn money. He will be cross
examined in September. The suit has
come to practical stop-with the excep-
ton of the cross-examination of assessors
until September 18th, when the fight viii
be renewed with new vigor. In the mean
time Judge Hoffman will probably COM
mence the preparation of the States brief.
.s.k-