The record-union., 1896-03-16
THE COST IN EXCESS OF THE
INDEBTEDNESS.

In the matter OF the acUon OF Ihe
State Railroad Commission, in passing a
sweeping reduction resolution affecting
freight rates upon the California system
of railroads. and which is now under ex-
animation before the United States Cir
cult Court at San Francisco, the basis
Of the claim for the reduction was that
the bonded Indebtedness of the railroad
company exceeds the cost of the con-
struction of the roads. This was the
only claim made, indeed, in justinca-
ton of the radical action that was
taken, and which has been assailed in
the suit now pending before the Circuit
Court.
In that case the court exercised the
discretion it has and permitted the
Railroad Commission the widest pos
sible latitude in drawing testimony
from all possible sources to sustain
it's contention, and it fastened to
avail of it. Among the testimonies
thus put in were those embraced in the
Investigation of the Pacific Railways
Commission some years ago. In the
argument of the case the other day the
counsel for the Southern Pacific Com
pany, Mr.. Herrin, reviewing, in fact,
accepting this and all the testimony
before the court, established beyond all
possibility of doubt that the cost OF the
construction of the roads involved far
exceeded the bonded Indebtedness.
Tt will well repay whoever desires TO
be informed upon this important matter
to read the argument Of Mr.. Herrin IN
full on this particular point, for he was
so fortified at every side by citations
from the evidence that he removed
even the faintest shadow of every doubt
as to the soundness of the contention
made by the railroad company, namely,
that the cost of the construction OF the
roads exceeded the bonded indebted
ness.
one of the chief values of the coun-
sePs argument, which ought to be read
by all citizens, and which was reported
in full in the EXAMINER of last Friday,
is that Iaymen may read it without any
confusion of thought. 1t is simple
clear. direct, logical and so marshaled
as to address the layman's understand
ing, and so arranged as to simplify the
propositions of law involved, and lu-
cidly expose the principles upon which
the contention rests, and the facts
from which the conclusions reached are
deducible.
AS a matter of preface it may be
stated that counsel made 1t clear that
in considering values in such an issue
as is before the court, a valuation made
for assessment for taxation purposes
is not only not conclusive when value
for other purposes is considered, put
is not a. lust basis for the estimation OF
actual values, since an assessment Tor
taxation is made for a special purpose,
and not usually at market value. 1t is
not, therefore, admissible as evidence
Of the value of property generally, when
another purpose is to be considered.
The testimony taken before the Pa
cific Railway Investigation Commits
sion was all directed toward the as
certainment of the cost, not the value
of the railroads under review. In ex-
anining this testimony counsel went
into detail, giving, however, the rea-
son for every detail, and Illuminating
his argument with citations from the
testimony given, and which the Cali
fornia Railroad Commission has in
troduced in support or its proposition
for a sweeping 1eveling and inequitable
reduction of rates of freight carriage.
The investigation, however, did not
include all the roads of the California
it did not at all touch. From this tes-
timony and all before the court, it ap-
pears that the funds for the construc-
ton of the original transcontinental
road and subsequent parts of it's sys-
tenn were obtained from three sources
the sale of first mortgage bonds, the
sale of Government bonds under Acts
of Congress, and the sale of municipal
bonds, together with aid had from peo-
pie as individuals.
All the money so obtained was paid
out to the last dollar for construction
and equipment, and even then the con-
tractors at the conclusion of the con-
struction were left some millions ot
dollars in debt. The profit that they
did make was made upon the stock Of
the Central Pacific Railroad Company
passed to them on the completion of the
line. The testimony on this point is
voIuminous, in the mouths of several
witnesses, and is not contradicted OF
even challenged.
The Central Pacific Railroad cost te
the 690th mile-according to the expert
accountant employed by the investigat.
ing commissioner $50, ,5S9, 1T 93
The Secretary of the company found the
cost TO be S32. Az, ,135 58; the commits.
sion found that the total cost of the road
from Sacramento to Ogden was in round
numbers 36,00O,000. The accountant
and expert of the commission testified
that he found the books honestly and
sauarely kept. It is to be remembered
that beyond the 690th mile forty -sever
xuilea of the road to Ogden were 2ux'