The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1897-08-19
ON THE GROSS EARNINGS
STATE TAX BOARDS METHOD OF AS
SESSING RAILROAD PROPERTY.
One of the Members Admission-The
Plea of Nandalia and Central
Union Telephone Company.

TO Know upon just what theory the Indiana
State Tax Board has been proceeding in
liking its valuations of corporate property.
AS the law requires, the board has taken
into account the cost of construction, the
market value of the securities and the earn
ing capacity of railroads and telegraphs.
but it has placed its main reliance upon
the gross earnings Year after year such
prominent men as Brooks, ingalls, and
others of long experience have given the
board their views upon what is the fairest
method of arriving at the true value Of rail-
road property. The systems of bookkeep-
ing vary to such degree that the net earn
ings do not form a fair criterion, for some
roads charge in betterments as operating
expenses. There is no uniform system Of
bookkeeping. Construction cost is no cri-
terion, for some roads are very valuable,
while others are hardly worth the iron
In looking the whole matter over this
year the board determined to place it's main
reliance upon the gross earnings, deducting
from tkem fair allowance for operating
expenses, and from the remainder capital
izing the property upon a 6 per cent. basis.
They found that the average operating ex-
penses of fairly well-conducted roads was
Il per cent. of the gross receipts, and this
they have figured upon, feeling that where
one management got it down to 60 per cent
it ought not to be taxed for it's ability, nor
ought the management that allows it to
run up to 81 or So per cent be relieved on
account Of it's incompetency. Allowance
mas been made for particular circumstances
ana the result thus reached has always
been compared with the market value Of
the securities, and where too wide Vari-
ance has been found allowance has been
MADE Tor the difference but as a general
thing the result thus reached tallies pretty
closely with market values.
All the railroad advocates that have APP
peared before the board this year have
made more or less indirect efforts to find
out how it arrived at it's conclusions, but
none of them has figured 1t out. After
yesterdays session, however, one Of the
method here described was the one pur-
sued
Two of the great railroads of Indiana and
the Central Union Telephone, Company were
before the board yesterday pleading with
the board to revise it's valuation of their
property. The Monon was represented by
A j. O'Reilly, who read a brief urging that
the assessment on the Michigan City di-
vision be reduced. Judge Field had pleaded
without effect.
The ,Xandalia was represented by Re-
ceiver Malott and John 9; Williams, re-
twenty years vice president and general
solicitor for the company. He resigned
when the Pennsylvania management took
hold, and after being out for year brought
the receivership proceedings. Th1s year
the board reduced the assessment OF the
Improbable Logansport and Lake Michigan
branches, but raised the valuation or the
main line $1,000 a mile. 1t was TINS that
brought Mr.. Williams again before the
board and he pleaded earnestly. lie pro-
ceeded upon the theory that the boaro was
fixing it's valuation by means of net earn
ings, and declared that the losses In OPP
Grating the Peoria, Logansport and Lake
Michigan branches should be taken INTO
account in figuring the net earnings o. tr.e
IiY1a for direct
against it's earnings. He desired he sald
to repel the insinuation that had been MADE
in certain quarters that the roao mao pee r
put into the hands of receiver Tor pur5
pose. 1t had been put there because IL Idu
to go there to protect its credltors ne
showed that during the eight months ana
seventeen days since Mr.. Malott had pc
come receiver the expenses had been re-
diced over 100000, but the gross receipts
come had decreased per cent, and the ex-
penses had been reduced Il per GENT Gent. put put
still in that period the road hao IaAeh Oe-
hind it's expenses over $23,0O0
The Vandalia and Big Four are warm
rivals for business between TINS city anu
mink the talk of President ingalls, before
the board had had something 70 40 win
the increased valuation. Toward the close
of his speech he paid his respects 10 Mr.
IF the statements made here by Mr.. In
calls have had an influence upon this
board and to them is due the fact that you
have raised our road and reduced MS.
ask Won 10 receive those statements WIN
extreme caution, and verify them, If they
can be verified before you allow them 10
control your judgment as to the value of
this property. l hardly like for the presi-
dent of the Big Four road TO come De1ore
this board and tell them so and so, and
that anybody who doesn't admit that Is IN
sane and that his road is only earning o0
per cent of what my road is and then to
see, as a result, that my property IS ra1sed
and his property lowered. / DO not wish
him to perform the functions OF this board
/ have always trusted implicitly in the
boards Judgment and in the board dlscre-
ton and in its entire and hearty desire 10
do what was best for all concerned. /
have never seen this board or single
member Of this board that l thought in
tended to do an injustice TO a single road
in the State of Indiana or any other State
| have always felt that they cid by me as
thew believed to be right, and If told
them what my judgment was | did not
think they were insane because their Judg-
ment did not follow mine / never thought
that they were not fit to pass upon the Valu
alton of the Terre Haute & Indianapolis
road. / never thought that the findings
should be assaulted before them, and be-
fore the courts, and through the Supreme
Court of the United States in an effort to
bring them into discredit and try to de-
stroy their authority"
In the afternoon the Central Union Tele-
phone Company appeared by Its attorney,
MIR Richardson and its treasurer, Mr..
Chapman to plead against the valuation
of its property at $3.50 mile. declaring mat
neither the cost OF construction nor the
earnings of the company would justify such
an assessment. +. ii. HAWKINS TAXED IN
behalf of the Chicago & West Mlchlgdn,
t@tvk val il41g