The news & observer. [volume] (Raleigh, N.C.) 1894-current, 1901-11-30
TAKING FRANCHISES.

much below their real value as shown
by the sale of stocks and bonds. Thu
railroad attorneys and agents have me
this argument by saying, falsely. that il
was born of desire to Cypress corpora.
tions, but have offered no argument t.
show why railroads, telegraph, telephone
and like quasi-public corporations whose
stocks sell for more than one hundred
million dollars in cash should be as
sessed for taxation at less than fifty mil.
lion dollars.
1t seems that, instead Of being in favor
Of policy that was wrong and unknown
this paper has been behind the actor
of other States and is in accord with the
State Court of Illinois and the decision
of the Federal judges of that Circuit. The
following editorial, from the Baltimore
Sun, reviewing the recent decision in
Ohio, shows the trend of modern methods
of taxation Of quasi-public corpora tons
"a just and proper system:
THE decision of the United States Cir
cult Court in Illinois in the taxing cases,
which was announced in the Sun last
week, is of the greatest Importance, not
only in Illinois but in other States. Few
cases in recent years have attracted more
general attention, because few have been
of more real Importance. The decision of
the United States Court confirms a pre-
vious decision of the Supreme Court of
Illinois that the State has a right to
assess corporations for taxation at the
real value of their possessions, including
the value of intangible franchises. Thus,
street car company is to be assessed
at what it's property is worth, including
its right to use the streets, and not
merely at the value of it's power house,
it's rails and its cars. The difference be-
tween these valuations is illustrated by
a transaction in Western city some
years ago. A company bought out a
street car line which operated horse cars
and paid several million dollars for it,
let us say ten millions. 1t was the design
Of the new company to institute an cleo
trio line. Therefore, after purchasing the
old line, the entire plant was discarded
rails were taken up and sold for scrap
iron, the old horse cars We're thrown
away and the horses sold, the entire
tangible property of the old corpora ton
being sold for 100000. After this sale
had taken place the new company I'D
nothing left except the right to build their
new electric line in the streets. That
right had cost it S9,900,000, and the COM
pany considered it worth that sum. The
city had originally given away the fran
chse valued at nearly ten millions. IN
der the Illinois decision the new company
would have to pay taxes on that ten mil
lion dollars.
THE assessing board of Illinois, known
as the State Board of Equalization, had
in assessing corporations, taken no ac-
count of the value of their franchises
only valuing the tangible property One
street ear company in Chicago, which
has apitalization, including stock and
bonds, of $63, 1874 900, was assessed at $15,-
526,7S5. 1t was contended that the laws
Of the State required the assessment OF
the corporation up TO the full value OF its
tangible and intangible property. At the
instance of the Chicago Teachers FEEDER
alton the States Attorney of Sangamon
county instituted a suit to compel by
mandamuS the Board of Equalization to
assess twenty -one corporations named in
the petition at fair cash valuation,
which in the aggregate. according to the
petition, amounted to S235, 000, 900 in eX-
cess of their assessments. The case went
to the Supreme Court of Illinois and that
tribunal decided that the board must as
sess the corporations at fair valuation,
taking into account the bonded debt and
the value of the capital stock Tie
mayor of Chicago estimated that this de-
csion would add eight millions to the
revenues of The State and two millions
a year to Chicago.
THE Supreme Court issued a mandam-
us directing the assessment to be made
not later than November 10, in accord
ance with its decision. Later on the
Chicago traction companies obtained from
Judge Grosscup, of the United States
Court, an order restraining the Board of
Equalization from making the assessment
as directed by the State Court. The two
courts, therefore, clashed but on Friday,
the last day of grace, the Federal Judges
Grosscup and Humphrey in the Circuit
Court dissolved their restraining order
and refused permanent injunction. In
his opinion Judge Grosscup adopted the
reasoning of the Illinois court. In esti-
mating the value of the property of the
corporations 10 be assessed the board is
to take into consideration the bonded debt
and the stock, although the market quo
tations of the stock would not do as
basis for assessment. The judge in this
connection cited the case of Northern
Pacific stock, which was quoted recent
ly at 81 900 share, which was ten times
more than its real value. After the decis-
ion of the court the Board of Equalization
increased the assessment of certain trac
tion companies in Chicago from SO, 500 600
to $4,000 900. How far this decision of
the courts in Illinois will affect assess
ments in other States may depend largely
upon the laws of the States bearing upon
the subject. The constitution of Mary
land requires the taxation of each indi-
vidual according to his actual worth in
real or personal property The only ques-
ton here is whether a franchise is
property.