Akron daily Democrat. [volume] (Akron, Ohio) 1892-1902, 1901-09-12
PROF. BEMIS' REPORT
ON RAILWAY VALUATION.
(N O. -

| to the value of the properties repre-
sented. The Baltimore & Ohio sys
tenn was not included because the Sc
curities of the portion of the system
in Ohio are largely the securities for
! the entire system from Philadelphia
westward. Since the eastern portion
Is probably more valuable per mile
of line than the Ohio division, it was
considered unfair to the road to dis
tribute its securities on a mileage
! basis over the roads west of Pittsburg
| This objection did not apply in any
considerable degree to the roads ac-
tually selected for special study in
this list. Other roads, like the Wa
bash and the Norfolk & Western, were
excluded because so small portion
of their mileage was in the state. I'm
fact, every effort has been made to
err IL at all, on the side of conservat-
ism in the attempt to be fair to the
roads.
There is evidence that the real value
of some of the Ohio roads is higher
than is reflected directly in the value
of their securities. Part of the value
appears in the value of the securities
! Of naS t,t. Iu hn hAI Ia,
1 of the stock, and, in order TO turn
freight in their direction, or for other
reasons, divert considerable portion
of the net income of the Ohio roads
into permanent betterments.
The New York Central. for example
is understood to be committed to a
policy of not permitting the Lake
Shore, which 1t controls, to pay more
than per cent dividends on its 500,
100000 of stock. This stock, conse-
y quently, sells at only go; yet the road
, not only earned and paid 7 per cent
dividends in the year ending December
/: 81, 1900, in addition to interest on its
debt but 1t had a surplus of GAG per
cent. besides, or 3,195, 1880, which
was used toward the purchase of a
controlling interest In the Big -Four
and the Lake Erie X Western roads,
E aside from large investments on its
own line. Under such management
as usually prevails the Lake Shore
| would probably sell in the market for
SSO,OOO,0OO more than it does and
there would be $4,000, 900 more of ap.
parent value on that portion of the
line in Ohio, while the New York
, Central would sell for less.
The Pittsburg, Cincinnati. Chicago
" ST. Louis, after paying its fixed
= charges and devoting its usual liberal
/. allowance for maintenance and repairs
: during the year ending December 81
/, 1900, had u net income OF $685., $50
4 and yet had only paid out In dividends
4 $9O7,67O, being per cent on its $22,
= 003,0ol of preferred stock The re
: maindcr, $1,474,6S0.27, was devoted tc
o extraordinary expenditures, in improv
: ing the road and in paying certain
i premiums. In order to exchange som,
per cent bonds for others bearing
@ 31a per cent interest. This was doubt
r less good financial policy for the road
4 and especially for the proprietary com
= pany. !. O., the Pennsylvania, but tn,
l. consequence wns that the market yalu,
{ of the stock was only 03ls for tn,
4 preferred and 03N for the common
), stock, or S36,sla,7l0. instead of $40,
|. 100000 more as 1t surely would hav,
:. been had the net income been distri
:. buted, since 5 per cent railroad securit
/ les of any OF our large railroad sys
9 TENS will today sell above par anC
: the not income, capitalized at pei
Y cent, would be $4764700O.
:. But even on the basis of existln,
l. conditions, as has bcen stated, tn
@ twelve systems that have been re
0 ferrcd to, are only assessed at one
,i third as much In proportion to thei
a true value as is farm and city rea
t. estate, These same roads during 100
/. had net earnings from operation Il
!. Ohio, before paying taxes, of $006,5s7,
10 or o23 per cent OF their market value
& Their net revenue, after paying take
$. of almost $2o00,000 was $i6,02i,3 o
s. 100 per cent of their true value. Il
[. other words the market value repre-
/ sents a capitalization OH the revenue
IF before paying taxes ut 5,23 per cen
O. and after paying taxes at 4.65 per cen
Is That is the same rs saying that til
20 market value ls 10,1 times the lncom
le before paying taxes, aud a1.4 times a
10 much as the income after payln
rr taxes These last computations wi
lie be applied to the net income Of tn