New-York tribune., 1901-01-07
FRANCHISE VALUATION.

The suggestion of Governor Odell's message
that the method of administering the Franchise
Tax law is crude and should be more clearly
defined brings Mr.. Edward Lauterbach 10 the
front with the proposition that net earnings of
franchise holders be made the basis of taxation.
Confronted by the criticism that net earnings
are open TO jugglery, he announces that the
corporations would graciously consent TO pay a
percentage even on their gross receipts, which
he thinks is all that any reasonable man can
ask. Perhaps it is, from the point of view of
Mr.. Lauterbach as attorney for franchise
holders who have been trying to secure a per-
petual mortgage on the future transportation
business of now undeveloped territory without
having TO pay for the privilege
The insuperable objection to abandoning the
principle Of treating special franchise as a
right in the nature of real estate. and instead
taxing the net or gross earnings of the fran
chise holder, is the encoura cement which would
be given to the dog in the manger policy so ire
quently exhibited by corporations of holding
suburban franchises unimproyed in expectation
of the ''unearned increment" which will come
from the growth of population. The tendency
Of municipal craftsmanship to-day is carefully
TO guard public utilities from diversion TO pri-
vate use, and there are many demands even
for the reacquirement by cities of the public
utilities already in the hands of private corpo-
rations. Mr.. Lauterbach's proposal, however.
runs directly counter to this tendency. 1t would
permit the continuance of the present practice
of securing franchises for all available routes
through districts of great future earning power
without any intention of immediate operation
under them, but merely to shut out possible
competitors, or to sell the unimprOved franchise
at a high price when travel over those routes is
imperatively demanded. Mr.. Lauterbach him
self has not been unsuccessful we believe, in
such enterprises The city not long ago had 10
buy from a private corporation permission to
build a bridge across the East River, and it is
notorious fact that bona fide private and even
public transportation enterprises in various d-
rectiOns here are hampered by the permits held
by various corporations which have not spent
dollar on railroad, bridge or tunnel building but
are merely an obstacle of progress, which, like
blackmailers must be paid TO clear the way.
A special franchise is a valuable property
right in a public street, and should pay taxes
the same as any other property, whether the
owner is getting income from it or not. He may
be holding it for future income or to sell, just
as a suburban lot owner holds land. The fran
chise is bought and sold often many times be-
fore a spadeful Of earth is dug to improve it,
IL it is property TO sell 1t is justly property for
purposes of taxation, and should be assessed on
the basis Of its potential earning power its
value compared with other similar property, not
upon the basis of it's actual earnings, as man.
aged or mismanaged or held idle for "unearned
increment" Such a rule of assessment does
penalize the owner of the unimproved fran
chise, and ii should Public policy should dis
courage the blanketing of territory with mort
cages to transportation companies, and encour-
age franchise holders to operate every line they
own as fully as patronage will warrant and to
branch out with permits no faster than with
tracks.
The present Franchise Tax law may need
some amendment TO prescribe q more definite
rule for fixing values, but, Governor Odell
says in his message, the principle is right, and
there should not be the least chance of receding
from that principle and allowing to the holders
of franchise property privileges given to no
other taxpayers. IL every landlord could scale
down his taxes with his rents, how the treasury
would suffer and how the owner of empty
buildings would rejoicei