The Houston daily post. [volume] (Houston, Tex.) 1886-1903, 1902-08-05
FRANCHISE VALUES.
(From The Public.)

and economically distinct One is the value Of services
dered the other is the value of monopoly power Sc
cured by law the right render services In the tor
category the values of plants OF good will OF oper
aonin word, of all those things which the owners sup
ply In the latter category the privilege generally called
franchise" conferred upon the by law to render
those services and which, either directly indirectly for
bids their being rendered by others For example he value
of tracks of of power houses and OF the
human expended in operation belongs in the former
category while the value OF the right of way belongs in the
latter Values of the latter kind are known franchise
values They arc distnctvey values which the does
but which conferred him at public loss
simply legal privilege The following signed editorial re-
gardng these franchise values is from the Of OF the
best equipped and best known observers and experts IN that
financial sphere OF influence" which bears the of Wall
He is the editor and his business house (John
Moody Co. IS Nassau street New York; the publisher
Of Moodys Manual of Corporation Securities OF
The Public.
As an example of the manner in which modern municipal
franchises increase in commercial value take the electric
Lighting industry in New York city
In 1898 the Edison Electric Illuminating company Of New
York controlled practically the entire eliminating business Of
Manhattan island There existed it is true several small
competing with limited franchises but the figure
they small the Edison company doing all the city
lighting and furnishing per cent OF the entire conf
mercia demand The capitalization of the Edison company
consisted of $6ooooo per cent bonds and So in
stock the latter paying per cent dividends,
The business of the company had been expanding rapidly
for and by the end OF 1898 the company
earning about per capital stock beyond liberal
amount set aside each depreciation Of plant
About this time called the New York Gas,
Electric Light Heat and Power company formed by the
so-caed BradyWhituey interests The company
cured liberal franchise and incorporated with
ton called the Consolidated Telegraph and Electrical Subway
company was formed The latter company acquired certain
franchises, giving the right many for the lay
ing of electrical subwa and also Tor electric
the sideways already laid along Broadway and other thor
oughares by the Metropolitan railway for its under
ground electrical system This subway company had this
time no other tangible property, however.
AT this juncture the New York Gas and Electric Light
Heat and Power company began its campaign OF cousoda
ton In December 1903 it acquired the aforesaid Conso-
dated Telegraph and Electrical Subway company and five
small electric lighting In acquiring these six
porations issued $7,5ooooo first mortgage per cent
bonds running fifty 1t then acquired the entire capital
stock $92ooooo par o. the Edison company BY ss
ing in exchange therefor SaLoooooo in own per cent
bonds secured purchase money mortgage the stock
itself In acquiring this stock agreed 70 denosi with
trustee $4oooooo cash be spent on the prop
er This cash raised by issuing S4oooooo more of its
first mortgage cent bonds making the the latter
SIl,5oo,ooo.
The entire electric lighting industry on Manhattan was
now consolidated and properties which few months before
mad had an outstanding capitalization in the aggregate Of
about $I97ooooo now had securities outstanding follows
Edison companys old mortgages $6sooooo; underlying
bonds OF the smaller companies, SIsoooo New York Gas
and Electric Light Heat and Power company per cent
bonds $1I5ooooo the compaWs per cent purchase
money bonds issued for Edison stock the same
company capital stock all outstanding $36oooooo total
Here was increase in capitalization (par value) in
three or four months from $t97ooooo to $76soooo all of
which less the S4oooooo cash mentioned above
franchise value or initiation
That was practically all tangible franchise value and not
shortly followed ~
In December, 500 the Consolidated Gas company ac
CURED the entire capital stock of the New York Gas and Elec
trc Light Heat and Power company by issuing in exchange
.nfIeoF $o57ooo IN par value or $2973oo6o in market
value OF its stock Thus the owners Of the S,6 ooo %
OF the New York Gas and Electric stock (Which had cost tb
nothing less than before) sold for cash eova
lent of $2973oo6o But the market value OF this Con.o
tncre ased 81,
gregate market value of the at the time Of the 90
change was about equal to their par value
Today the market value OF the stock and bonds has j.,
creased in all about $S,s33ooo making the total osr.
value OF all the securities involved something like SIS
900 or an increase of $54 100000 over the amount f -
which has actually been put in the property This $saSoo
900 logically represents nothing else but values Of the
Yet this franchise value, represented by 600 oo 80
securities out Of total Of $7S 900 (about ~ W
certainly very valuable These franchises have
the company cash, il is true. Neither has the c.
any cash for them. Yet the company has in Some @ @
ized $S4Sooooo from them In other words tho o.yy
has practically capitalized them NJ az 9oo 49, ~ PanS
ing ana paying interest and liberal dividends on all tbse 80
Gur1ues The credit Of the company is high and ci @
I m its business and franchises today for fully as
financially valued ' AZ winch II is
speGaato and the Spectator only benefits from this
In the long run no one else bere6,s 49,. - ,
mate investor. " NOT even the legiti-
ihfsos which the community sustains in this wav
am 10 react sooner or later every class Of nvest ~,
the rich who invest their surplus wealth and both
hves tne labor or their brains For in the last %
the interests OF the investor class" soeaed I'D dysis
ing class are identical not say This bo n work-
b M or gambler class for they could not nos sde
Of be ~ ~ M present power and glory were the interests
''''y IN no way encroached upon
, ~ ,. sam NOT Tor one moment be commended nv 49,
anu dlSnterested observer either In mr. o, - ay frank
mar me situation is either equitable or healbf ba an street
mu'ly presents absolutely without compensation ae com
200 premium TO Sa4ooo,ooo corporation ana S94ooo
ing H. eompacenty pays large rate Of , "I'et present
ou year and further only pays this interest," t
in % H. On. as the years roll its present @
INCREASING INCREMENT 'NlERESI ON THE
sand dollars to who had no spesa, IIn over thou