The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1904-11-04


what is the fair and equitable value
of the plant, which by the statute and
ordinance the city is to pay for the
plant This amount was found by
the circuit court to be $2,714,00O. The
company insists that the test is to take
the income, or earnings, and capital
ize them. The earnings pay 6 per cent
on four millions and a half. In other
words, the company has produced a
property which earns per cent on
four and one half millions, and that,
it is claimed. is the fair and equitable
valuation of the property, per cent
being ordinary interest.
ION the other hand, the city in
SiStS that the franchise has ceased,
and that basing the value upon earn
ings is in effect valuing the franchise,
which no longer exists and which the
city is not to pay for; that the true
way is to take the value of the pipe,
machinery and real estate, put togeth-
er into a waterworks system, as a
complete structure, irrespective of any
franchise, Irrespective of anything
which the property earns or may earn
in the future. We are not satisfied
that either method, by itself, will show
that which, under all the circum-
stances, can be adjudged the fair and
earnings and continuance of earn
ings rests upon a franchise to operate
the waterworkS. The original cost of
the construction can not control, for
not equivalent terms"
ct would appear from this that if
the water company's franchise has not
expired, and that it has a self-renew-
ing franchise, as it claims, it has
right to estimate the value of its plant
by a capitalization of earnings"
which would make the plant cost the
city about $S50.000) A
Nor would the mere cost of repro
ducing the watefworkS be a fair test,
because that does not take into ac-
count the value which flows from the
established connections between the
pipes and the buildings of the city.
1t is obvious that the mere cost of
purchasing the land, constructing the
buildings, putting in the machinery
and laying the pipes in the streets-in
other words. the cost of reproduction
does not give the value of the prop
erty as it is today. A complete sys-
tenn of waterwOrkS. such as the COM
pany has, without a single connection
between the pipes in the streets and
the buildings of the city, would be
a property of much less value than the
system connected as it is with so many
buildings, and earning, in consequence
thereof, the money which it does earn.
The fact that it is a system in opera
ton, not only with capacity to sup
ply the city. but actually supplying
many buildings in the city-not only
a capacity to earn, but actually earn
ing-makeS it true that the fair and
equitable value is something in ex-
cess of the cost of reproduction. The
fact that the company does not own
the connections between the pipes in
the streets and the buildings-such
connections being the property of the
individual property owners-doeS not
initiate against the proposition last
stated, for who would care to buy, or
at least give a large price for, a water
works system without a single cOnnec-
ton between the pipes in the streets
and the buildings adjacent? Such a
system would be a dead structure,
rather than a living and growing bust
ness.
1.-THE additional value created by the
fact of many connections with buildings,
with actual supply and actual earnings,
is not represented by the mere cost OF
making such connections Such connec-
lions are not compulsory, but depend
are secured only by efforts on the part of
the owners of the waterworks and induce
ments held out therefor. The city, by
this purchase, steps into possession OF a
waterworl1s plans-not merely complete
system for bringing water to the city and
distributing it through pipes placed in the
streets. but a system already earning a
large income by virtue of having secured
connections between the pipes in the
streets and a multitude of private build
erty which not only has the ability to
earn, but is, in fact, earning. 1t should
pay, therefore not merely the value of
a system which might be made to earn,
but that of system which does earn
Our effort has been to deduce from the
volume of testimony that which, in this
view of the situation, can be safely adj
judged the fair and equitable value, ex-
elusive of the Jarboe street station, which
is already the property of the city.