Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1904-05-02


earn S10,S4S.S5. By an expenditure of
Sl0o,5S4 1t Is raised from it's incapacity
to the degree of efficiency required by
law. The loss can be paid only by re-
ducing the award to $147.567.SS.
Is the income assured?
Lawful net earning power fixes the
Value OF the plant and franchises, but
II not assured, due allowance must be
made. This company under the city
contract cannot exceed certain rates.
1t has been decided that maximum
rates in such a contract cannot be col
lected If unreasonable in fact and law.
The revenue from the city drops to
$1,000 in 1907 and is assured at s., "a
for only three years. The income from
Togus is certainly not assured beyond
July l, 1904. When we concede, tenn
porarily, a lawful earning power of
$10,S4S.S5 as the full maximum lawful
net income derivable from the present
property, assuming that it had been
capable of supplying pure water, we
have ignored the fact that the income
is certainly not assured. The discus
sion of the proper allowance of these
business risks as affecting present value
can be reserved for later discussion.
Now | take up the company's method.
The argument of counsel and the testi-
mory of West. Payson and GOodhue
show that they assume the present in
come to be lawful. Now capitalization
of a supposed net income of $29,4S7. As
treated as an assured income is very
simple, and at per cent. it would be
s5SS 749; and, if that is the method to
be adopted, we might say with the dis
tinGuished Mr.. Flanagan of Texas,
What are we here for? Now CAPT.
talization is emphatically forbidden by
the court. The court says. I'VE cannot
assent to the proposition that the capt.
talization Of income even at reasonable
rates can be adopted as a sufficient or
satisfactory test of present value. Such
Il capitalization would fix at the pres
ent time a specific value which would
continue for all time to come, as a
fixed and unvarying source Of income.
no matter how conditions may be
changed-if the franchises were ex-
elusive. if they We're perpetual, and if
it could be known that what
are reasonable rates now would
continue TO be reasonable rates
lIltIt "Oulu Ue SIOuliu loE
sustaining such a test. But the fran
chises are not exclusive. Competition is
possible and even, as the event has
shown, more than probable. They are not
perpetual. but may be repealed" Which
is to be followed may it please the court?
The law. which says that you shall find
property value assess upon the customers
the cost Of production, and then give To
the company a fair return upon the value
OF its property and then if sufficient, and
the income is assured. add to it a going
concern value, no more. If it appears
then that the company has reached it's
lawful maximum earning capacity, add
nothing more. because when you go over
| the maximum the rest of it becomes un-
lawful. If they are not up to the maXi
, mum then the rule of court applies. Now
which will this tribunal follow? The
supreme court or the over-ruled request
of counsel? The assumption that the an
nual depreciation is not to he deducted
from the gross income means that the
time will come when. by exhaustion Of
| capital, by their putting into their own
pockets year after year part of the
plant, and its continued fraudulent di-
vision as a part of the dividend account
bankrupt, as every business man knows.
Now the assumption further that the
taxes are to remain as they have been.
simply on a small fraction OF a property
value, is asking the court to violate the
constitution of this state and the statutes.
1 have already discussed the assumption
that the present gross income is lawful.
| and shown it is not. That the operating
n rprn1iO constant and
assured factor is untcnable. OF course the
assumption that the company is to con-
| time to supply impure water is too UNI
sound to require argument. Charging now
the full maximum rates, the operating eX-
penscs and depreciation of the filter plant
cannot re shifted to the takers, but
must come out Of the present income.
Now this filter plant would be taxed
and the total amount to be deducted
annually for filtration would be $3.50.
| t..kc oU; deduct ions for taxes and de-
pr, iatior. | am not quite willing to
aGrlit, may il II. asc the Court, that
dcl citation cln Be divided by any as
sumption THAI can be put up here; that
depreciation can be divided as this
corliHny has been doing; nor am L
willing 10 admit on any sort of all as
sumption that the company can so
along without paying taxes. Tn.
proposition is 10 start with different
physical values. and see how you come
out as Illustrating the basic PROPOSE
ton that laid down this morning that
the great determining element in this
case is the one thing that we have
spent the most time on: how much
property do they own, and what is 1t
worth Now let us see how we would
come out. I will take Mr.. Aliens
value. 1 call it here s272,O0O-I have not
the exact dollars and cents; gross in
come, s3s.4l1.SS; operating expenses,
sS,97443; additional tax, S4,6S5: depreo Ia
ton. 81 ,632; total outs. s15,291.43; leav-
ing an aggregate net income of s23.12o.-
a.. Now per cent. on the property
value. s272000 would give $13,60O. That
leaves for the income on the franchise
value s9.520.45. We capitalize that at
per cent. and you have your franchise
value. $3.50 400. In other words. apply
ing the methods the company has
used here. and the basic elements of the
testimony of all their people, and turn