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

l in 1903 instead of on March list, 1904
when iron had dropped, they swore
their estimate of the present value to
be $275,o00. that is, without any going
concern. The bonds represent the full
investment and exceed the property
> value that is put upon it by any en-
gineerS of the company. i nope the
court will not think / am disrespectful
to Mr.. Goodhue. / have never included
him in this estimate of value; a most
worthy old gentleman, who has accu-
mulated a large amount Of money by
following these same methods, always
being shrewd enough to limit the water
in his stock and bonds so as to post
pone.r the evil day. He testified in
Waterville, and so far as we could
catch him and that was a mere ques-
ton Of figures, he certainly varied
here to the extent of $4,000 and pro-
badly more. so | submit, may it please
the Court, / owe Mr.. GOodhue no apollo
gy and this will be his exit from the
case. l say the bonds represent the
full investment and exceed the highest
property value given here by any man
worthy of respect.
The stock represents no investment, no
the franchise value if any there be.
| Now as to the materially of this dis
| cussion, the rates have been graded and
liked not as permitted by law to give
1alr return on the fair value of the prop
erty. but to yield a fair return on the
property value and further to do what
the law does not permit, to give an equal
return on the franchise value which is
represented by watered stock. Now the
bondholders, the actual owners of all
the property the company is using, are
content with so, or $14, $50 per year in the
aggregate. The stockholders, owners of
no property, simply in possession by the
suiferance of the bondholders whom they
have defrauded by running their property
value down and dividing the depreciation
apparently-these are the cOmpany's fig
ures, $l5,1S7.45 year, or go on their SO
called stock of $25O,0O0.
| Now l submit that when rates are
charged that return per cent. upon
more than the property value to the
men that furnished all the funds to buy
such property and now hold mortgages
in excess of the property value, and
also return $4,000 a year based upon
its supposed franchise value of $3.50, 900,
the law is violated and a double return
charged, when there should be but a
single return, to use the words of the
court, upon the full value of the prop
erty at the time it is being used for
the public. From your income get
your going value, and then if you can,
find the franchise value, then put the
three together, each value shaded back
and forth into the others. This award
is not to be made up as counsel sug-
gested indirectly in his argument by
finding the three values. Those are
steps and reasoning. The court says
there is but one value when you get
through--one unit, one system, one
thing. The court says that property
value is the basis of the net income and
that net income is the chief basis of
the franchise value, and that the two,
intermingied as they necessarily are
one worthless without the existence of
the other-make up the award. When
the day of settlement comes the stock
holder is safe. His illegal profits of the
past are his to keep. If the az. ard falls
below the bond issues, the stakeholder
loses nothing. If by n proper use of
the going concern rule it goes beyond
the bond issue, then the excess is clear
gain to the men that invested nothing.
This analysis shows why it is that
rates are generally, We might say uni
versally. higher with private companies
than with municipalities. The NUM-
cipality has no watered stock upon
which dividends must be earned.
If its net income pays a fair return
upon it's property it is content That
property is usually represented by
bonds. So that philosophically a mu-
Inicipality makes up its rates upon the
basis of the rule of court, but the pTi-
lvate company adjusts its rates in .ad-
vance to yield a fair return on the
property value and an equally fair re-
turn upon an equal amount added to it,
which we call franchise value. If you
reduce the net incomes to the lawful
net income of the property-to fair
return upon the value of the property,
land eliminate from the charges Of these
men the returns charged upon the
franchise value. it is quite possible
THAT some of them might be as poor as
the laboring men of Augusta who work
a week in dusty mills at their $1.50 a
day to pay this company $500 a year
for this necessity of life that the SUI
preme court of the United States says
lshould be furnished at the cost of pro-
lduction plus fair return on the value
of the property used.
Now that these income rules are
plain, we quote from the opinion. No
doubt your HOnOrS have studied it fire.
lQuently-p. 200: "The basis of in
come of course. is the tolls charged and
received" And also p. 204; the court
gives the rule to determine rates. The
rates are to be determined under this
rule: ''The right of the company to
derive fair income based upon the
fair value of the property at the time
it is being used for the public, taking
into account the cost of maintenance
land depreciation" as used, and the
same thing as to current operating ex-
Irenses, and Mr.. Chairman, what is a
more important of that whole rule
when company is before a, court for
rating purposes, and on the other hand.
the right of the public to have no more
IeXacted.tnan the services in themselves
Iare WOrth-nO cOnSt itl1tjOnal riobt fr,