The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1906-01-05
TASK BEFORE
STATE COMMISSION
MUST FIND RAILROADS. PROFITS
ON STATE BUSINESS.
No Means Yet Devised to Show What
Part Of Operating Expenses Should
Be Charged to Business Beginning
and Ending In State-Profts on Inter
state Business Can't be Considered.

and Ending in state-Profts on Inter
state Business Can't be Considered.
The supreme court Of the United
States has set d problem for the ran-
road commissioners Of Minnesota that is
battling the resources of those officials;
The commission has been instructed
by the legislature to revise and reduce
freight rates on business done within
the state. This work has been begun.
but it will have to proceed on lines laid
down by the courts, or it will be wasted
effort. The courts have held that in
determining a reasonable rate the value
Of the property must be taken as the
must decide what would be a fair re-
turn to the owners, and what change
can be made in existing rates without
depriving the owners of their just rev
enues. -
So the Minnesota commission is start
ing on the work of valuing railroad
properties in the state. That is a stu
pendous work in itself, but when it is
finished a still harder task. will remain.
In the case of Smith VS.. Ames, the
United States supreme court decided
that state authorities have no right to
consider the revenue derived from in
t~erstate business. In fixing a reason
able rate they may not count on the
profits derived from interstate business.
In other words, the railroad companies
able profit on their investment, out of
the state business alone. State earnings
are already separated, but in getting at
these figures, the authorities must find
some way to separate the operating ex-
penses Of state traffic from that in
CURED i'll hauling interstate business.
There is no such record kept, and no
means Of making this separation.
eff there is a man living who. can
show us how to find what proportion of
operating expense is chargeable to state
traffic, we will hire him at once,' de-
clared Railroad Commissioner Staples
today.
The decision referred to is the guide
down March 7, 1898, by Justice Harlan,
and it had the effect Of multiplying a
law passed by the Nebraska legislature
April ~, 1898. 1t therefore took nearly
five years to get a final decision on the
act, which was a general rate revision,
reducing freight rates in Nebraska near
ly so per cent. The railroads obeyed
the law and put the reduced rates in
effect, but certain eastern stockholders
brought injunction proceedings, claim
ing that they were being deprived of
their property. After two years in the
federal courts, during, which William j.
Bryan appeared as counsel for the Ne
braska board Of transportation, the law
was knocked out. The principle re-
ferred to is stated by Justice Harlan as
follows:
Supreme Courts Construction.
"In our Judgment it must be held
that the reasonableness or unreason-
ableness of rates prescribed by a state
for the transportation of persons and
property wholly within it's limits must
interstate business lone by the carrier,
or to the profits derived from it. The
state cannot Justify unreasonab1y low
rates for domestic transportation, con-
sidered alone, upon the ground that the
carrier is earning large profits IN it's
interstate business, over which, so far
as rates are concerned, the state has
no control. Nor can the carrier justify
PROFESSIONALLY high rates on domestic
business upon the ground that it will
4 be able in that way to meet losses on
4 its interstate business. So far as rates
4 Of transportation are concerned, domes-
4 tic business should not be made to bear
4 the losses on Interstate business, nor the
4 latter the losses on domestic business.
q It is only rates for the transportation of
) persons and property between points
= within the state that the state can pre-
scribe, and when it undertakes to pre-
scribe rates not to be exceeded by the
carrier, it must do so with reference ex.
clusively to what is just and reasonable,
as between the carrier and the public,
in respect of domestic business
In this same opinion the court lays
down the basis which must be followed
in fixing a reasonable rate. It saws
eve hold that the basis Of all calcu.
~lations as to the r~easonableness of rates
to be charged by a corporation main.
tanning a highway under legislative
sanction must be the fair value Of the
property used by it for the convenience
Of the public. And in order to ascertain
that value, the original cost of construc.
ton, the amount expended in permanent
improvements, the amount and market
value Of it's bonds and stock, the pres
4 emit as compared with the original. cost
of construction, the probable earning
lar rates prescribed by statute, and the
sum required to meet operating ,-ex
q penses, are all matters for consideration
a and are to be given such weight as may
be just and right in each case. We dt
q not say that there may not be othe:
matters to be regarded in estimating
q the value Of the property. What tn,
company is entitled to ask is a fair re
81 turn upon the value of that which i
employs for the public convenience. o.
tied to demand is that no more be ex
acted from it for the use of a publ
highway than the services rendered b,
q it are reasonably WORTH
Will Have Hearing on Taxation.