Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1908-07-29
PHYSICAL Valuation Of. Railways.


Some of the suggestions of the
this subordinate and ancillary
machinery to which have referred.
Take for instance the so-called
physical valuation of railways" 1t
is clear that the sum of all rates or
receipts of a railway less proper ex-
penses. should be limited to fair
profit upon the reasonable value of it's
property, and that If the sum exceeds
this measure, 1t ought to be reduced.
The difficulty in enforcing the
principle is in ascertaining what is
the reasonable value of the Company's
property. and in fixing what is fair
profit. 1t is clear that the physical
value of railroad and its plant is
an element to be given weight in
determining it's full value; but as
President Roosevelt in his Indian
apolis speech and the Supreme Court
have in effect pointed out, the value
of the railroad as going concern, in
Guiding its good will. due to efficiency
of service and many other circum-
stances. may be much greater than
the value of it's tangible property, and
vestment on which fair profit must
be allowed. Then. too, the question
what is fair profit is one involving
not only the rate of interest usually
earned on normally safe investments,
but also sufficient allowance to
make up for the risk of loss both of
capital and interest in the original
outlay. These considerations Will
have justified the company in impos-
ing charges high enough to secure
fair income on the enterprise as a
whole. The securities at market
prices will have passed into the hands
of subsequent purchasers from the
original investors. Such circum
stances should properly affect the
decision of the tribunal engaged in
determining whether the totality Of
rates charged is reasonable or ex-
cessive. To ignore them might 20
seriously and unjustly impair settled
values as to destroy all hope of re-
storing confidence and forever to end
the inducement for investment in new
railroad construction which, in re-
turning prosperous times, is sure to
be essential to our material progress
of this very subject:
THE effect of such valuation and
supervision of securities can not be
retroactive Existing securities
should be tested by laws in existence
at the time of their issue. This Ma
ton would no more injure securities
which have become an important part
of the National wealth than it would
consider a proposition to repudiate
the National debt"
| The question of rates and the treat
ment of railways is one that has two
| sides. The shippers are certainly en-
! titled to reasonable rates; but less is
! A. injustice to the carriers. Good bust
! - . Tor the railroads is essential tC
general prosperity. Injustice to them
| is not alone injustice to stockholders
and capitalists, whose further invest
ments may be necessary for the good
of the whole country, but it directly af-
fects and reduces the wages of rail-
way employees, and indeed may de-
prive them of their places entirely.
From what has been said, the proper
conclusion would seem to be that il
attempting to determine whether tn,
| SltIIC SIHCduiC VI IdlSo VI IL IiIlW aS
| is excessive, the physical valuation o
the road is relevant and importan
but not necessarily a controlling fac
| tor.
Physical Valuation Properly Used
Will Not Generally Impair
Securities.
1 am confident that the fixing Of
rates on the principles suggested above
would not materially. impair the pres.
ent market values, of railroad securi.
| ties in most cases, for l believe thai
the normal increase in the value OF
railroad properties, especially in theil
| terminals, will more than make up fol-
| the possible OvercapitaliZation il
| earlier years. In some cases doubtless il
| will be found that overcapitalizatior
is made an excuse for excessive rates
and then they should be reduced; bu
the consensus Of opinion seems to bt
that the railroad rates generally in this
| country are reasonably low This is
| why, doubtless, the complaints fileC
| with the Interstate Commerce Com.
| mission against excessive rates are 81
few as compared with those against
unlawful discrimination in rates be,
tween shippers and between places O.
! course, in the determination of the
! question whether discrimination is IN
| lawful or not. the physical valuation
| of the whole road is of little weight
Conclusion That There Should Be
| Physical Valuation.
| 1 have discussed this. with some de,
gree of detail. merely to point out tina
the valuation by the Interstate Com
| merce Commission of the tangible
property of a railroad is proper an(
may from time to time be necessary
in settling certain issues which may
come before them. and that no evil ol
| injustice can come from valuation in
such cases, if it be understood thai
the result is to DE used for just pur-
pose. and the right to fair profit un
der all the circumstances of the in
vestment is recognized. The Inter.
state Commerce Commission has nov
the power to ascertain the value of the
physical railroad property, if neces
sary, in determining the reasonable
ness of rates. If the machinery fol
| doing is mot ADEQUATE iS r,roha