Evening star. [volume] (Washington, D.C.) 1854-1972, 1910-05-03
General Counsel Go1dsborough Concludes
80. His Argument Before the
House Committee.

| a direct contravention Of the Constit ution
Of the United States and ought not to
| receive congressional sanction even II
there was or is reason to dOubt-whtch
insist there Is not-the legality OF part
| or the company's present capitalization.
But. Mr.. Chairman, there is not and
cannot be any legal question about the
bona fides Of the existing security capt.
| talization of the Washington Gas Light
Company. for the proof is overwhelming
that 1t is in truth and fact the most un-
dercapitaHzed public utility in this coun-
! try, If not on the face Of the globe. In
| the name. Mr.. Chairman, of common
sense. Of all that is serious, of good re-
port, and worthy Of honest respect and
I consideration. how can 1t be cOntended
that company is overcapitalized wher
the testimony in the case not only tends
to prove, but actually does prove that II
has beyond the possibility of a reasona BILE
In physical property for every dollar OF
securities that are outstanding against it
! This fact once established makes ii
| wholly immaterial, in so far as the public
Is concerned. as l have already shown,
whether or not its bonds or certificates
were legally issued. II the company en-
ploys the property in the conduct Of the
business repeat 1t. that property is its
invested capital. and it is entitled to have
reasonable return upon every dollar
of 1t, and to have every dollar Of 1t that
has never been capitalized now capital
| lied in securities for an. amount equal to
Its actual value. whatever that may be.
Mr.. Chairman, the language employed
| In all these cases is SO simple and direct
| so plain and obvious; so full and frank
| that 1t looks like rejecting upon your
Intelligence to try to further elucidate
them: with all due respect. it does seem
| to me that only the willfully blind can
| fail to see the palpable application of all
| to the point at issue.
Before summarizing our legal postu-
lates. however. l feel that 1 ought to
more formally marshal the law Of the
case and the evidence in 1t as to
the value of our invested capital First
| in order of time. is the Humphreys
appraisement of 1893. which established
purchasers. that the company then had
assets OF the value of $9.O0O.OO0. Next
| comes the Humphreys Glasgow ap-
praisement of 1908 (ten yea later rails
| ing the total valuation t. o. 100000, OF
which practically $1O.OOO.Oh, covered the
| physical plant Then we have in the
| case the sworn statements of the other
public service corporations here I'm WASH
ington from which it appears to be IN
deniably true that we are grossly $50 to
speak, underca pitalized relative to them.
no matter from what point of view COM
| PARSONS may be made whether. for in
stance, as to the volume Of business done
or the value of the property employed. or
as to the assessment values, respectively,
as shown by the amount of taxes paid in
each case AS / said In my statement
when last before the committee. the COM
parison is all the more advantageous
to the gas companies because the re-
turns of the other public utilities are
believed to be reasonable when compared
with those received for like services under
like conditions in the principal cities of
the country. If indeed there are any cities
in the country so efficiently and satisfactor-
lily served. Perhaps I ought, also. to say
before passing this branch of the
subject. gentlemen Of the committee.
cation which 1 have made of the
prosperity Of my neighbors would tend
to produce insensibility of their merits
to make the public obiivious to the fact
that their success is due mainly to care
full and able management by which the
community has directly and largely prof
tied. l should not have felt myself justi-
fed in using their names at all in this
connection. The truth is, / should not
have done so under any circumstances
had 1 not been fairly persuaded that
their reports when correctly interpreted
will serve to bring home to your minds
an economic fact that Mr.. Justice Moody
has so ably emphasized. to-wit: That
large capitalization and generous profits
thereon are not necessarily hostile to the
public interests nor incompatible with
efficient service.
The corroborative testimony as to val
ues also shows that the actual value OF
the property. as shown by the average
I market value of its securities. Is between
twelve and thirteen million dollars.
Finally, as to all the elements Of value,
confidently submit that the question
Of the value of the invested capital of
the company. which Is the point around
which this case revolves, Is foreclosed by
the operation of two well known rules
Of law applicable to such cases. The
first law is that corporate values are
property, and taxes thereon are taxes on
property, within the constitutional provi-
sion as to taxation of property at value.
AS Illustrations of this proposition. I beg
to refer you to Adams Express Company
agt. Ohio, 166 United States, page 1S5.
where it is held that it is cardinal
rule that whatever property is worth for
purposes Of income to sell 1t Is also
worth for the purposes of taxation; the
converse Of which proposition must also
be true; and in Gulf, ETC., agt. Hughes.
1873 United States Reports. page III. It
was held that corporate privileges are
property and taxes thereon are taxes on
property within the constitutional pro-
! vision as to taxation Of property at
value: it was held. also in Railroad, ETC.,
agt Board of Equalizers, 8Sth Federal
Reports. page 302. 31b;- also I'm Spring
Valley Water Works agt. San Francisco.
124 Federal Reports, page 574. that the
valuation Of the franchise for the pur-
pose Of fixing rates should not be less
than it's valuation for the purpose OF
taxation.
1t is true this method. although COM
petent, Is not conclusive, but on the gen.
/ eral doctrine laid down in People agt-
/ Comrs 76 N. Y. "a, and In many other
cases-that I'm matters OF taxation. IT
| is a sacred duty to impose the burdens
] equally''-a duty fully recognized by the
Federal Constitutional must be obvious
| that this method Of appraisal is entitled
| to a high degree of respect and conf
dence. But there is another legal method
of computation that completely verines
| the correctness Of the Humphreys val
| uation, both of the tangible and intan-
| gible assets of the company-a method
| that has been legally defined as follows:
| From the average market value OF Its
securities. which the courts say II taken
| for q period long enough to cover ordi-
nary fluctuations Is competent evidence
| to be accepted as the basic factor In an
| equation to determine what Is the actual
| value, for taxation purposes. OF the fran
| chise viz: From the total actual value
| of the securities mot face or par yalue)
| take the total value of all the known
assets, other than franchises. and the
I remainder Is the value of the franchises.
State Railway Tax Cases. 02 u. 5. go,
COZ, GOT. (23, 883 $50. GID: Spring Valley
| agt Schotter. 62 Cal. 69-117: Burke agt
Badlam - Cal. 594: San Jose agt. jan
uary. 81 CAL. 6l4.
/ Now. II the market value as here In
! dictated Is an acceptable basis for COM
| putting franchise value 1t follows that 1t
must also furnish at least satisfactory
| check upon an appraisal Of total value.
value of the stock is ST. per share-which
| for 100 on shares amounts IN 50 C40 0N0