Newark evening star and Newark advertiser. [volume] (Newark, N.J.) 1909-1916, 1910-03-09

of depreciation due to age, wear and
obsolescence, as may seem proper and
right under the circumstances
The inventorying Of railroad property
is not different in its general character
from the commonly employed method
of taking stock in mercantile or in
dustrial establishments, which requires
an examination of each parcel of prop
erty of whatever kind, with such meas
urements as may be necessary to de-
termine its quantity and full notes as
to its present age, condition and value.
Unit of Prices.
In computing the cost of reproduce
ton il becomes necessary to decide
upon unit prices, and this is a very
important part of the work. The a
ket prices of the materials used in rail-
road construction, and the cost of labor
vary from time to time within quite
wide limits. Even within a year or
two the market prices of such supplies
may vary as much as 20 per cent. AZ
h prices assigned and used are sup
posed to have some degree of perma-
nent application and to govern a COM
putation of cost that may be considered
as controlling for a number of years
the determination of unit cost becomes
a troublesome and difficult matter. For
the of our work we have en-
deavored to obtain and use the average
prices for a period of five years pre-
ceding the date of appraisal. In es-
timating cost of reproduction there are
a number of general items in addition
to those of cost of materials and labor
that must be taken into consideration
The building of a railroad requires
time, and the unproductive capital en-
ployed must be secured at prevailing
rates of interest. The cost of engineer
ing and of general and legal expenses
which are necessarily a part of the
total cost of the road, must also be
considered.
The application of proper rates OF de-
probation to the various classes OF
railroad property presents many dill
ficulties and requires careful considera-
ton. Age, wear and natural decay are
not the only causes of Depreciation
Even where these elements have very
little effect, depreciation may be very
great because of the fact that in the
rapid advance OF improved methods
ard the invention of new devices a ma.
chine or article that is nearly as gooo
as new may be practically valueless
because some better article or device
can be proftably substituted for 1t.
or because new conditions make 1t no
longer suitable for its purpose. Thus
steel railroad bridges seldom, IL ever,
are discarded because they are worn
out, but the rapid and often unforeseen
increase in the weight of locomotives
and other rolling stock makes it neces'
sary to remove them while still COM
paratively new In order that structures
of the requisite strength may be SUD
stituted. Again, the character
volume of service over a railroad must
be taken into consideration. since the
track material will not endure so long
on a road doing a very heavy bust
ness as on one doing a light business.
and therefore the rate of depreciation
must be considered and fixed with
Judgment and care. in each particular
case. While machinery and other
equipment may be kept in good repair
and efficient working condition there
will still be an intangible depreciation,
for a point will sometime be reached
when the cost of maintenance makes it
more profitable to buy a new outfit. 1t
is obvious, therefore, that no set of
rigid rules for depreciation can be ap-
piled to all kinds of property; each
class, and often each individual item.
must be considered with reference to
the particular conditions affecting its
life and usefulness. While no full dis
cussion of his subject is attempted at
this time. some of the principles in
volved and the difficulties of their APP
plication to certain classes of prop
erty are outlined n Illustrated IN
the attached memorandum. Appendix
L., dealing with the value of floating
equipment.
The determination of the value of the
land owned and used by the railroads
and canals presents many difficult and
complicated problems. When originally
acquired by the corporations they were
often compelled to pay prices having
little reference to the value of adjoining
property. A railway company may ex-
ercise the right of eminent domain to
secure the land it needs for its right-of-
way and other purposes. but in such
cases it has no voice in the determine
ton of the compensation to the owner.
The ordinary conditions of bargain and
sale are absent. Even when bought at
private sale the railroad is practically
helpless. 1t cannot shift its located
line to exercise choice or invite compe-
tition. The owner. knowing this, usu-
ally demands a price many times what
he would ask under the usual condi-
tons of bargain and sale between free
and willing negotiators. AS a copse-
quence the prices the railroad is com
PEELED to pay are often excessive. The
cost of land purchased under such con-
ditions may be it's proper value for the
urposes Of determining the balance
sheet assets of the railroad property,
but it might be wholly wrong and UNI
just-to base tax assessments upon such
q valuation. Again, the conditions of
use after the railroad is constructed
may increase or decrease the value, not
only of the railroad land, but of that in
it's vicinity. Railroad lands are usually
permanently held, and as there are no
sales of them the usual criterion OF
market value is not applicable. AdVen-
titious conditions may make sale prices
in the vicinity unreliable as evidence of
the value of the railroad property. The
ownership and control of a large tract
of land for a certain purpose may limit
or enlarge the uses that can be made of