The Fargo forum and daily republican. [volume] (Fargo, N.D.) 1894-1957, 1913-05-05

valuable records in the San Francisco
earthquake and fire. Whenever the
records no longer exist the commission
will be forced to determine original
cost by indirect testimony and calcu-
lations.
The Original Cost to Date.
Quoting from the report of the SEN
ate committee which reported the bill.
the original cost to date will, at every
stage of construction, take account OF
the prices paid at the time for proper
ty, material and labor; the amount OF
money paid out for legal services, en-
slneers, architects, designers, manage
ment in organizing the corporation
and constructing the road. 1t will show
the exact amount received from the
sale of stocks and bonds. It will show
the amount paid in by the stockhold-
ers'
The commission, moreover, has au-
thority to determine whether railroads
have paid excessive prices for any
portion of their properties, and if
prices are adjudged excessive, the
commission is empowered to fix the
reasonable amount which should have
been paid, and to accept this figure as
the proper one in the valuation.
This part Of the work. the compila-
ton of the actual investments from
the beginnings of American railroad
the most important and the most la
borious. There are 250,000 miles of
road to be inventoried, 2,250,000 freight
cars, $4,000 locomotives and shops,
rights Of way, stations and other term
inal properties, bridges, construction
equipment, and, in short, every single
piece of property owned or used by
every railroad.
Simply to find the value of the prop
erty now in use is a herculean task. 1t
tok the Lehigh Valley road nearly @
year and cost nearly 100000 to in
ventory its present property. But the
commission must go into past history
and find the value Of every rail that
long since went into the scrap iron
heap, every freight car that finally tot
tered to the dump, every station ever
replaced by new structure and every
locomotive of the period of history,
when twenty miles an hour was hair
raising speed
But the method of valuation by
present and past inventory is not the
only line of research to be followed by
the commission. Its inventory figures
will be checked by other methods, so
that the final result will be a value
arrived at by experts who have con-
sidered all systems of valuation.
Engage Corps of Experts.
gage another corps of experts, will be
the calculation in dollars of the cost
of rec0nstructing all existing railroad
properties at existing prices. The
experts will assume that all the rail-
roads are to- be built in d single year,
and will calculate the cost of duplica-
tion at present prices for labor and
materials. Some courts and commits
siOns do not recognize. this as a just
T10n rf oIY1nf o1ofV Eaf
actual costs in the past can only be
consider as value. But the roads
contend that it is their right to have
the cost of duplication taken into con-
sideration, when there is being fixed
a valuation. which is to be a basis for
rate making. If the companies were
to pull up their rails, scrap their
engines and dismantle their round
houses, the government in building its
Of duplication at present prices, and
government rates would therefore be
based on that valuation.
The third method to be employed is
an amplitication of the first. 1t takes
the historical cost of railroad property
in use today and from it subtracts the
amount of depreciation through use
which has occurred in every part OF .
the property. This, too.- is an inn
mense task, and will require the hery-
ices of a large number of experts.
Finally, the intangible values will be
ascertained-the going value, good
will, value and franchise value. This
is the most perplexing and theoretical
part of the work. Experts differ wide
ly as to the value Of these intangible
assets. Some experts declare fran
chises are worth nothing at all to the
government which granted them. AS
between railroad and railroad the fran
chises are among the most valuable
of assets, since they. constitute 81
charter of monopoly, Of any right of
way, but the theorists contend that
since the government has the right to
revoke them, they represent no value
to the government. - =. a4
The Intangible Values, Etc.
The point of view of the commission
will determine the intangible value. II
the investigation is to be made from
the point of view of the railroads, then
franchises, good will and going value
are real elements of worth. But from
the standpoint Of worth to the govern
ment, it is doubtful If any value can
be attached to- them. A government
of transportation could
possess not good will obviously, nor
could it assign cash value to fran
chises or worth as a going concern.
The commission, and later the courts,
will decide what value is to be given
intangible assets. or whether the roads
are to be permitted to include these
assets in their total valuation at all.
In the case of franchises and good
will, should value be assigned to these
elements, it means that the public
will be required to pay interest on
what it gave to the railroads as a
gift.
The valuation Of the physical and
intangible assets OF the railroads.
however, is but one Of the two grand
divisions of the task before the Inter-
state Commerce Commission An
equally important line of investigation
will be that which will 60 into the
financial history OF the railroads. This
will investigate original capitaIiza-
tions, increases or decreases Of securi-
ties occurring In reorganizationss
ascertain the total amount which the
railroads have received from the sale
of securities, and investigate the
underwriting and banking arrange
ments of the roads and what they
have cost. Total net and gross earn
ings from the beginning Of railroad
ing will be determined. and the CONF
will report In detail all money
ever expended by the railroads and
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