The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1913-06-10
Can Fix Rates for Intrastate
Traffic, Court Decides.
Speculation Where Victory Lies
in Minnesota Case.
RATE MAKING is CLARIFIED
Congress Has Not Taken Power
Away From States Yet.
Method of Determining Fair
Value of Reproduction.

Washington. June 10.-Lawyers who
gathered today at the supreme court to
listen to the application of the princi-
pies laid down by Justice Hughes in
the Minnesota rate case to the rate
cases from Missouri, Arkansas. Ken
lucky, Oregon and West Virginia. were
of the opinion rate-malSinS both in
the states and before the federal gov
ernment had been reduced to a much
more accurate basis than ever before.
All sorts of opinions prevailed as to
where the victory rested in the Min
nesota decision. Minnesota state off,
cials in dispatches expressed their
pleasure over the result and Attorney
General McReynolds and members OF
the interstatet commerce commission
saidthey were fully satisfied.
Justice Hughes held that there was
no place for hypothetical multiples in
fixing the fair value of railroad
property upon which the public must
pay a return, and that the railroads
ought to be satisfied if fair average
market price was given their land,
free from any hypothetical additions
That would allow railroads to enjoy
the benefit of the general prosperity
of the country by receiving a return
not only upon their original invest
ment, but on the increase in the value
of their investment.
Where the inquiry is as to the fair
value of the property" said Justice
Hughes, ''in order to determine the
reaSonablenesS of the return allowed
by the rate-making power, it is not
admissible to attribute to the property
owned by the carriers a speculative
increment of value over the amount
invested in it and beyond the value
of similar property owned by others
solely by reason of the fact that it is
used in the public service. That would
be to disregard the essential condi-
tions of the public use and to make
the public use destructive of the pup
lie right"
The prospect of congress taking
charge of state rates affecting inter
state commerce indirectly lent encour-
agement to the railroads that they
would escape from regulation by 4s
state commissions. The attempt or
railroads to establish the cost of re-
producing their property new as equiva-
lent tn the fair value" on which they
were entitled to earn returns was re-
garded as doomed. The federal court In
Minnesota adopted that basis. 1t al
lowed the railroad to multiply the
normal market value of land by two
in order to arrive at the cost of re-
producing new right of way outside
of the three big cities in that state.
Several times the reproduction
cost new theory of valuation has been
urged upon the interstate commerce
commission at the proper basis of rate
making. One of the instances was in
the advance sought by the western
railroads about two years ago. The
commission refrained from establish
ing a basis, waiting for the supreme
court to pave the way.
Members of the house and senate
when asked for opinions as to whether
congress would soon exercise the pow
er found by the court to rest with It
to regulate such state rates as affect
indirectly interstate commerce were
not inclined to come forth at first
-, I4rrwr
of the federal government through the
last hundred years of leaving such reg
ulation in the hands of the states.
The problem of regulating railroad
rates, however, is rendered more COM
plex and perplexing by the findings of
the court, in the opinion of officials
of the interstate commerce commits
sion. The holding of the supreme
court in effect, is that states not only
have the authority to fix intrastate
affect interstate rates, they are valid
unless shown to be confiscatory.
Thus it is pointed out the line Of de-
marcat ton drawn by the commission
between intra state and interstate rates
practically is eliminated. AS commits
sion officials view the matter the net
result of the courts decision will be
to stimulate rate making and rate re-
duction by every state railroad COM
mission or legislature In the country.
In their probable action of the states
in the fixing of rates will clog dockets
of courts with transportation cases as
the courts naturally will have to de-
termine whether any given rate, over
which there is a dispute, is conf1Sca-
tory.
Washington, June 10.-The power
of the state to fix reasonable intrastate
rates on interstate railroads until such
time as congress shall choose to regu-