The Washington herald., 1913-10-06
THE VALUATION OF RAILROADS.
By GRIDLEY BEDE.


Northern Pacific with per cent intangi-
BILE value above costnf reproduction OF
the railroad. but New Jersey adds 20 per
cent or S75.sI1. 600 and then deduets 20 per
cent for depreciation (which is an abso-
lutely unhaltable process and so there
you are: the value of New Jersey rail-
roads is Just what 1t cost to bring them
into existence
h Minnesota sees no Intangible" values;
neither did Massachusetts when it was
trying to get At the value Of the New
Haven road.
Earning Power as Test.
Now let US see how the complications
multiply beyond all the above. The value
at which a railroad should be marked If
in the market for purchase is its earning
power: just as the Value Of a horse lies
in what it can earn and not in the direc-
ton IL may be headed.
But two lines OF equal cost would not
necessarily have equal value. for an Old
going line has more value than a new
one Just developing its territory
Then into the puzzle comes the value of
strategic position, for instance, the
stretch Of rails between the Harlem
Bridge and the Grand Central Depo-,
over which the New Haven must pass.
Inc privilege Of passing over this
sFateslc stretch is figured away up in
the millions
fhlhs little more on the problem: The
depreciation question has the railroads
themselves IN doubt, and how can q re-
mote commission decide this for ~ ner
cent OF all the railroad trackaRe Of The
world? Some railroads wear cut quicker
IMAM others Ties are always decaying.
cent of their cost. The far-South tie in
its moisture will not live as long as thu
Arizona tie in its dryness, but on the
other hand, Southern tracks will NOT have
to be constantly moved or lifted to keen
up with enCroaching sands Every NOR
tai device grows old; some things on a
railroad age out and some wear out, but
when they are out they are out and I'M
less replaced there is no railroad
Depreciation must everlastingIv he
emphasized. for it IS the one factor thu
is always active: and efficiency consists
in supplying material for it To grayv
away, but whether il il 20 per Cen; or ~
per cent or ) rer cent Il Is only possible
10 tell after replacement: for one year
may wear hard and another lightly; for
irstarce, the Baltimore and Ono had
StOOo'0e worth of equipment loss in the
floods o. last spring.
Differences in Construction.
Now going one step farther back-to
construction. 1t s seIf-evident thai such
a road as the Union Pacific, from Omaha
westward across Nebraska. was little
more than matter OF laying ties on A
gradual RE: bat the way across the
Sierra Mountains in California was one
to test mCr's every device and capacitv.
All these differences this graz task in
vo!vCs.
A thousand other complications could
be ranged N rows and then not exhaust
the list. But passing back to the very
first item in railroad building-the right
Of way-it must be realized that in many
cases the right Of way acreage costs two
and one-fourth to two and one-sa'-
times as much as the value OF the ..
il touches. But to duplicate now at
and one-fourth times present vel
would be prOhibitive, and vet such
bilites Of reproduction have to l.
ported on; which is reporting on
thing purely imaginative and cutie
less except for technical argument
increasing technical employment
The last question should really be first:
What is this valuation for? II is To-
ind supposed scientific basis for rail
road rateS-both passenger and freight
This cannot be done by the means pro
posed, for this contradiction is visT 70
II passenger rate is rightly low la
crowded territory where prosperity foul
ishes. then a rate ought TO be high where
the population is sparse and poor and
journeys necessarily long. Yet from III,
pocketboOk point OF view the crowded
region could stand high rates better
than the thin region.
g..
When the enormous task of the Inter
state Commerce Commission approaches
completion and the Federal g,vernmen,
can prevail over all the jangiinG. con-
fusing railroad laws of all the States.
then it seems possible to foreteII a gen
eral advance instead OF a decline in rates.
both passenger and freight: and for this
reason: railroads must come 10 the point
of providing out of earnings a sinklra.
fund for reproduction and thus AVOID
everlasting dependence on the money .
market for bonds piled on bonds and
obligations plsstered on every decavfrE
asset The unwise agitation against all
roads on one hand and the former indie
fensible independence Of public service
on the part of railroads on the other
hand has reached its limit in this scheme
In the years that will elapse before the
task approaches its first form OF COM
pletiOn. the common sense OF the railroad
msgnates must work out the idea of a
sinking or replacement fund for property
and amortization for the bonds: for in
definite extension OF bonded indebtedness
Is impossible
POPULAR bonds.