Newark evening star and Newark advertiser. [volume] (Newark, N.J.) 1909-1916, 1914-01-17
BOARDS
VIEW DEFENDED
CONTINUED from First Pase.)
" to benefit the people who are goinl
to pay the rate.
p. 5. Argument Ingenious"

qu1reS property 10 DC ldAco eSNoA uAA5
tc it's true value the rule which
defines the eompany's right to re-
turn limits such right to a fair re-
turn upon the reasonable value OF
the property devoted to the pubic
use.
"The words true value have, SO far
as / can bring to mind, never been
employed in the statement of the rule.
1.-THE phrase employed in its state
ment has invariably been timer 1an
value or reasonable value.
"2. 1t fgails to recognize the fact
that fundamentally value is the de-
gree of imortance attached TO an
object with reference to some END
which that object subserves, and
that. therefore, there are as many
types or classes of value as there
are objects or ends, that may be
served by the object valued.
"'True value in taxation and emil
lnent domain is under normal ana
ordinary conditions, market value
the highest price the property Will
bring for any and all uses.
Fair and reasonable value IN rate
making, however, cannot be deter
mined by taking market value alone
Into consideration. Its determination
requires that the value in the par
ticillar public use to which the prop
sdro accept market value, under or
binary and normal conditions, as the
basis of assessment for taxation OF
stock and franchises is unobjection-
able. The present dividend earning
| poWer at the time of the assessment
| is known; it affects the value of the
| franchise, and the value of the fran
chise is in turn reflected in the mar
| ket value of the stock.
1T is far cry from this PROPOSE
ton to that advanced by the company
| that such market value must be ae-
| cepted as the determining factor in
a. proceeding under the legislative
power to fix rates.
1.-THE purpose of such q proceeding
is to fix for the future the rate upon
which the dividend earning power
| depends.
''The rate limits the capacity of
the company to earn profits.
1.-THE value of the franchise is it,
self based upon the capacity to earn
profits, and so is dependent upon the
rate.
at is therefore impossible to base
the return to the company upon the
value of the franchise, since the value
of the franchise in turn depends on
the rate.
"5. 1t loses sight of another element.
.'AII" Property should Be Taxed.
"All of the property of the company
| is subject to taxation. The public
estimate of the value of all of the
| companys property is reflected in the
market value of it's shares.
1.-THE property upon the reasonable
value of which the company is en-
titled to fair return is, however,
not all of its property, but that only
| which it has devoted to the public
use.
1.-THE franchise is not property de-
voted to the public use by the COM
pany.
vested by the State in the company
the franchise sanctions the act of the
! company in deyoting other property
to the public service and the use by
/ it to that end of the public high
ways.
$50, too, property may be possessed
| by the company, neither used nor
useful in the performance of the pub
lie service, and it may have accumu-
lated surplus earnings set aside for
| future distribution as dividends
1.-THE market value of the company's
stock would be affected thereby.
These items are property and are
subject to taxation.
''They do not, however, form part
of the property devoted by the COM
pany to the public use, the fair value
of which is the basis of calculation of
a reasonable rate.
| sc. It .overlooks the fact that while
all of the property of the company
| is subject to taxation, the property
upon the reasonable value of which
the company is entitled to a fair
return is not all of its property; nor
all of its property devoted to the
public use; but only such of its prop
erty devoted to the public use as is
reasonably necessary for the public
service.
THE actual value of a plant may
| in some cases be enhanced by the fact
that it is larger than is reasonably
needed.
This actual value would be true
value for purposes of taxation.
ut would not, however, be the fair
or reasonable value for purposes
of rate-making.
What is measured in taxation is
the true value of the property pos
sessed.
What is measured in rate making
is the value of the property possessed
| in and for the performance of the
public service rendered.
Failure to recognize this distinc-
| tion would in a case such as that
suggested inevitably lead to the rule
that the company is entitled to earn
revenue on an unnecessary expen-
diture in providing a plant larger
! than is reasonably needed.
1.-THE rule is, however, settled 9TH
erwise.
| Reasonable Return Only.
'7. 1t fails to take into account the
l sa.w1A hn h. +
a reasonable return only and that the
public are entitled to be served at
reasonable rates.
IF this rule is not to be deprived of
| all substance, the rule Of reasonable
ness must be applied to the amount
of the investment.
Assume that the gas company had
| originally located its works at the cor
ner of Broad and Market streets, in
the city of Newark, and that its lands
had attained the enormously enhanced
value which prevails at this point.
This enhanced value would, of
course, be reflected in the market
value of its shares.
For purposes of local taxation the
present market value of the land
| would be taken.
"But would it follow that the COM
pany is entitled to a return from sales
OF gas on the present value of the
site?
Prudent management would sug-
gest removal to a less expensive site
better adapted for the business.
Under such conditions would not
the value taken in a rate case be the
estimated cost of replacing the land in
use with other land capable of ac-
complishing the same result?
FINALLY, the rule contended for
would make the market value of the