The Washington herald., 1920-06-20

These reports comprise the first
group of any considerable size that
has been available since the work
of government valuation was begun
several years ago. They show for
fifty railroads. with a total mileage
Of 51,s53. a reproduction cost, in
cluding land values at 1914 prices, of
$3.203. .782.43, or about s46,000,O00
more than the total property in
vestmcnt account as shown by the
books of the inventoried companies.
To be sure, these reports are
preliminary" and cover only about
one-fifth of the country's total rail-
road mileage. They are not. there
fore, conclusive in themselves. But
by whatever method they are anaI-
yzed, they seem to point inevitably
to a conclusion which will mark an
epoch in, the history of American
railroads-the conclusion that back
OF every dollar. par value, of rail-
road bonds and stocks outstanding,
there exists in the aggregate more
than an equivalent amount Of tam
gible property values.
Emphasis falls upon the fact that
these preliminary valuation returns
are made on the basis of pre-war
prices. Values computed on pres
ent prices admittedly would show
a large excess over those prevail
ing in 1914. For example, c. A.
Prouty, Director of Valuation for
the Interstate Commerce Commits
sion. has declared that in his judg-
ment 1918 reproduction costs were
approximately IFS per cent of 1914
costs: and a more recent investiga-
tion appears to have established the
fact that 1920 costs would figure
more than 200 per cent OF those for
the year for which the official re-
turns are made. a
OF even greater Significance, how
ever. as pointing toward the con-
clusion to which we refer, Is the
fact that with few exceptions, the
available reports cover none of the
larger railroad systems. The ex-
ceptions are in the cases OF the
Great Northern and the Rock Is
land in the West; the New Haven.
Boston & Maine and Big Four in
the East. 1t is in these cases, more-
over, that the official returns estab-
lish the widest margin above book
values. What this promises in re-
spect to the engineering inventories
and land appraisals for such sys-
TENS as the Atchison, Southern Pa
cif1c, Union Pacific, Pennsylvania,
New York Central, Norfolk & West
ern-in fact, for the railroads as a
whole-seems obvious.
Nor Is the significance of these
figures lessened by the contention
that they may be subject to deduc-
tions on account of depreciation.
For the legal principle appears to
have been established that where
is considered. in COM
putting costs of reproduction. appre-
and going concern value"
should also be considered
With all of these factors on his
side, IL would seem, therefore, that
the vice chairman of the Confer
ence Committee on Valuation for
the railroads is well within the |
bounds of reason in estimating the |
actual value. of ths> carriers at more !
than $2,000,000, 900 in excess of their |
and more than s6,-
o00. .o00. 900 in excess of the current /,
aggregate market value of their /
bonds and stocks.
From the point of view OF the !
holders of railroad securities. or of |
investors in them, IL Is !
not of so much immediate impor-
tance that oficial assurance of un-
derlying property values should be
as that the railroads /
should be placed in position to earn |
a just and reasonable return on
those values.
The situation in this respect de-
pends upon the manner in which |
the Interstate Commerce Commits
sion applies the provisions of the
Cummings-Esch railroad law. The
are asking for a rate
schedule that will enable them to
sarn on property investment of /
$40, ,e16,o00,000 the per cent in
come return provided by the law.
They declare that. IL the present.
evei costs OF operation had pre-
Vailed throughout 1913, that year.s
,et income would have been only a /
little more than 1 per cent on their
Investment It follows that the re-
ldtustment which IL sought must |,