The New York herald., 1921-04-14
5 CENT FARE BASIS
FOR VALUING LINES
Miller Changes Transit Act to
Guard Public Against Ex-
cessive Appraisals.
CONTRACT IS TO BE GUIDE
Average Earnings on Fran
chise Fare Under Normal Con-
ditions Stressed in Message.

Special Despatch to THE NEw YORK AyxALp
New York Herald Bureau.
Albany. April Is.
Gov. Miller sent a special message
to the Legislature to-day suggesting
amendments to the new transit act
whereby O standard Of valuation will
be set up to safeguard the public fur
ther in determining the amount to be
allowed the traction corporations in
New York for properties to be taken
over and welded into one unified sys-
tenn.
The Senate tonight passed by
unanimous vote the amendments as
suggested by the Governor. Even the
Democrats who heretofore have op-
posed the Transit bill at every step
voted for the amendments.
There are several minor changes.
One is that the jurisdiction OF the
Transit Commission shall be extended
to Westchester and Long Island terri
tory adjacent to New York which are
served by the city transit lines. This
includes Yonkers and Mount Vernon
The other amendments are technical.
1t was pointed out aa an illustration
that IL a company is receiving $1,000
900 net income on a flve cent fare. that
line could be capitalized fairly ON a
per cent income basis at s2o,ooo.ooo
To that extent only would the fare
enter as q determining factor in fix-
ing valuation. Tho Governors mes
sage said:
1T is claimed that many surface lines
in New York cannot be operated al
profit at any reasonable or practicable
fare, ana II will doubtless be necessary
to discard some lines and to operate
others. even at a loss. TO provide the
public the necessary service. Any plan,
or any rate based on the physical valua-
ton OF such lines. would nlanifestiy be
unjust 70 the public.
THE rate of fare fixed by franchise
or contract is proper II not an essential
element to be taken into account In the
valuation Of the property affected Com
panies which have agreed to operate at
Ave cent fare have no just claim 10
a valuation Of their properties without
regard to the average earnings which
they may reasonably be expected 70
make in the future at such fare under
the conditions which are likely TO obtain
Indeed. the true rule OF valuation OF any
property for business purposes Ia the
capitalized value OF its prospective earn
Snpdfttnpa
where such earnings in the case OF n
public utility are limited by contract
OF franchise they should be computed
and the property affected by them valued
according to such limitations. Any other
basis of valuation OF the traction lines
in the city Of New York might result in
enormous gratuities to the companies at
the public expense.
"It is difficult 70 prescribe by statute
n standard or principle Of valuation that
will be fair and not too inflexible. The
valuation should be based OH the osti-
mated prospective earnings OF the fare
In each case which the company is per-
rnitted 10 charge under its franchise or
contract with the city, the valuation In
no case to exceed the original cost or
the fair reproduction cost less deprecia-
tion OF the property necessarily en-
pioyed In the public service. The stat
ute should be flexible enough TO permit
consideration OF all relevant facts and
circumstances such as. for example, the
prospect Of increased earnings Of lines
now serving undeve!optd territory
"The foregoing principle of valuation
will, in my opinion. be fair to the pub
lie and TO the companies alike. and with
the limitation that the valuation cannot
in any case exceed the original cost or
the fair reproduction cost less deprecia-
tion, Il will adequately eafeguard the
public interest OF course. construe
fair reproduction cost 10 mean such cost
under normal not abnormal conditions"