Evening star., 1927-04-13

A bitter controversy is forecast
over the decision of the Interstate
/ Commerce Commission that the val
uation of railroads should be based
on the cost of property as Of 1914
Advocates Of values based on repro
tuction costs at the present time
contend that this ruling is destruc-
tive and are hopeful that it will be
upset on an appeal to the United
States Supreme Court, while others
contend that such an outcome would
disorganize the entire rate structure.
"The grounds on which the radical
divergence of opinion is based, ac-
cording to the New York Times. in
dicate clearly enough that the final
and proper course of the commission
cannot properly be determined except
by the Supreme Court itself. No one
who has examined this complicated
question of valuation is unaware OF
the numerous confusing and trouble
some results of applying any of the
possible methods But it has equally
been manifest to every impartial stu
dent Of the problem that fixing prop
erty value for making purposes
by pre-war prices, while the COM
pany's expenditure for labor and ma
terials was governed by the subse-
quent rise of 40 or so per cent, in
volved an injustice whose scope only
circumstances could measure. Inc
Times, however. raises another issue
with the statement that "a large
body of thoughtful judgment viii
agree with President Hadley's con-
clusion in the Yale Review that the
use of cost OF plant (and especially
original or historical cosO as rate
basis is wrong in principle and often
dangerous in practice
%% *
On the other side OF tie question
is the positive expression Of view
from the st. Louis Post-Dispatch that
"the decision is not destructive or
confscatory." and that. while the
investment value is taken as the basis
Of rate making, it is a well estaD-
lished policy that no railroad or pun
lie utility will or can be compelled
to run at a loss. Rates VIII be ad-
justed to needs" continues the POST
Dispatch with due regard 10 good
service and a fair return Tor the
money invested Under this sound
policy there can be no destruction OF
railroad property or hamperinS of
of property or investment. AS mat
ter of valuation. however. the decision
is altogether good. It puts the earn
ings on the basis of the money in
vested in the property, instead OF an
estimated variable and speculative
basis"
Viewing the outcome as extremely
uncertain, the Boston Transcript
says: THE same issue. raised IN an
other form, brought from the United
States Supreme Court the decision in
the so-called Indianapolis case, hold
ing that a public utility, IN this in
stance a light and power company,
was entitled to a return OF per cent
upon the replacement value OF It's
properties-due regard being had for
preciation-rather than upon the val
ue at the time of construction. 1t
might seem that the Indianapolis case
constituted q precedent for the ac-
ton of the Supreme Court with ref
erence to the valuation Of the rail-
roads. but that may not necessarily
follow. More than that, it is possible
that a presentation in different form
of the issues in the Indianapolis case
might lead TO q different outcome.
= j: X x
The Des Moines Tribune suggests
that "the Supreme Court will have
plenty of leeway to say that present
day earnings are enough. and not be
very specific about valuation" while
the Louisville Courier-Journal de-
clares: The pronouncement OF the
commissions majority is of the great