New Britain herald., 1927-10-04
A VITAL ISSUE BEING
 DEBATED

tegin an argument that may lead 10 the undoing Of the entire system so laboriously constructed.
 It Is the case of tha O'Fallen 6, st. Louis Railroad Co. ys. the Inter state Commerce Commission. This is Q small railroad and last February the I. C. C. directed the line to pay $226.S5o 10 the Commis- sion. with accrued interest, as re capturable excess earnings for 1920 10 1923, under the recapture pro- visions ot the transportation act. This provision directs railroads earning more than per cent on the value of their transportation prop arty, as determined by the commis- son, to turn over half the excess tor the maintenance Of a. fund 10 assist the less prosperous roads,
 Note these points; The value or property is determined by the com mission, not the railroads. The com mission and the railroads do moi, agree upon values determined Thc commission seeks 10 establish a low actual value based upon actual in- vestnent; the railroads seek 10 es- tablish a value based up reproduc- ton costs.
 There is q vast difference between per cent return based upon actual value and ths same percentage of return based upon reproduction costs.
 If the I C. C. contention wins i,A the federal court in Kansas City, and is maintained up to the L. s. Supreme Court, then the allowable return on railroad property will re- main low; if the O'Fallon railroad wins the allowable return on its line-and on all other lines in the United States-will be much higher l than at present.
 It is estimated that if the railroad wins the court case the railroads could exact an additional two hil- lions of dollars year from Amer ican transportation users. If the railroad wins the regula- ton Of the I C. C. will be practical ly wiped out. The railroads are en- deavoring 10 obtain a valuation so high that if they get it the returns pill be more than the traffic can bear. That means they will be able to fix rates 10 suit themselves and the I, C. C. will become a rubber stamp.
 The railroads want the valuation fully s3o,00oco0,0o0 higher than at present. A boost of such a nature has already been foroshadowed by a , decision Of the L. s Supreme Court i ir a case involving the Indianapolis Water company. In that litigation it was held that reproduction costs were proper as a means of deter [ mining value upon which to base returns.
 The O'Fallon line case to be heard in the federal court Of Kan sas City, is only a test case That is all that IS necessary to gain the railroad end, should the small linc win it's contentious against the | C 1 C. The precedent would affect every railroad in the country; and like, wise every shipper and every per sen travelling as passenger.
 The difficulty in valuing the rail roads lies in when it is done. The I C. C. has been engaged for mor' than ten years in the process. Mean while, it is contended by the rail roads. the value of all property rise! before the commission gets througl with it's job.
 For instance, there was the cas' of the San Pedro, Los Angeles ( Salt Lake Railroad. The I. C. C. n 1923 decided the final value of thi road for June 30, 1914, was $45, 100000. while the carrier claimed { value of more than $7o.ooo.ooo.
 IL is necessary 10 note that the C'. C. made it's report "as of 1914 in the year 1923-or nine year later,
 And if is interesting to note tha the San Pedro railroad asked tn federal court of Southern Californi tor annulment Of the commission orders and was successful. But th
 Supreme Court unanimously revers d this decision last February, say
 that the valuation fixed by the com
 mission had not been used as
 hasis for rate making and that th
 railroad had in consequence suffere
 no injury. Since that time a simila
 case instituted by the West Virgini
 Northern railroad was decide
 agains. the carrier on the sam
 grounds.
 But the OFallon case goes deep
 or. + is the first instance in whic
 q railroad has challenged the com ! mission before the courts on basi
 of valuation on the ground that