Evening star., 1927-02-07
Continued from First Page.l

computed as of July /, 1914, as normal
for the purposes of the valuation.
THE company appealed to the Su
preme Court of the District which
held that this method of computing
reproduction cost was unlawful, being
in violation of the express terms of
the statute which requires the value
to be determined as of the date of
the valuation. The commissions val
uation was accordingly set aside, and
it is now conceded that this ruling
was correct. Potomac Electric
Power Company VS.. Commission, 81
App. District of Columbia II. 1t was
then agreed by the parties that the
lower court should find the fair value
of the company's property as defined
by the act as of January /, 1925.
This the court did upon the record be-
fore it, and found the value as of
that date to be $30,906, $780, The
court.
Valuation Is Itemized.
THE total valuation thus found by
the lower court was composed of the
following items, to wit: 1887 ,419 as
the net cost of reproduction on Jan.
uary i. 1925. of the company's ply
sical property included within the
corresponding valuation found by the
commission as of June 30, 1914, less
subsequent retirements; $748,1S2 for
the cost of certain lands and $114,333
for other lands: $500 900 for "preor.
ganization expense; $4,000 for pre-
liminary operation expense; 81 ,946. .2S1
for certain right of way expenditures
and development costs allowed by the
commission and not questioned by
plaintiff company; $4,2S9, 1926 as the
reproduction cost on January 1, 1925,
of all additions to the physical prop
erty of the company made between
June 80. 1914, and January l. 1925;
$125. .68S for materials and supplies on
hand, and $256,151 for working cap
ital. These items aggregate 25,756,-
$50, and represent the total reproduc-
ton cost new, without deduction for
depreciation of the company's line as
of January /, 1925, considered as a
going concern, but not including
franchises or good will.
THE lower court then added to the
foregoing total the sum of $3.50, 600
as the actual or historical cost to
the company of the franchises and
good will of the Washington and
Georgetown Railroad Co., purchased
by the present company together with
the line of the former company in
the year 1895. The inclusion of this
item brings the lower courts final
valuation of the company's property
to the aforesaid sum of $50, 0,906,SS0.
This item of $5,150,000 for franchises
and good will was presented to the
commission when making it's valua-
ton and was totally rejected by it. 1t
is now contested by the commission.
Stock Value Soon.
It appears that the Capital Trac-
ton Co. first took that name in the
year 1895, concurrently with merger
of the intersecting lines of the Wash
ington and Georgetown Street Rail
road Co. and the Rock Creek Railway
Co. of the District of Columbia. The
Washington and Georgetown Railroad
Co. had a capital stock of 10000 shares
of the par value of $50 per share and
a bonded indebtedness of $4,000, 900.
These bonds, bearing 6 per cent an
nual interest, were secured by deed OF
trust and contained a stipulation that
they should be interchangeable for
stock at par whenever the right to
increase the capital stock in an
amount equal to the amount of bonds
issued shall be obtained" The COM
pany enjoyed great prosperity, Its
shares of stock $50 par) were selling
at $275 per share, and its bonds, ow-
ing to the provision for interchange
with stock at par. We're quoted at dou-
Bile par value. The Rock Creek Rail-
way Co. had a capital stock of $1.250.-
900. 1t served a territory not yet
fully developed and was operating at
a net annual loss.
"In the year 1895 the Rock Creek
Railway Co. was authorized by act or
Congress, 2S statute, 700, to contract
with any street railway company
owning or operating connecting or
intersecting line for the joint man
agement, lease or purchase or such
connecting line or lines, and operate
the same in connection with its orig
inal line, and in case of such contract
may provide the means necessary by
an increase of its capital stock, not
to exceed the actual consideration
paid or the actual cost of the neces-
sary equipment" 1t was also pro-
vided by the act that in event the
company entered into such a contract
as contemplated by the act it's direc-
tors were authorized to change its
name from the Rock Creek Railway
Co. of the District of Columbia TO
the Capital Traction Co.
w. & G. r.. r.. Co. Purchased.
Under authority of this act the
Rock Creek Railway Co. purchased
the line of the Washington and
Georgetown Railroad Co., and as
sumed it's present name of the Capital
Traction Co.
In carrying out this transaction
the company issued it's corporate
shares to the amount of $12, 900 900, of
which $2,750, 900 were delivered to the
stockholders of the vendor company
in exchange for their stock in that
company, being at the rate of $275 per
share; and $S,000000 were delivered
to the bondholders of the vendor com.
pany in payment of their bonds at
double par value; the remaining
81 ,250. 900 went to the stockholders OF
the Rock Creek Railway Co. for their
stock at par in that company. 1t ap.
pears that the book value of the prop.
erty of the Washington and George.
town Railroad Co. at the time of the
transaction was only $5,103 ,37625; in
other words the purchase price paid
in stock by the Capital Traction Co.
for the property of the Washington
and Georgetown Railroad Co. amount.
de to $5,646 .623.75 over It's book value
at the time of the purchase. This re.
suited, of course, chiefly from the pay
ment of $S,000,000 in stock for the
81 900 900 of bonds as already noted.
"It is claimed by the company that
this excess over the book value of the
properties of the vendor company was
paid for it's franchises and good will
The lower court approved this claim
! and accordingly added the sum OF