Organization.
The State Legislature of Michigan, at the session of 1899, passed an act creating a Board of State Tax Commissioners and outlining and prescribing their duties. This act authorized the board to "inquire into and ascertain the value of the property of corporations paying specific taxes under any of the laws of this State."
The object of this valuation was to determine the rate at which the corporations were paying taxes, to the end that necessary laws should be passed so that all taxable properties in the State might be taxed uniformly.
On September 1st, 1900, the Board of Tax Commissioners appointed Professor Mortimer E. Cooley Appraiser of Properties. Immediately thereafter the general organization was mapped out along the following lines of division of labor and responsibility:
1.—Administration.—All matters of general policy in regard to the conduct of the work, all matters relating to negotiations and conferences with officials of corporations, all transactions with the State Tax Commission, the Governor, or the Board of State Auditors, and the entire direction of all relations with the public through newspapers and other channels, were retained by the appraiser, who was the final arbiter on all matters referred to him regarding the details of the work.
2.—Civil Engineering.—The appraisal of all property which in the course of construction would fall under the supervision of the civil engineering department of a road, including land, roadway, bridges, and structures, was in charge of the writer.
3.—Mechanical Engineering.—The appraisal of all motive power, rolling stock, and property which in the course of construction would fall under the supervision of the mechanical engineer, including power and electric plants, shop tools and machinery, water stations, etc., was in charge of Mr. Theodore H. Hinchman, Jr., of Detroit, Mich.
In the matter of the final assembling of figures, computation of percentage values, and compilation of final results, Mr. Hinchman and the writer worked together with joint general supervision.
4.—Telegraphs.—The inspection and appraisal of all telegraph properties was under charge of Mr. William S. Conant, of Detroit, Mich.
5.—Telephones.—The appraisal of all telephone properties was directed by Mr. William J. Rice, of New York.
6.—Vessel Properties.—All vessels belonging to companies whose property was involved by the appraisal were inspected and appraised by Herbert C. Sadler, Professor of Naval Architecture and Marine Engineering at the University of Michigan.
In the following narrative, no special mention is made of the work executed under the direction of Messrs. Conant, Rice, and Sadler, because they really had charge of independent appraisals which were conducted on lines similar to those adopted in the railroad appraisal, and their methods were not different from those of the latter; hence any description of their work would be in a large measure repetition. This omission is in no wise to be construed as any reflection on the importance or high character of their work.
The organization as just outlined, while necessarily touching and overlapping at points, was generally defined so clearly that there was no duplication of work. Each head of department was responsible for the work of his special division, and directed the laying out and execution of the work done by his men.
The first task, after deciding on the general organization, was to determine the general methods to be adopted and the manner of getting the necessary detailed information. The magnitude of the work was appalling. There were seventy-eight different incorporated companies, owning some 10,000 miles of railroad, scattered over 54,000 sq. miles of territory. In addition, there were a number of small unincorporated railroads, telegraph, telephone, plank road, and other corporations, many of which had no records, no complete inventory, and no department organized so that the information could be readily secured. It was determined:
(1) To make or secure a complete detailed inventory of every piece or parcel of property belonging to each company;
(2) To examine each separate thing, place on it an estimate of cost of reproduction and depreciation;
(3) To prepare, as a basis for the final figure of value, an estimate of the present value, being the cost of reproduction less the depreciation.
Having determined on a detailed physical inventory and appraisal, the next step was to outline the work so as to secure absolute uniformity. The difficulties which confronted the appraiser at this period were many, chief among which were:
(a) Lack of Complete Understanding on the Part of the State Officials.—The Governor and Board of Tax Commissioners rendered every possible assistance, but the Board of State Auditors was not at first fully committed to the work, and the uncertainty as to whether or not bills would be paid, delayed seriously the employment of men and the full commencement of work for 3 or 4 weeks after the first organization was made.
(b) The Attitude of the Railroad Corporation Managers.—While this was not actively hostile, it was a serious cause of delay, as they could not foresee what effect the work might have on the interests in their charge, and, while not refusing access to their records, they delayed and held back information; in fact, a long time elapsed before all the companies opened their records to the appraiser and his staff.
(c) The Confused Condition of the Records. Many small corporations had absolutely nothing in the way of records of buildings, bridges, land, or other properties. Others had very complete records in certain departments and very imperfect ones in others; still others had records which had every appearance of being complete, but they were not up-to-date.
Facing an appraisal of this magnitude, with a time limit of only 4 months for the entire work, with delays at the outset which seriously hampered the organization for 2 or 3 weeks, the appraiser was compelled to occupy this time in preparing the blank forms to be used on the work, and in conducting correspondence with the men who were to make up the working force, investigating their references, etc.
The blank forms, Figs. 1 to 10, were the result of a series of conferences between the members of the staff. By this time it was quite evident that no great amount of help could be hoped for from the corporations. Had it been possible to secure access to the records of such railroad companies as the Michigan Central or the Lake Shore and Michigan Southern before the final drafts of the forms were prepared, the writer believes that several might have been simplified and many improvements could have been made. However, this was not possible, and the forms were prepared and printed before access to any railroad office had been granted.
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That a few changes were made in 1904 was to have been expected; that these forms were almost in their entirety made a basis for the similar work of the Wisconsin appraiser, some three years later, was in the nature of a high compliment and goes far toward answering the criticisms of this part of the work, generally to the effect that the forms call for much more information than could possibly be used, and that they show lack of care in arrangement.
It may be said here, properly, that the uncertainty as to the final attitude of the companies made it essential that the appraiser prepare, if need be, to make his inventory by personal inspection in the field. Indeed, this was done in the case of several roads, and, while most of the companies finally accorded every courtesy, either giving the appraiser access to their records, or furnishing the information desired, it is not probable that the shortness of the time limit would have enabled the appraiser to secure any sort of result had a modified plan been adopted.
The law provided no requirement that the companies should furnish any information. In order to secure the data, it would have been necessary to employ a large number of men, and this would have been such a serious expense to the companies that refusal to comply would probably have followed such a request. Many of the companies had no men in their service able to prepare the required data; and, finally, eight or ten men after having worked in the files of companies owning reasonably full records, were much better able to take off the desired data intelligently from the records of other companies than men unfamiliar with the needs of the appraiser and with no prior experience. Then, too, the work secured was that of one body of technical men, all experienced in different phases of railway work, and thus was uniform and consistent. Had seventy-five or eighty different men or sets of men prepared these inventories, there would certainly have been a great variation in their worth and reliability.
It must be kept clearly in mind that lack of time was the main feature which kept the appraiser from considering any such plan of co-operation with the railroads as was adopted later in Wisconsin and Minnesota, and that no distrust of the railroads, or lack of desire to co-operate, had anything to do with the appraiser's decision to use the method which was adopted.
Shortly after the preparation of the blanks, access was granted to the records of the Ann Arbor Railroad, and almost immediately thereafter several other companies opened their files to the appraiser; the State Board of Auditors determined to pay the bills, as approved by the appraiser; and the initial difficulties were so far removed that it was possible to carry out, without any further delays, the plan of organization which had been perfected.
The personnel of the staff was considered to be of the greatest importance, and, in the selection of men, the requirements desired were: experience in the construction and operation of railroads, thorough technical training, high standing in the Profession, as shown by membership in the American Societies of Civil or Mechanical Engineers, or of other Societies of high standing, and high moral character. Politics, residence in the State, or local influence, had absolutely no weight in the selection of any of the men. In a number of cases men were secured who had for some years occupied the position of Chief Engineer of important lines. In a very large number of cases men who were engaged on this work have since its completion held the position of Chief or Principal Assistant Engineer of important railroads, and practically all of them returned to railway service. Dozens of these men are well known, and their work deserves that full credit should be given to each, but it is impossible to do so within the limits of this paper.
The minor positions, such as assistants in the field and in the computing and compiling rooms, were assigned to younger men, generally with some railroad experience, and in many cases they were graduates of technical schools, Cornell, Yale, Rensselaer, Michigan, Ohio State, and other schools having representatives.
The writer believes that no more harmonious or loyal organization was ever gathered together before, or has been since. Men who had held Chief Engineer-ships trudged miles in the wilds of Michigan on foot, inspecting and inventorying property, and came into the office and worked long hours at the computing tables with the utmost cheerfulness and camaraderie. There was complete harmony, absolute loyalty, and as perfect a spirit of unselfish devotion to the work as the writer has ever seen in any organization.
The fact that such a staff of engineers, of wide experience in railroad construction and maintenance, had been assembled, made it feasible to carry out a plan of the appraiser which proved to be of great value. At frequent intervals, during the progress of the work, conferences were held which were attended by all the heads of departments and by many of the older and more experienced engineers. Matters of policy, details, general principles, and rules and methods for conducting the appraisal, were fully discussed, and stenographic records were made of the discussion and conclusions. These conferences covered practically every question that arose; they were of such a nature as to draw out the opinions of the men fully and freely; and their effect was to eliminate the error due to individual judgment, and harmonize and unify the methods and results of the appraisal.
Special emphasis has been laid on the organization of the staff, because the criticism has been made that this work was lacking in care, was hurriedly done, and was unreliable. The work must be judged by its results, but the criticism that it did not receive proper care is absolutely unjustified in fact. The men engaged were of the highest type of experienced, technically educated, and highly qualified engineers; they entered the work unreservedly, and gave the best there was in them. The Michigan appraisal was not a one-man job; it was the work of many men, and all are entitled to credit.
That some men in an organization such as this, gathered from all over the United States, should prove to be lacking, and should fail to hold their place with their fellows, was to have been expected. That the number of such men should not exceed half a dozen was remarkable. In fact, almost every such case was found when the first notes were returned to the office, and in only two or three instances was it necessary to send a second man to do work which had been once covered. In several cases men were sent over certain sections which had been inspected by some one else, with a view of getting an idea of the personal judgment of the different men, but in such cases the results were astonishingly close, and created the greatest confidence in the figures of depreciation which were being received.
Looking back on this work, after the lapse of 10 years, after having fully reviewed it twice, and examined all records, after having heard the men engaged on it testify in court, and knowing the record of these men since the completion of the work, the writer believes himself fully justified in stating that, no matter what opinion may be held as to the accuracy, reliability, or value of the result, no charge of carelessness, neglect, undue haste, or lack of consideration can be sustained as against the staff.
To strengthen the work further, to eliminate the element of personal error, to guard against the danger of dulled perceptions due to constant application to the work, and to forestall, if possible, every point of objection to methods, a Board of Review was chosen by Appraiser Cooley to whom were referred:
(a) The methods of inventory and valuation, as determined by the staff;
(b) All points on which special discussion or difference of opinion were noted in the working conferences;
(c) Questions as to elements of value in the physical property which were in themselves not tangible or capable of inventory; and finally,
(d) The results of the whole work.
The members of this board were chosen on account of pre-eminent standing in the Profession, and on account of experience and prominence in railway engineering. The board was composed of four men, as follows:
Chairman, Octave Chanute, Past-President, Am. Soc. C. E., former Consulting Engineer, Atchison, Topeka, and Santa Fe Railway, but at the time not engaged in active railway work.
George W. Vaughn, M. Am. Soc. C. E., Engineer in charge of Track Elevation in Chicago.
Charles E. Greene, M. Am. Soc. C. E., Dean of the School of Engineering, University of Michigan.
Charles Hansel, M. Am. Soc. C. E., former Engineer, Wabash Railroad, former Chief Engineer, Illinois Railway and Warehouse Commission, and at that time General Manager of the National Switch and Signal Company.
These gentlemen were not engaged in any detailed work on the appraisal; they came to the work for one week each month with minds entirely clear of all confusion raised by issues of detail, and were thus enabled to pass as a court upon all matters laid before them. Their association was of inestimable value in giving confidence to the members of the staff. The many years of railway service of Messrs. Chanute and Vaughn, and their unquestioned ability in that special field of engineering, gave the stamp of finality to points decided by them. The special knowledge of Mr. Hansel in the field of signal engineering, and his known ability as an expert in organization and administration, were of the greatest value. The service of Professor Greene was that of the analyst and logician; his clear and judicial mind enabled him to formulate the final arguments in many cases under consideration.
The writer wishes to make it perfectly clear that he has not attempted to minimize the work of Professor Cooley by stating the exact relation of the many engineers on the staff to this work, but to bring out and emphasize the fact that no one man, or no two or three men, were responsible for any single part, but that the whole represents the best efforts of sixty or seventy experienced men working to secure a fair, honest, unprejudiced, engineering estimate along such lines as would eliminate, as far as possible, all errors of individual judgment.
It has never been claimed for the work that it was perfect, or that it was entirely free from errors. It has been and is claimed for it that it probably represents as close and conservative an estimate of cost of reproduction and depreciation as it would be possible for any set of men to make under the conditions then existing.
Professor Cooley was in constant touch with the work, knew its every detail, passed upon and approved every rule and order, presided at every conference, and nothing more than his activity, optimism, and constant watchful care and tireless energy kept the force at work day and night and brought about the prompt completion of the details. His recognized high standing, his remarkable ability as an executive and organizer, and his powers of diplomacy, more than anything else, brought about the final acquiescence of the railroad managers and kept up the confidence of the State authorities; his personality pervades the entire work. After giving all due credit to the staff, and they were entitled to much credit, the real honor must go to Professor Cooley. It was his conception, his plan, and the brunt of the battle was his.