Special Problems of the Mechanical Department.

The Civil Engineering section dealt wholly with fixed property located entirely within the State; and the work offered no special difficulties in the way of assignment of values. It is true that, when the question of terminal values was under discussion, the Wisconsin and Michigan Railroad offered a very pretty example, in that the revenue-producing half of its mileage lay in Michigan, while its shops, yards, docks, and car ferries, comprising the great bulk of its physical property, were in Wisconsin. This instance merely emphasized the fact that no State valuation of an interstate property can settle finally and definitely all the questions that arise.

Assignment of Value to States.—The Mechanical Department was compelled to handle the valuation of moving property, and to assign values as between the States on such a basis as would be fair to all parties. The Courts have been inclined to view the distribution of values between territorial units on the track-mileage basis as being a fair one. The study of the problem in Michigan indicates that while this method, perhaps, is just in most cases, it will not hold in all. Assignment was made upon several bases, as follows:

(a) Main-line mileage;

(b) Total track-mileage;

(d) Car- and locomotive-mileage, entire equipment;

(e) Freight-car mileage of the entire system.

The results secured by these different methods show, in many cases, very little difference; all are close, and no injustice is worked by any method, while, in other cases, the figures are widely divergent.

The Lake Shore and Michigan Southern Railway owns a high-class main line between Chicago and Buffalo, and for part of the way there are two lines several miles apart; the entire line is double-tracked, and there is much third track. None of this line is located in Michigan, except some 80 miles of single-track main line of the Michigan Division between Toledo and Elkhart. The company, however, has several hundred miles of branch line in Michigan, which comprises most of the branch-line mileage of its system. These lines, generally, are far inferior to its main line.

Any apportionment of its equipment between States on the basis of either line-mileage, total track-mileage, or locomotive- and equipment-mileage of total equipment will result in the assignment to Michigan of a value far in excess of a proper or fair amount. An apportionment of locomotive and passenger-car equipment on the basis of equipment-mileage or equipment operating in the State, and for freight cars on the basis of car-mileage of total equipment, was found to be most fair.

In making the assignment of values, this study was made for all interstate roads, and such basis used as was apparently most fair in each case, the department making a special effort not to assign to Michigan undue values or those which could not be sustained.

Freight Car Inspection.—One of the most perplexing problems which was faced by the Mechanical Department was the proper and satisfactory inspection and valuation of freight equipment. The freight cars owned by the companies were scattered over the United States and Canada, and the inspection of any considerable percentage of those owned by any company was, of course, an impossibility. The fact that these cars had been purchased in series, so that there were considerable numbers in a group, all of the same age, and built according to the same specifications, made possible a valuation by groups. The acceptance, however, of any arbitrary percentage of depreciation by years, or the acceptance of the rules of depreciation of the Master Car Builders Association, without making independent investigation with a view of establishing the correctness of the rule, appeared to be unwise.

The several companies submitted carefully prepared statements of equipment. These statements were compared with the equipment register and the reports to the Commissioner of Railroads. The prices used were those of the rules of interchange of the Master Car Builders Association wherever applicable.

Prices were furnished by the leading manufacturers, and in many cases were secured from the books of the railroad company.

In order to determine the condition of the equipment, the inspectors of the department personally examined 32,000 freight cars in Michigan and adjoining States. Their reports were separated, classified, and analyzed by groups, with the result that the inspection fully confirmed and justified the use of the rule for depreciation of the Master Car Builders Association, which was therefore applied. In the 1902 appraisal this rule was accepted without any inspection or further study of the problem.

The criticism of this part of the work by the appraiser of the State of Washington is wholly unjustified, as the work was necessary in order to qualify in Court and defend the rule adopted, and the actual cost of the work was small.

Locomotives.—The inventory of locomotive equipment was secured from the companies, and checked against reports and the equipment register. Personal inspection was made of every locomotive in the State, then a complete description was prepared, and the percentage of depreciation assigned. Curves of depreciation had been computed and plotted, and the figures of the inspectors were compared carefully with the curve in order to eliminate possible errors.

Vessels.—Professor Sadler's appraisal of vessels involved a personal examination of every vessel. This survey included:

(a) The hull of the vessel and general equipment;

(b) The machinery and boilers.

An independent estimate of the cost of reproduction and depreciation was made, and, wherever possible, this was checked by comparison with the detailed original cost. In case of material difference, various shipbuilders were consulted, and independent estimates of cost were secured. In every case these latter estimates were confirmatory of the estimated cost of reproduction, which figures were used throughout the appraisal.