The Minnesota State Railway Appraisal.
The valuation of railway properties in the State of Minnesota was undertaken with a view to establishing a basis for rate-making. The work was in charge of Mr. Dwight C. Morgan, Engineer of the Railroad and Warehouse Commission of the State, whose full and complete report is a very valuable addition to the literature of valuation practice. This work was undertaken after the completion of that in Michigan and Wisconsin, and advantage was taken of the experiences of the appraisers in these two States. The Wisconsin plan of co-operation with the railroads was adopted, and each company scheduled and appraised its own lines.
The "cost of reproduction," and "present value of physical properties" were the two sets of figures shown in the final results.
Unit prices were fixed on the basis of current prices in 1905, in preference to an average of 5 or 10 years.
Apportionment of locomotives and rolling stock was made on an engine- and car-mileage basis. The organization of an office force was undertaken, and special study was made of the subjects of unit prices and the various local conditions surrounding the different properties, checking of quantities of earthwork, rails, etc., and preparing to harmonize and unify the estimates as they should be received from the railroads.
The greatest difference between this work and that in the other States was the fact that the field inspection, instead of being made by many men, was made by Appraiser Morgan, accompanied by two assistants, inspection being made in a special train, which was paid for by the State.
The detailed reports of the railroad companies were completed and in the hands of the appraiser, maps and profiles of the road were prepared and available, the train was run at slow speed, and many stops were made for examination of bridges, culverts, and structures. About 100 miles per day were covered, but this did not include the larger terminals of St. Paul, Minneapolis, and Duluth, which were given many days.
In the preparation of final summaries, percentage values were placed as follows:
| Engineering, superintendence, and legal | 4½ per cent. |
| Contingencies | 5 " " |
| Interest, time of construction varying according to mileage from 1 to 8 years | 4 " " |
In addition to these three items, the item of "adaptation and solidification of roadbed" was given a large place, being, for all the roads of the State, $11,743,007.15. This feature was novel to this class of valuation, and it is to be regretted that, in his report, the appraiser did not narrate more fully the detailed methods by which he arrived at his resultant figure.
Land Valuation.—The vexed question of a proper value to give to lands owned by a railway company, was treated by Appraiser Morgan in a different way than it had been in Wisconsin or Michigan. A number of special agents were appointed, who made an exhaustive study of the transfers and assessed values throughout the State. The discussion of this subject in Mr. Morgan's report is exhaustive, and of great interest. The conclusions are quoted. It is regretted that the discussion of methods of valuation can only be given in brief form.
"Careful and full consideration of all information made available for establishing the value of the right of way owned and used by the railway companies for railway purposes, led to the conclusion that in the state at large exclusive of the three terminals of St. Paul, Minneapolis and Duluth, a multiple of three (3) applied to the true value or normal value of lands, as obtained from the transfers, would in general satisfy the conditions.
"During the period referred to, the railway companies paid for the property acquired by them, over and above its normal value, an amount sufficient to justify the use of the following multiples: St. Paul, one and three-fourths (1¾); Minneapolis, one and three-fifths (1⅗), and Duluth, one and one-fourth (1¼), which when applied to the normal value of the lands as established from contiguous and surrounding property, formed the basis for measuring the cost of reproducing the existing terminals of the railway companies."
In the final compilation of results, two sets of schedules were rendered:
(a) Those which gave the land values with added increment,
(b) Those which omitted the increment.
The cost of the engineering work was about $70,000; this covered 7,596.4 miles of main track, 427.4 miles of second track, and 2,414 miles of side-track, or a total of 10,437.8 miles of all tracks. As yet there has been no decision by the Courts on the Minnesota rate cases.
Forms Used in the Compilation of Information.—The forms used in the Michigan appraisal have been described and fully illustrated. They were all printed on 8½ by 11-in. sheets.
The Wisconsin appraisal used the Michigan forms as a basis, twenty of them being practically identical with the corresponding Michigan forms. The forms shown by Figs. 11 to 21 are materially different from those used in Michigan.
The forms used in Minnesota in 1906 were based on those of Michigan and Wisconsin, and were printed on 14 by 18½-in. sheets. They were remodeled and elaborated to such an extent, however, that the writer believes himself justified in submitting reproductions of the entire set, as representing the most complete form for inventory yet used on any of the State appraisals.
The appraiser in Nebraska in 1909, and Mr. Hansel in New Jersey in 1910, have both returned to the 8½ by 11-in. sheets, and, while both clearly followed earlier precedent in general, both have modified the details to suit the requirements in their respective States.