Third, that there need not necessarily be any relation between rate regulation and rate-making. Rate regulation can well be confined to rates in the aggregate, rate-making applies to the adjustment of individual rates, and must necessarily be the work of men well versed in all the varied elements which control it and the particular conditions affecting the business of each particular road. The speaker believes that valuations made in this way and with these objects in view will do no harm to the railroads, and will do much to restore confidence and give us the much needed peace and quietness to carry out necessary development.
Charles H. Higgins, Assoc. M. AM. Soc. C. E.—Mr. Riggs' able and timely paper is of great interest and worth to all concerned with the matter of values, whether of public service corporation property, or other property; and what engineer is not concerned with values?
One cannot but wish that an index accompanied the paper, as its usefulness would be thereby greatly increased, particularly as, by its arrangement, such subjects as depreciation, non-physical values, etc., are treated of in many different portions of the paper.
The Wisdom of Having a Physical Valuation.—It is hard to understand how any thoughtful person can now doubt this, for we are in a period of regulation and taxation of public service corporations, and the only question is whether they shall be regulated and taxed with a full understanding of the investment involved, or by arbitrary methods, such as the 2 cents per mile passenger rate, which has been so popular in many States, under widely different conditions and irrespective of the cost of the service.
The time would seem to have arrived when the thoughtful public service corporation manager would welcome a fair valuation of the company's property, as protection against legislation conceived in ignorance of the capital invested.
Relation Between Railroads and Other Properties.—The relation between appraisals of railroad and of water, gas, and traction companies is very close, and the same general principles apply. In the former, however, it is complicated more often by the fact that the lines of a railroad extend through many States, with terminals in one or two, and, further, that the railroads have many subsidiary, controlled, or dependent companies, such as coal, lighterage, terminal, car, warehouse, contracting, elevator, stock yard, and supply companies, often owned, wholly or in part, by men in the railroad management. Agreements with these companies may greatly affect the non-physical values, as determined by the methods advocated in this paper, which may otherwise be sound.
Valuation of All Properties.—The author says that the valuation of all railroad properties in the country "would be of interest." It would be more; it would be of value infinitely greater than the cost. The mere presence of light prevents many vices, and this is as true in corporation practices as in the streets. It is in accord with Dr. Woodrow Wilson's "pitiless publicity"; and, which is, perhaps, more important, it is the basis, or should be, of all legislation concerning the regulation of these great highways.
One and Only One Fair Value.—Nothing in Mr. Riggs' paper is of more value than his insistence that there is one and only one fair value of the physical property of a railroad, no matter for what purpose it is to be used. How futile are the misdirected efforts of those who would have it otherwise, for, no matter what the purpose of the appraisal may be, who can foresee the use that may be made of it when it becomes public property?
Cost of Reproduction.—Cost of reproduction less depreciation seems to be the established method—that recognized by the Courts—for arriving at the value of the physical property. Cost, as the author contends, can only be an element in determining the present value, for the owner of a stone bridge has as much right to any appreciation in the value of masonry as the owner of land has in the increased value of his property; and, though the cost early in the life of the structure is usually near its value, it may lose that position. What relation exists between the value of the Pyramid of Cheops and its cost? Now, as then, our unit measure of value is changing. Cost is certainly of historic interest, but present value is the subject for present uses.