The writer's experience as appraising engineer for more than 10 years with the Texas Railroad Commission, and for the past 2 years as a construction engineer—having built about 160 miles of railroad in Oklahoma and Texas—confirms his belief that, in the absence of actual figures of cost, right of way and other railroad real estate should be appraised at but little in excess of the market value of abutting property. The practice of the Texas Commission has been to add from 25 to 50 per cent. The conditions under which railroads were built in Michigan, Wisconsin, Iowa, and Minnesota cannot have been radically different from those in the Southern and Western States. In Texas it has been a rare instance when a railroad has had to purchase all of its right of way. Also, contiguous lands have greatly increased in value since the advent of the railroads. It would appear highly illogical to advocate that these increased values should be multiplied by 3—or even 1½—and used as a basis for taxing the railroads on the one hand, or taxing the public on the other, by permitting indebtedness to be issued against it, the interest on which the latter must pay. The railroad recently constructed by the writer traversed fertile and thickly populated areas, already quite well served with transportation facilities. Only a small fraction of the necessary real estate was purchased by the railroad company, and only in a few cases of such purchase did it pay largely in excess of the market value of the land—and these were where the road interfered with houses and other farm improvements. In cities and towns, land was acquired at practically its fair market value. For rural property, the ratios used by Professor Taylor in the Wisconsin appraisal appear to be quite fair, but in cities they are too high—especially for the Southwest. The Minnesota ratios appear to be unreasonably high.
Any appraisal of the physical value of railroads—in the absence of figures as to their actual cost—is necessarily only approximate, and is correct only within certain limits. Especially with regard to the old roads, where original cost data cannot be had, the values applied to property and construction must be largely speculative. It is impossible to build two railroads in the same territory, on the same specifications, for the same amount; yet, on the basis of cost of reproduction, an appraisal board must apply the same value to each.
The writer believes that unless there is more uniformity as to methods of valuing corporation property, as between the States, all valuations will be more or less discredited, as they should be, by the Courts. It is to be hoped that this paper will be generally discussed by the Profession, and will lead to the adoption of more uniform methods.
Charles H. Ledlie, M. Am. Soc. C. E. (by letter).—The following is suggested as a method of procedure for determining the fair and equitable value of a property:
1st.—Examine carefully the statutes governing corporations of the class under examination.
2d.—Form an opinion as to whether or not the locality can support such a property, by inquiry regarding the different businesses carried on, bank clearings, railroad facilities, what the surrounding country produces, etc.
3d.—Find from the archives of the company a general description of the property, from its conception to the date of appraisement.
4th.—By close examination of the minute books, directors and executive committees, there can be ascertained all the details of organization, issuing of stock, bonds, and other forms of indebtedness, contracts for equipment, supplies used in the construction, etc.
5th.—Obtain from the general manager or the superintendents an explanation of the details of operating and maintaining the property, including the different classes of service, rates, etc.
6th.—Go over the property, examine it carefully, and talk to any and all employees from whom it is thought that any information can be gained.