Company officials know that they are often compelled to employ and train specialists to furnish, within fairly accurate limits, the very information which is being sought, and naturally they are skeptical about the data presented by those who, though not intimate with the property, purport to give exact cost figures. Any one who is able to point out a consistent method whereby these exact figures may be obtained surely will obtain credit for a valuable contribution toward the solution of the complex subject of valuation.
Referring to the valuation of the property of the Detroit United Railroads, mentioned in the paper, the Director of Appraisals for the city estimated that the cost of the complete appraisal of the property, which includes about 220 miles of single track, would be from $3,000 to $4,000. Approximately, $25,000 has already been spent, not including the expense sustained by the company, which furnished a large proportion of the information.
Probably correct present value estimates which include depreciation may not be even fairly approximated without intimate knowledge of the particular property, and this should embody operation, policy of management, past performance, study of historical cost (as far as the records will permit), estimated cost of construction, and actual cost of maintenance. The life of a piece of track or equipment, disregarding obsolescence and extraordinaries, generally depends on the type and details of construction, the service it has done, and the service that will be required of it. Renewals should be made when the cost of repairs reaches a certain figure, other conditions being favorable. It is a fact that able engineers, intimately acquainted with the case at issue, and employed on the same property, often have conflicting ideas in reference to the life of track or equipment, one recommending immediate renewal and another advocating longer operation.
The speaker does not intend to argue against the possibility of placing fairly accurate values on reproduction or present value, but wishes to bring out the fact that it is not as simple as the lay mind is often led to believe. Further than that, he is of the opinion that the following is essential for economical and satisfactory valuations for all concerned:
(1) There should be co-operation of the appraisers with the public service property officials, including operators, engineers, and their records.
(2) Present values should be determined by:
(a) Cost of reproduction,
(b) Mortality tables,
(c) Data of performance,
(d) Field examination.