(3) The organization for the appraisal work should be of sufficient scope, and should be allowed the time and funds which the project reasonably requires.
(4) The appraisers should be carefully selected, the personnel including men who have had wide experience in the particular class of operation; and specialists should be obtained if necessary.
Mr. Riggs states that the valuation should be the same, regardless of the principles at issue. It seems questionable to consider the fair value which involves the non-physical value in costs or tax regulations. Certainly, in the case of street railways in cities, where a percentage is levied on the gross receipts, the non-physical valuation, only representing present value, is necessary. Again, a physical present value for taxation should not include the value of paving in the street in the strip occupied by street-railway tracks. That the street-railway company often pays an arbitrary assessment tax and keeps the paving in repair, though it is in no way responsible for the wear, should be sufficient to offset any obligation for other taxes. In some States this is fixed by the Courts. The physical valuation, however, intended to be used in connection with rates, cost, or capital regulation, should include the cost of paving the railway strip. Referring further to the question of including the paving in the physical valuation of street railways, in the case of a decision of R. W. Tayler, Arbitrator, in the proceedings between the Cleveland Electric Railway Company and the City of Cleveland, on a basis of a renewal of franchises, Judge Tayler said:
"Paving represents actual money expended. It belongs to capital account, and in its depreciated form is worth all the allowance that I have given it."
Also for rate-making and the capital regulation some consideration is certainly due to obsolescence and change of art, while in taxation they should not be included.
In conclusion, the speaker is optimistic enough to believe that the problem of physical valuations will be solved satisfactorily for all concerned. Co-operation of officials of the public service properties, reliable testimony, with a better understanding by the Courts, will certainly tend to clarify the situation. Non-physical values are very difficult to determine, and their intelligent treatment will require some well-defined procedure. Mr. Riggs' valuable paper will go a great way toward producing a correct idea of the general proportion, and will, no doubt, assist in the formulation of proper methods for valuation.
Clinton S. Burns, M. Am. Soc. C. E. (by letter).—The author is to be congratulated on the detailed care shown in the presentation of this subject. Perhaps few engineers who have not been called on to cope with the subject of valuation of properties, realize or appreciate the real complexity of the many varied problems encountered in work of this class. To those who are engaged directly in appraisement work, this paper will be a welcome contribution to the literature on the subject.
The author's statement that if a commission of engineers is directed to report the true cost of reproduction, depreciation, or present value of a certain property, the final figures should not differ, whether the report is to be used as a basis for reorganization, sale, rate purposes, or taxation, is open to argument. It seems proper that, if a property is appraised in order to fix a selling price to a Government or municipality exercising its right to purchase, the final figures should be based on current prices of labor and material, because this does no injustice to either party. It is evident that if the seller secures payment for his property based on current prices, he may, if he desires, reinvest the proceeds of the sale in similar enterprises at current prices, so that thereby he secures the same benefits, whether prices are high or low.
It is equally evident that if the purchaser (the municipality) chooses to purchase the property, the right to purchase must be exercised at the particular time permitted by the franchise. If prices chance to be abnormally high at that time, the municipality is exactly on a par with what it would be if compelled to build its own plant at that particular time; while, if prices be abnormally low, the same relative situation still exists. There seems, therefore, to be no possible injustice to either party in using current prices, when the object is a sale or transfer of the property. However, in determining a proper value as a basis of rates, another factor must be considered. It is inexpedient and against public policy to make frequent changes in the rate charged for such commodities as water, gas, or electric current. Theoretically, the rate could be fixed each year, based on an annual valuation of the property, thus permitting a high rate one year and perhaps an abnormally low rate another year; but, practically, this is impossible, for, aside from the inconvenience of such a cumbersome system, no community is well enough informed as individuals to comprehend any reason whatever for ever raising rates. Raising rates is invariably accompanied by a wave of indignation. However, it is apparent that a series of rates based on an annual current price valuation of the property would average exactly the same, during a term of years, as though the property were valued once for all on the basis of the average prices of labor and material for the same term of years, and the rate based on the one valuation thus determined.
If the object of the valuation is to afford data for taxation, the same argument applies as in a case of fixing rates. It thus seems proper that the object of the appraisement should be taken into consideration before it is determined whether to use average prices, or current prices, of material and labor; and, if this is correct logic, the final figures must differ according to the object in view; but, having determined the proper unit prices to be used throughout any appraisement as being the most equitable for the object in view, then, as the author well says, the appraiser must not allow personal prejudices or fancied conditions to influence his course. Above all, an appraiser must not be afraid of his client. He must not allow his personal judgment to be swerved by the latter's desires. It perhaps seldom if ever occurs that an appraiser, representing a municipality, or State, is subjected to this unconscious influence, inasmuch as his employer is merely a temporary public official, and consequently he has no client to fear. He goes into the work with a full knowledge that his employer knows little or nothing of the subject, and his only desire is to reach results which will be unquestionably fair to both parties.