The problem of an appraiser is to determine, with the best evidence at hand, what land is fairly worth for railroad purposes at the time of appraisal. He must take into account the railway-purpose increment, if he is consistent in his appraisal.
Non-Physical Values.
The foregoing narrative account of the general field and office handling of the Michigan appraisal of physical property, while not touching on matters of principle of valuation, except as to land values, is submitted as describing briefly the machinery of the appraisal. A number of very important issues were raised which have to do with the theory of valuation. These are worthy of discussion at length, in the subsequent consideration of the method of determination of a fair value, but are not here referred to. Within any short limits it is impossible to give a comprehensive description in detail of all the work of the Michigan appraisal. Several articles descriptive of this work have been written, giving quite full extracts from the various sets of rules which were promulgated, and describing some phases of the work in much more detail than is here attempted.
The physical valuation, as represented by two figures—the cost of reproduction of the physical property, and its present value—was submitted to the Board of State Tax Commissioners as the work of Professor Cooley, and in most of the literature descriptive of it, it has been termed the "Cooley Appraisal."
After the completion of Professor Cooley's work, his figures were submitted to Professor Henry C. Adams, who had been making a study of the income accounts of the various companies, and to whom had been assigned the duty of determining the non-physical or franchise values of the properties.
Professor Adams has described[[5]] very fully the plan adopted for this work, and this plan has been commented on so fully that any lengthy description is deemed unnecessary. It appears to be perfectly proper, however, to correct certain misstatements regarding this work.
When it was first determined to make the appraisal, Professor Cooley—not Professor Adams—was requested to take charge. The assignment to Professor Adams of the non-physical valuation was made after the physical valuation was well under way.
The use of a negative or subtractive non-physical value was considered, and advised by Professor Adams. The work was not undertaken with a view of "increasing the assessments," but to put the Tax Commission in possession of a figure which would represent the business value of the property as well as the physical value.
Professor Adams held that the non-physical element of value was not a simple commercial element, but included:
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