(d) What method shall be finally adopted in determining depreciation? What elements shall depreciation be made to cover?
(e) What elements of cost or appreciation shall be treated as parts of the physical property although not capable of inventory, and what shall be treated as non-physical?
(f) Is an allowance for contingencies a proper item to include in an appraisal?
(g) What weight shall be given the matters of adaptability, proper or improper design, and the economics of location?
(h) How shall the values of such property as locomotives, cars, etc., be geographically assigned?
(i) What is the effect upon values of large terminals?
(j) Should an allowance be made by reason of rapid development of the art?
These are not by any means all the perplexing questions that arise; each valuation offers some that are special, but these cover the more important points.
(a) Classification of Properties.—In making an appraisal involving the properties of a large number of companies, such for instance as any of the State railroad appraisals, it becomes evident that there are certain properties which are small, badly run down, and either built to serve a very limited trade or located in a territory which has not developed, and that such properties cannot be compared equitably with the large trunk-line roads, or even with smaller roads in a good territory and doing a good business. Several such properties exist in Michigan in a district which was originally a lumber-producing country, and at the time they were built local conditions were such that prices of timber and labor were far below any cost that it would be reasonable to assume to-day. Whether taxation or rate-making be the ultimate end of the work, it is certain that these carriers are entitled to some classification which will separate them from the more prosperous roads. Many of these roads would not be built to-day under any circumstances, yet their maintenance and continued operation is absolutely essential to the people of the district served by them.
Whether this classification should be undertaken at the time of making the appraisal of physical property, and an attempt be made to classify unit prices, or whether this should be taken up in connection with the intangible values, and solved, as far as the valuation is concerned, by the adoption of such a method as will affect these physical values by a subtractive or negative non-physical value, or whether the entire matter should be left for the subsequent work of rate-making or assessment, is one which must be determined at the outset of the physical valuation. It may not be left without determination, as the question will be raised in all probability in the form of an attack on the valuation, if it is not considered and a conclusion reached.