§ 185. Opinion of C. L. Corey on services furnished by con

sumer.

The same rule as to valuation of gas services is expressed in a paper on Rates for Gas Service by C. L. Corey, C. E., read before the nineteenth meeting of the Pacific Coast Gas Association: 5

Only that portion of the service belonging to the company should be included, and if consumers have paid for any portion of the service that portion should not be considered as belonging to the company. The total value of the services should represent only those actually owned by the company, and in general should not include any services, or reproduction of any services, within customers' premises, unless the cost of the same has actually been met by the company.

§ 186. State and city aid in grade separation improvements. A number of cities and states have spent enormous sums in paying a portion of the expense of track elevation or depression or the construction of highway bridges and subways incident to the elimination of grade crossings. The states of New York and Massachusetts and the cities of Boston, New York and Philadelphia have spent millions of dollars in this work. The question now arises as to how these investments of cities and states will be treated in a determination of the fair value of the railroad for rate-making purposes. Judge Chas. E. Otis, Special Master in Chancery in the Minnesota Rate Cases, has included in the fair value of the road the cost of three bridges built at the expense of the City of Minneapolis, over the Minneapolis and St. Paul Railroad. He says: "

5 Printed in American Gas Light Journal, October 23, 1911, p. 259.

6

Shepard v. Northern Pacific Ry. Co., United States Circuit Court, Minnesota, Third Division, Report of Chas. E. Otis, Special Master in Chancery, September 21, 1910. Circuit Judge Sanborn approved the report of the master but his opinion does not refer specifically to this finding (184 Fed. 765, April 8, 1911).

It was claimed by the State that the three bridges mentioned were built by the city and for this reason no allowance was made therefor. But as they apparently form a part of street highways, as the law now is, their repair and renewal as required must be borne by the company and the city could not have been compelled to construct them in the first instance if the law had been properly interpreted and observed. Their reproduction cost should have been allowed at the sum of $54,580.

§ 187. City's grade separation contribution considered by New York Public Service Commission.

The City of New York contributed about one-half of the expense of depressing in part and elevating in part the Brighton Beach division of the Brooklyn Union Elevated Railroad. The city spent about $800,000 for this purpose. A case came before the Public Service Commission, involving the reasonableness of a ten cent fare to Coney Island. The dissenting opinion of Commissioner Maltbie in this case contains the following:

In the fourth place, contributions by the City should be deducted. The City of New York has paid to the Brooklyn Union Elevated Railroad Company approximately $800,000. No company ought to be allowed to capitalize such contributions or charge a rate which will yield a fair return upon these contributions. With equal propriety the companies could claim the right to earn profits upon the capitalized value of the streets and of the Brooklyn and Williamsburg Bridges, which they have been allowed to use practically without charge. The capitalization of franchises, a procedure prohibited by law, would be more plausible.

The inclusion or exclusion of the city's contribution was not decided or considered in the majority opinion in this

case.

7 Monheimer v. Brooklyn Union Elevated Railroad Co., 2 P. S. C. 1st D. (N. Y.) 00, March 8, 1910.

§ 188. Grade separation contributions in appraisal for capitalization.

This subject is discussed in a report by George F. Swain, Engineer in Charge, to the Massachusetts Joint Board on the validation of assets and liabilities of the New York, New Haven and Hartford Railroad. This is a valuation for purposes of capitalization. Mr. Swain says (at page 88):

In the appraisal which has been made, the endeavor has been to ascertain the cost of reproduction new of the existing lines. The existing line, however, includes some elements involved in the elimination of grade crossings which have been partly paid for by the State, and by the cities and towns. In Massachusetts, for instance, 35 per cent of the cost of eliminating grade crossings is paid for by the Commonwealth. and the city or town. In this valuation, however, it has not been considered that the Commonwealth or the town has thereby acquired any perpetual or proprietary interest in the property of the railroad, but that its contribution was for the purpose of remunerating the company for the destruction of existing property involved in the charge, and for the cost of protecting traffic during the alterations, as well as for the better accommodations and greater safety afforded to the public. It would have been impossible to adopt any other course, and the one described seems eminently fair. It is not contended, I presume, that where grade crossings are abolished the Commonwealth or the town becomes thereby the owner of any portion of the railroad.

§ 189. Conclusion as to grade separation contributions.

In certain cases of grade separation the contribution of the state and city is not more than sufficient to pay for the necessary structures and reconstruction within the street or highway and outside of the lines of the railroad's

Published in Report of the Massachusetts Joint Commission on the New York, New Haven & Hartford Railroad Company, February 15, 1911, pp. 51-154.

right of way. Where this is true it is entirely proper to allow the company the full value of structures within the lines of its right of way. And in case the company pays the entire expense of grade separation including the cost of street reconstruction, the cost of such street reconstruction should be included in a valuation for rate purposes. It seems just that the company should receive a return on the cost of all the improvements that it has made with its own capital but not upon such as have been made at the expense of the city or state. Otherwise the public is doubly taxed; once to pay the cost of the improvement and again to pay interest and profits on its own investment. The argument that the public's contribution to grade separation may be considered as a contribution not for construction, but as made "for the purpose of remunerating the company for the destruction of existing property involved in the change and for the cost of protecting traffic during the alterations" (see § 188) seems rather fanciful in view of the great advantage of grade separation to the railroad from many points of view and in view also of the state's undoubted legal right to require grade separation at the sole expense of the railroad."

§ 190. Statement of problem of donated property.

The problem as to donated property is well stated in an article on Valuation of Railways in the Railroad Age Gazette of January 29, 1909, page 222:

Conflicting opinions are entertained with respect to the status which should be assigned, in connection with a valuation, to donated property-right of way, station and terminal grounds, government land grants, and the like, to which

On this point see N. Y. & N. E. R. R. Co. v. Bristol, 151 U. S. 556, 14 Sup. Ct. 437, 38 L. ed. 269, February 5, 1894; State ex rel. City of Minneapolis v. St. P., M. and Manitoba R. R. Co., 98 Minn. 380, 108 N. W. 261, affirmed Northern Pacific Ry. Co. v. Minnesota ex rel. Duluth, 208 U. S. 583, 28 Sup. Ct. 341, 24 L. ed. 630, February 24, 1908.

no considerable cost attaches. Is it proper that it should be made a constituent of that value for the use of which the public may be taxed in the interest of the donee? If so, should it be appraised at its full worth in the market, or only at the cost to appropriate it? Is a grant of land, which must be converted into cash and reconverted into transportation property, different in any important particular from a gift of right of way, which enters directly into the transportation plant? Is the case affected by the origin of the gift, whether public or private, or by the consideration that it is devoted to a public use? It may not seem consonant with the principle that cost only should be capitalized, and sentimentally it may not seem fitting that the public should be assessed for the use of that which it has donated to a private corporation to be employed in the public service; but, much as one might incline to the opposite view, it is difficult to escape the conclusion that donated property ranks at its cash equivalent with that purchased or condemned. Upon conveyance of the gift estate title vests in the donee; if there are no qualifications, such title is absolute; and the use of the property, and the right of enjoyment of the profits arising from it, are necessary incidents of ownership.

It may, however, be recalled that this land has been donated to a private company because that company is undertaking to supply a public utility at reasonable rates of charge. Under the circumstances would it seem fair and equitable for the company to so adjust its rates as to produce for itself a fair return not only on its own investment but upon the investment that the public has donated? Would it be unreasonable to assume that these donations were made with the assurance that rates would be fair and equitable under the circumstances and with due regard to the respective contributions and equities of the company and the public?

191. Contributions by the company.

The inclusion or exclusion of a particular item in a val