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this company show that it issued $7,351,000 par value of first-mortgage, 4 per cent bonds, dated July 1, 1903, due July 1, 1953, during the period April, 1904, to October, 1906, for cash and other considerations recorded at $6,725,310, or at a discount of $625,690; also that in April, 1907, it issued $2,500,000 par value of 6 per cent, 2-year notes for cash and other considerations recorded at $2,400,000, and in April, 1909, issued $3,000,000 par value of 5 per cent 2-year notes for $2,955,000 cash, or at a discount for these two issues of $145,000. The discount suffered on these issues was charged to investment in road and equipment account. In our accounting classification we have provided that the investment account should include only such proportion of the discount and expense on funded debt as is equitably assignable to the period between the date of actual issuance of securities and the time when the property acquired or the improvement made becomes available for the service for which it is intended.

The records of the carrier show that it acquired 4.78 miles of its road by construction about 1904. While some portion of the amount claimed might be properly chargeable to the investment in road and equipment account we can not determine what part, if any, of the proceeds from the sale of the bonds and notes above referred to is included in the recorded money outlay for construction. Sufficient evidence has not been presented to us to warrant the restoration of the amount contended for to the investment account.

COST OF REPRODUCTION NEW

Grading. The fundamental difference between the carrier and the bureau regarding the proper unit prices to apply to the grading of the lines involved in Valuation Docket No. 556 lies in the contention of the carrier that there was a definite upward trend in grading prices during the period 1899 to 1914, used as the basis for the determination of the prices of the tentative valuation, and the denial by the bureau of any such trend. The carrier's witness asserted that from evidence offered in numerous hearings by witnesses representing the bureau who have made an analysis of the grading-cost data their position has been that the date of any contract was of no special significance when using the data as a basis for arriving at contract prices. The witness takes the position that the dates of the contracts are of prime importance and should be taken into consideration in an analysis of the data.

In his analysis of contract prices the witness divided the territory traversed by the carrier into three regions, viz, coastal plains, Appalachian, and interior plains, and similarly divided the data used by him. These data were further grouped according to the dates of the contracts where that information was available and separate studies

made of common, loose-rock, and solid-rock excavation. Each contract or each different price under the same contract was considered as a separate item, the intent being to consider each price agreement between the parties as a separate determination of a grading price as of the time at which it was made.

In his computations to ascertain whether or not there was a trend in grading prices during the period above mentioned the witness realized that the ranges of prices would not be accurate for comparison with each other because of the changes from year to year in the relative amount of each class of grading material. Accordingly, he reduced the data to an unclassified basis and determined equivalent unclassified prices. These composite grading prices were then plotted on a chart for the period 1899 to 1914 for the purpose of visually showing the existence of a trend. The witness then proceeded by successive tabulations to ascertain the weighted-average date of doing the grading covered by the data, and the trend of the weighted and simple average annual contract prices determined mathematically. Decided fluctuations in the rise and fall of grading prices are shown to have occurred throughout the period, but with the prices generally higher in the later years than in the earlier. This, however, is not necessarily indicative of a definite upward trend throughout the period. The prices developed by the witness for the various classifications as of the year 1914 are 28.10, 29.99, and 27.02 cents per cubic yard for common excavation, 44.25, 43.13, and 39.39 cents per cubic yard for loose rock, and 82.58, 76, and 72.15 cents per cubic yard for solid rock in the coastal plains, Appalachian, and interior plains territories, respectively.

As to whether these are the proper normal prices to apply to the grading involved is another question and must be answered in the negative. Two reasons why this is so immediately suggest themselves one being that as developed they are trended spot prices as of 1914 and the other is that in some instances they exceed the annual weightedaverage contract prices for any year in the entire period. To illustrate, the witness has developed a trended price of 43.13 cents per cubic yard for loose-rock excavation in the Appalachian territory. In 1899 the weighted-average contract price in this territory is shown as 29.7 cents, in 1913, 42.6 cents, and in 1914, 40 cents. The year 1913 shows the highest weighted-average price of any year during the period and yet the trended price is 0.53 cent higher than in 1913 and 3.13 cents greater than the actual weighted-average price of 1914. We find that by using the period 1910 to 1914 where substantial yardage is involved, or, where the yardage is sparse, by extending it back through 1905, the averages of the weighted-average prices approximate rather closely those that would be obtained by the use of the carrier's formula trending to the middle of the 1910 to 1914 period. To

illustrate the result, the average prices thus obtained for common excavation in the coastal plains, Appalachian, and interior plains are 26.6, 28.76, and 23.8 cents, respectively, as compared with the trended prices of 26.8, 28.68, and 25.47 cents. Corresponding average prices for loose rock would be 41.5, 41.3, and 37.4 cents as compared with 43.11, 41.8, and 39 cents, and for solid rock 77.9, 73.8, and 70.5 cents as compared with 80.8, 74.55, and 71.99 cents.

We have not applied identical unit prices to the common, loose-rock, or solid-rock excavation of the lines here involved in any of the territories covered by the data. For each of these classes they vary a few cents per cubic yard. The carrier contends for a lump-sum money increase by applying the trended prices developed by its witness to all of the grading in the particular territory. No justifiable reason for this appears in the record.

We are also asked to increase the total amount of money estimated for overhaul. The carrier's witness has developed weighted-average overhaul costs from a portion of the data upon which the gradingprice study was made. No separate unit prices have been developed for team haul and train haul and to accept his analysis and its result would necessitate the assumption that the specifications affecting distribution of grading quantities covered by the data used by him are identical with those under which we are reproducing these lines. The evidence submitted in this form can not be considered reliable cost data upon which to predicate unit prices for overhaul in this case.

The Cincinnati, New Orleans & Texas Pacific contends that the grading prices of 25, 40, and 76 cents per cubic yard, exclusive of haul, for common, loose-rock, and solid-rock excavation, respectively, reported in its tentative valuation are inadequate and should be increased to 27, 42 and 78 cents per cubic yard. In support of its position a witness submitted an analysis of cost data covering newline construction, selected from an exhibit introduced by the bureau in the Virginian Ry. Co., 141 I. C. C. 595. The witness testified that in arriving at the proper grading prices to apply he gave consideration to the bureau's exhibit above mentioned, although he selected therefrom certain construction projects which he considered most nearly like the grading work on this carrier's line. The projects covering new-line construction he divided into two groups, one containing nine and the other 15 projects. Commenting on the first group he stated that the cost data therefor are not reliable, as they include construction in a different character of country and involve smaller quantities. In view of this, the witness relies chiefly on his study and analysis of the 15 projects in the second group.

In this group the witness has included a substantial amount of cost data covering the grading of the Virginian Railway Company.

115541-32-37 VAL. REP.

Much of this grading was done under the McArthur Brothers' contracts which, as we said in our report on the Virginian Railway Company case, were awarded without competitive bidding, and the prices paid thereunder on rock excavation influence markedly all cost data of which they are a part.

The witness has made two computations in his exhibit, one including and the other excluding the McArthur Brothers' contracts. In these respective computations the resulting prices are 26.8 and 26.6 cents per cubic yard for common excavation, 40.4 and 39.8 cents per cubic yard for loose rock, and 78.6 and 75 cents per cubic yard for solid rock. With the McArthur Brothers' contracts excluded it will be observed that the prices derived for loose rock and solid rock do not support the carrier's contention.

In this carrier's grading considerable hardpan is found and the witness urges that more consideration should be given thereto in pricing the common excavation. In the original construction the work was done under the 2-way method and four classifications were used, viz, earth, hardpan, loose rock, and solid rock. In the classification of the bureau hardpan is included in common excavation. For this reason the carrier contends that the unit price of common excavation should be increased.

The witness submitted an exhibit in which he converted the original construction quantities and costs under the 2-way method and four classifications to the 1-way method and three classifications. In the summary of his study the common excavation is divided 76 per cent earth excavation at 21.8 cents per cubic yard and hardpan 24 per cent at 56.4 cents per cubic yard, resulting in a composite price for common excavation of 28.8 cents per cubic yard. This analysis indicates that the price for hardpan on original construction increased the price of earth excavation 7 cents per cubic yard.

In view of the analysis presented by the witness we are of the opinion that sufficient consideration was not given to the hardpan excavation in pricing its common excavation in the tentative valuation. The price tentatively applied will be increased to 27 cents per cubic yard. No change will be made in the prices for loose and solid rock.

Construction trestle.-In approaching New Orleans from the northeast the line of the New Orleans and Northeastern Railroad crosses Lake Pontchartrain on a trestle and two draw spans with an aggregate length of 30,736 feet; the draws have spans of 250 feet each. The approach to the bridge over the lake and marshes from the north is 12,386 feet and from the south is 71,161 feet on fills about 7 feet above the surface of the lake and marshes. In our reproduction estimate it was assumed that the fill on the north approach would be made by construction trains and it therefore included the estimated

cost of temporary trestles sufficiently strong to carry these trains. It was also assumed that the fill on the south approach would be made by side dredging and our estimates include the cost of a revetment to hold the dredged material in place until it became sufficiently solidified to permit operation. For this portion of the fill no cost was reported in the tentative valuation for a temporary trestle for the reason that it was not regarded as necessary.

This carrier contends that the estimated cost of a temporary trestle should be reported by us, asserting that in a proper and economical reproduction of this fill a temporary trestle would be required, as the territory traversed consists of low marshy ground. The witness stated that in the original construction of the line a trestle was used and this method represents the best engineering practice. This trestle carried traffic for about eight years before any filling was begun.

The dredged material from which a large part of this fill was originally made is swamp muck or ooze, very largely vegetable matter, and it is stated that shrinkage within the fill itself would probably last from six months to a year, and the settlement into the soft marshes would continue much longer, probably about three years. In original construction, the dredge filling was prosecuted continuously day and night for three and one-half years.

The carrier makes the point that the construction period of two and one-half years assumed by the bureau would preclude the safe operation of trains if the embankment were built with a dredge and permitted to settle of its own weight. The time necessary to solidify the fill under the conditions of historical construction is not indicative of the time needed if no trestle is provided, for the reason, as stated by the carrier's witness, that the solidification of the fill under historical conditions occurred only through the pressure of its own weight without the artificial assistance of the pounding of trains, etc.

It appears from the evidence that what the carrier is seeking is the cost of a substantial permanent trestle such as was originally installed rather than a temporary trestle to make the embankment. Even assuming the necessity of a trestle to reproduce the fill a practical and economical program would not contemplate other than temporary trestle work sufficient to permit the filling and would not comprehend the construction of a trestle capable of sustaining the carrier's revenue operations for eight or 10 years.

It is the position of the bureau that the embankment made by dredging would become sufficiently stabilized within the construction period reported in the tentative.valuation to permit operation thereon. From the evidence submitted we are not convinced that a temporary trestle would be required to produce the fill, and our provision for a revetment to hold the dredged material in place appears to be a rational and economical program. No change will be made.

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