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In ascertaining the value of the property of a water company, preparatory to condemnation of the same, the "property' " includes the real estate or other property, if any, not connected with the water system, the plant or physical system, and all franchises except the franchise to be a corporation.- Kennebec Water Dist. v. Waterville, 97 Me. 185, 54 Atl. 6, 60 L. R. A. 856.

The pecuniary value of the property of a public service corporation depends, to a considerable extent, upon the financial returns it can be made to yield to the stockholders.- Kennebec Water Dist. v. Waterville, 97 Me. 185, 54 Atl. 6, 60 L. R. A. 856.

The basis of all calculations as to the reasonableness of rates to be charged by a public service corporation is the fair value of the property used by it for the convenience of the public.- Kennebec Water Dist. v. Waterville, 97 Me. 185, 54 Atl. 6, 60 L. R. A. 856.

The value of the plant and franchises of a corporation is affected by the character and duration of the franchises.- Kennebec Water Dist. v. Waterville, 97 Me. 185, 54 Atl. 6, 60 L. R. A. 856.

[47]

Cost of construction or reproduction.

Not to be included in operating expenses of single year,― see post, note [52].

The cost of reproducing railway property is not an exclusive guide to the return which should be allowed.- Matter of Proposed Advances in Freight Rates, 9 Inters. Com. R. 382.

In ascertaining the reasonableness of rates fixed by a commission, the cost of constructing the road is not to be deducted from the earnings under the proposed rates, but is only a factor to be considered in determining the fair value of the company's property.-State v. Seaboard Air L. R. Co., 48 Fla. 129, 37 So. 314; affd. 203 U. S. 261, 27 Sup. Ct. R. (U. S.) 109.

A fair rate of interest upon the money invested in the plant of a public service corporation during construction and before completion, is as much a part of the cost of construction as is the money itself which is expended for materials and labor.- Brunswick Water Dist. v. Water Co., 99 Me. 371, 59 Atl. 537.

The cost of present reproduction is evidence of the strongest character in determining the value of the property of a public service corporation. -Brunswick Water Dist. v. Water Co., 99 Me. 371, 59 Atl. 537.

Evidence of the cost of reproduction of a plant is some evidence of its present value.- Kennebec Water Dist. v. Waterville, 97 Me. 185, 54 Atl. 6, 60 L. R. A. 856.

The actual cost of a plant, together with proper allowances for depreciation is competent, but not conclusive, evidence of the present value

Kennebec Water Dist. v. Waterville, 97 Me. 185, 54 Atl.

of the same.-
6, 60 L. R. A. 856.

The court cannot assume that the cost of reproduction of a line of railway, or that the present as compared with its original cost of construction, is the amount of stock and bonds outstanding, or what the road has cost up to the time of trial.-State v. Minneapolis & St. L. R. Co., SO Minn. 191, 83 N. W. 60; affd. 186 U. S. 257, 22 Sup. Ct. R. (U. S.) 900.

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In determining whether given rates fixed by law yield a reasonable return, it is proper to take into account the depreciation in the road and rolling stock. Perkins v. No. Pac. R. Co., 155 Fed. 445.

[49]

Losses of traffic from new routes.

In determining whether rates fixed by legislative authority are confiscatory, the stockholders are not the only ones whose rights and interests are to be considered. If the establishment of new lines of transportation causes a diminution in the total tolls collected, that is not, in itself, a sufficient reason why the corporation, in an effort to recoup, should be permitted to maintain rates that are unjust to those who must or do use its property. The public cannot properly be subjected to excessive and unreasonable rates simply that the stockholders may earn dividends.Covington & L. Turnpike Co. v. Sandford, 164 U. S. 578, 17 Sup. Ct. R. (U. S.) 198, revg. s. c. 14 Ky. L. R. 689, 20 S. W. 1031.

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It is erroneous to include in the basis of assessment against an elevated railroad company the cost of leases of roads operated by it, without deducting the value of the franchises included in the leases.- People ex rel. Manhattan R. Co. v. Barker, 152 N. Y. 417, 46 N. E. 875.

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Preferred stock cannot be considered as indebtedness, warranting the relieving of a carrier from any duty otherwise to be imposed.-St. John v. R. Co., 22 Wall. (U. S.) 136.

In considering whether rates fixed by statute yield a reasonable return, outstanding debentures and preferred stock are considered to be of much the same nature as bonds or securities.- Perkins v. No. Pac. R. Co., 155 Fed. 445.

The value of the stock and bonds which a corporation has outstanding may be considered in determining the reasonableness of rates.- Houston & T. C. R. Co. v. Storey, 149 Fed. 499.

The interest upon an honest bonded debt of a railroad, incurred in a careful, economical and efficient administration of its affairs, is a fixed charge, which the company is entitled to earn before any reductions in its earnings can be compelled by the state.- Chicago, M. & St. P. R. Co. v. Smith, 110 Fed. 473.

That stock was issued as a part of a reorganization scheme and is still outstanding, does not necessarily require that rates shall be such as to earn fair returns on such capitalization.— Danville v. So. R. Co., 8 Inters. Com. R. 571.

The preferred stock of a railroad corporation is not an indebtedness which can be considered in determining whether it would be confiscatory to require such railroad to operate separate freight and passenger trains.

- People v. St. L. A. & T. H. R. Co., 176 Ill. 512, 52 N. E. 292.

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Cost of service rendered as affecting rates,- see post, note [54]. Expenditures in improvements as justification for advances in rates,see ante, § 26, note [39].

Unnecessary cost of operation not permitted to excuse unlawful discriminations, see ante, § 31, note [48].

Expenditures for additions to construction and equipment should be reimbursed by all the traffic they accommodate during the period of their duration, and improvements which will last many years should not be charged wholly against the revenue of a single year.- Illinois Cent. R. Co. v. Interst. Com. Commission, 206 U. S. 441, 27 Sup. Ct. R. (U. S.) 700.

The cost of doing a carrier's local business may be approximated by ascertaining the relation of the cost of doing the entire business of a railroad to its gross income, and then applying that proportion to the total proceeds of the carrier's local business.- No. Pac. R. Co. v. Keyes, 91 Fed. 47.

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Ordinary repairs and replacements of a railroad are to be included under the item of "operating expenses.' Metropolitan Trust Co. v. Houston & T. C. R. Co., 90 Fed. 683.

The power of a state to fix rates cannot be thwarted by the sum which a railroad may see fit to charge to operating expenses or outstanding indebtedness.- Chicago, M. & St. P. R. Co. v. Tompkins, 90 Fed. 363; explained, 91 Fed. 47; revd. on other grounds, 176 U. S. 167, 20 Sup. Ct. R. (U. S.) 336.

Cost of operation and maintenance of the road is to be considered in determining as to the reasonableness of rates.- Milwaukee Elect. R. &

L. Co. v. Milwaukee, 87 Fed. 577; In re Excessive Rates on Food Products, 3 Inters. Com. R. 93, 4 I. C. C. R. 48; Evans v. Oregon R. & N. Co., 1 Inters. Com. R. 314, 326, 641, 1 I. C. C. R. 325.

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Operating expenses" of a railroad include those improvements which are necessary for keeping the road in a serviceable condition, such as the replacing of rails, bridges, etc., but exclude improvements in the nature of extensions of the road.- Southern Pac. Co. v. R. R. Comrs., 78 Fed. 236.

In an action in which the question was whether a statute fixing a maximum rate on a railroad allowed a sufficient return to the company, a deficit in operating a road leased from another company is not properly considered a part of operating expenses where it appears that the deficit resulted merely from the advancing by the lessee to the lessor of funds to pay interest on the lessor's bonds, it being assumed that the lessor and the security are good.- Southern Pac. Co. v. R. R. Comrs., 78 Fed. 236.

Expenditures for permanent improvements and for equipment, made in a single year, should not be taxed as part of the year's current operating expenses, and should be, so far as practicable, "projected proportionally over the future."- Central Y. P. Assn. v. Ill. Cent. R. Co., 10 Inters. Com. R. 505; Tift v. So. R. Co., 10 Inters. Com. R. 548.

Improvements projected or required, such as the elevation of tracks, abolition of grade crossings, etc., increase the amount on which dividends must be earned without enlarging the capacity to earn them; and should be taken into account in determining what return is reasonable.Matter of Proposed Advances in Freight Rates, 9 Inters. Com. R. 382.

The cost of the service in railway transportation is the expense of the two terminals and the intermediate haul, and the terminal expenses remain the same without regard to the length of the haul.- Board of Trade v. Ala. Mid. R. Co., 6 Inters. Com. R. 1.

In estimating the operating expenses of a railroad, stock dividends cannot be included.— State v. Minneapolis & St. L. R. Co., 80 Minn. 191, 83 N. W. 60; affd. 186 U. S. 257, 22 Sup. Ct. R. (U. S.) 900.

[53]

Earnings and general financial condition of road. Need of revenue by carrier as justifying discriminatory rates,— see ante, § 31, note [42].

Failure to pay expenses as justification of discriminatory rates,— see ante, § 31, note [50].

Financial necessity as justifying violations of long and short haul rule, see ante, § 36, note [27].

That the total receipts of a carrier from local freight rates are less than the cost of doing such business does not justify it in an inequality of rates between different portions of the state, or prevent the commission from insisting that the lower rate be the uniform rate.- Seaboard Air L. R. Co. v. Florida, 203 U. S. 261, 27 Sup. Ct. R. (U. S.) 109, affg. s. c. 48 Fla. 129, 37 So. 314, and 48 Fla. 150, 37 So. 658.

The "earnings" of a railroad include all the receipts arising from its operations as a railroad company, but not those from public lands granted, nor fictitious receipts from the transportation of its own property. "Net earnings" are the excess of gross earnings over all the ordinary expenses of organization and of operating the road, and expenditures made bona fide in improvements, and paid out of earnings, and not by the issue of bonds or stock; but not deducting interest paid on any of the bonded debt of the company.- Union Pac. R. Co. v. U. S. 99 U. S. 402; followed and elaborated in U. S. v. Kan. Pac. R. Co., 99 U. S. 455, revg. s. c. Fed. Cases, No. 15,505.

The defendant railroad was unfinished, had not made through connections, was being compelled by state legislation to expend large sums on its equipment, was not extravagantly managed, was not maintaining excessive fixed charges, was paying salaries to only two of its officers, and yet its income was barely sufficient to pay its operating expenses.- Held, that it should not be compelled, under these circumstances, to transport interstate passengers at the same rates per mile as are completed and prosperous roads.- Railroad Commission of Ark. v. St. L. & N. Ark. R. Co., 12 Inters. Com. R. 269.

While the financial condition of a railroad does not justify it in violating the Interstate Commerce Act, it is a reason why the Interstate Commerce Commission should carefully consider what the effect of its order would be on the revenues of the company.- Board of Trade v. Nashville, C. & St. L. R. Co., 8 Inters. Com. R. 503.

While the demands upon a road and its earnings must be considered and receive due weight in the determination of the reasonableness of rates, they are not controlling to the extent that independent of all other circumstances rates are never unreasonable until the earnings are sufficient to operate the road and meet all the obligations of the company.Jerome Hill Colton Co. v. Mo. K. & T. R. Co., 6 Inters. Com. R. 601. The earnings of the road are to be considered in determining what is a reasonable rate for a particular commodity.- Evans v. Oregon R. & N. Co., 1 Inters. Com. R. 314, 326, 641, 1 I. C. C. R. 325.

That a road earns little more than operating expenses is to be considered in determining what rates would be reasonable, but it cannot

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