The Valuation of Public Service Corporation Property: Transactions of the American Society of Civil Engineers,; vol. LXXII, June, 1911, ASCE 1190Riggs, Henry Earle
General
The Valuation of Public Service Corporation Property: Transactions of the American Society of Civil Engineers,; vol. LXXII, June, 1911, ASCE 1190
There are countless cases where this will not hold. The rapid
development of large cities has compelled electric lines to extend
largely. The demands of the people for more frequent and more rapid
service, and more modern and larger equipment, have greatly shortened
the term of life of power-plant equipment and cars. The rapid
development in the art of electricity, the congestion of traffic in
streets of cities, the enormous increase of train movements, and the use
elsewhere of newer types of cars, have compelled the abandonment of
millions of dollars' worth of property and the investment of other
millions in new and improved facilities to provide for the increased
movements of traffic and increased safety to the public. These changes
are not due to the fact that the original installation was defective,
but to the demands of the public for frequent, safe, and speedy service,
demands which are perfectly reasonable. The query is: should a
corporation which complies with public demands be compelled to lose
capital invested in facilities which have not yet paid for themselves;
and which, under a continuance of conditions which existed when they
were installed, or any that might then have been anticipated, would
normally have a useful life of several more years, and which were
abandoned, not by reason of being worn out or unfit for service, but
purely because facilities of a more modern type were called for?
To answer this affirmatively increases the hazard of investment greatly
in the large centers of population. To answer it affirmatively in some
cases might amount to confiscation of property. The writer inclines to
the view that, as far as appraisal is concerned, the value due to the
remaining life of the abandoned facility, where such abandonment was in
response to legal requirement, and where no element of corporate
necessity due to increased efficiency or economy of the new facility
enters into the computation, should be added to the value of the
facility replacing it. Any consideration that is given such claims by an
appraiser must be most careful, as the inference to be drawn from the
decision of the Court in the Knoxville Water Case (212 U. S., 1) is that
such elements of value will receive scant consideration unless most
fully supported.
If the policy of the management of any public service company is to keep
up with the demands of modern civilization, it would appear that such
policy should not be discouraged, and, in computing the value of the
property, some provision ought to be devised for covering such values as
remain in serviceable property at the time of its abandonment in
response to public demand; or else the rates for service should be
increased sufficiently to compensate the corporation for losses of this
nature on the ground that it constitutes an element of extra hazard.
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