Railroad Valuation

Some ten years ago the "anti-railroad" group in the Senate, led, of course, by La Follette, conceived the idea of investigating the value of American railroads, in order to determine whether or not they were over-capitalized, and if existing railroad rates as largely set by the Interstate Commerce Commission were too high. Advocates of this most elaborate of all recent Government investigations assumed that the work, could be done easily, quickly, with relatively small expense.

Starting in 1913, the work has proceeded ever since, and completion seems at present quite remote, despite the huge amount of work already done. To Jan. 1, 1923, the work so far has cost $90,200,103--of which $23,219,190 has come from the Government and $66,980,913 from the railroad companies. To date, the expense of the inquiry has been just about $100,000,000.

It was to be expected that dispute concerning the valuations arrived at would occur, especially on the part of the ' railroad companies themselves. The Union Pacific and other roads are preparing to settle the question of their correct valuation through the courts. The whole subject bristles with auditing, legal and financial problems, and litigation on the subject will probably follow for many years.

The worst of it is, that even at the low valuation often set by the Commission, the value of the American railroad companies is so vastly greater than vvas imagined by Senator La Follette and his followers, that they too are challenging the accuracy of the valuations already set.

Moreover, the value of a railroad can hardly be determined apart from its earning power, which depends on its rates. Consequently, valuation depends on rates as well as rates upon valuation. If too low rates are arbitrarily set, the value of railroad properties can be greatly diminished.

The work of valuation meanwhile goes on at heavy expense.