158 TEE POPULAR SCIENCE MONTHLY 



form, and, as we have seen, the user is a co-investor with the producer 

 in public utility properties. Obviously no part of the return on the 

 user's investment should be included in a " fair return " to the producer. 

 It follows, of course, that lands donated, whether by a person, by a com- 

 mercial body, or by a government, should not appear in the valuation 

 at all.^ 



An objection might be raised in the case of a utility comprising 

 several smaller properties obtained by purchase. It is probable that the 

 existing corporation paid prices for the land involved that were deter- 

 mined by the current prices of adjacent land at the time of purchase. 

 These included the unearned increment to date. This increment should 

 not be included in the valuation of' the combined properties for rate- 

 making purposes. If the purchasing investors were willing to agree 

 upon a price including any part of the unearned increment to date of 

 purchase, they were in the place of a man who, to secure a valuable prop- 

 erty of forty acres, buys up four ten-acre places. So long as the pur- 

 chaser uses the forty-acre place himself he gets no return on the unearned 

 increment, except that flowing from increased enjoyment, a better out- 

 look, or more freedom of action. He recovers that portion of the pur- 

 chase price invested in unearned increment, with or without interest, 

 when he sells. If he never sells, he never recovers it; and moreover, he 

 loses interest on the investment. If a corporation makes such terms, the 

 users can not fairly be required to pay a return to investors on values 

 contributed by the community. The profits of the investors reside in 

 the continuing increment, if such there be; and they can be taken only 

 at the time of sale. It may be that the whole transaction, involving 

 the purchase, holding and sale, does not show a profit. This may fre- 

 quently occur; but it is no reason why the public — the user — should be 

 compelled to assume the responsibility of guaranteeing such profits. 

 Some transactions are bound to show loss. 



One very remarkable contention has been made in connection with 

 the valuation of land. Stated in its simplest terms, it is this : If a utility 

 has secured the land necessary for its activities, this land should be 

 given a value determined by the advantage residing in it above that 

 afforded by the next less desirable land usable for the operations desired. 

 For instance, if a railroad has located in a very desirable pass, the value 

 of the land in the pass should be determined by the saving in expense 

 both in construction and operation over the next possible location in that 

 vicinity. This argument needs no further attention. 



Let us now apply this principle of user's investment to the question 

 of depreciation. This is the next important ground of dissention among 



1 Similarly, bonds guaranteed by counties, a procedure not at all uncom- 

 mon in the southern states in railroad promotion, have no place in a valuation for 

 rate-making purposes. 



