The Bismarck Tribune Newspaper, November 29, 1927, Page 2

PAGETWO _ TWO-BILLION DOLLAR BOOST IN UTILITY RATES HINGES ON HIGH COURT RULING Decision on Rail Valuations For Purposes of Rate Mak- ing May Cost Each Citizen of the United States $100 a Year — Washington, Nov. 29.—(NEA)— [f we. were to wake up some day and discover that the entire Euro- pean war debt had been saddled upon us and that, with high interest rates, we would have to pay some $2,000,000,000 a year forever and ever— Well, probably we would holler. Yet, wit: hardly a holler, the country is confronted today with a problem, the solution of which in- cludes the possibility that we might have to pay the $2,000,000,000 in in- creased rates to railroads, telephone companies, gas and _ electric ee reet car lines and other public utilities. Rates Would Soar The fact that this tremendous |? sock to the family pocketbook, which would theoretically take $100 from the head of every family in the United States, would not be like- ly to be imposed by the utilities is some consvlation. But the belief that we would be spared the full burden rests only on the likelihood that the national business structure would crack under the strain. And if the railroads and other utilities are granted the contention which they have taken to the courts, it is assumed by experts here that they would come as near to the two billion-dollar sock as they safely could and that in any event, all reg- ulation of public service rates would end automatically. The question is one of whether the utilities are en- titled to the boost. . All this is seen by members of interstate commerce commis- sion and other experts as they fight out the question of valuing the rail- roads for purpose’ of rate-making. There follows an attempt to outline the principal facts of a situation which has been obscuréd by mil- lions of words piled high in supreme court decisions, interstate commis- sion hearings and reports, and vari- ous other records and proceedings. |; Under the law, railroads are per- mitted to earn up to 6 per cent on their valuation as fixed by the I. C. C. Half of the excess above 6 per cent goes to the government for a fund to aid weak railroads and the other half goes to the railroads, Valuation Is Issue The big question is that-of fixing the valuation of ‘the railroads for rate making purposes, and it is this question which the supreme court is expected to decide when it gets the test case involved in the appeal of the St. Louis & O'Fallon railroad awd the valuation fixed by the I. The I. C. C. has adopted a base estimated to give the railroads a return on from 10 to 20 per cent more than the estimated original investment, whereas the railroads insist on the reproduction value plus minor additions such as for “going value.” ,.The.cost valuation of the Amer- ican railroads, according to I. C. C. estimates, is about $23,000, he It is estimated that the railroad theory would place this figure at about $33,000,000,000, although the ‘Wall Street Journal has placed it at| 55 billions. Ifthe railroad theory is accepted, the railroads ;would be Permitted to increase their rates so as to receive 6 per cent on the ad- ditional 10 billion dollars. The I. C. C.'s Basis If the principle spread to the other utilities,.as a clear supreme court decision would spread it, the extra burden Psd be boosted to more tl accord- ing to Commissioner J. B. Eastman, and at 6 per cent the increased cost which be passed on to the con- sumer would be around $2,000,000,- 000. In many instances it would provide an excuse to double freight, gas or electric light rates. In 1913 ee 2 C. enon Rees, cor -make_ valuations o! a vitteta oie mates thom, the commission estimated original cost on the basis of 1914 prices, striking an average for the’ 10 years pre- vious, as it was impossible to learn the original amount investment in most cases, Then the commission estimated depreciation and deducted it. It estimated the value of the railroad’s land holdings by study- ing prices of privately owned land and added that. Finally it considered the condition of the road, added about La cent for good measure and that the valuation. have gone railroads ‘benefit and what it & beg f tet TH EE v THE BISMARCK TRIBUNE represented by bonds and preferred stock. Assuming that valuation is dot 1, re ‘will receive a re- turn on $2 Zor every $1 invested and all the benefit will go to the one- third of the capital represented b; holders of common stock, who will reap a three-fold harvest. But if levels should drop oie common kholders would virtually wiped out. It works both ways. Eastman says that “In all probability it would pro- vide a feast superior to anything the bulls and bears have enjoyed since the creation of stock ex- changes.” . “Conflict With Justice” The railroads hold that they are made to suffei for the depreciation of the dollar if less than reproduc- tion cost is used as valuation basis. The commission replies that even if this were admitted the holders of bonds and preferred stock could not possibly benefit any more than hold- ers of bonds and preferrec stock in other industries are compensated for dollar depreciation. The holders 100,000,000 in government and municipal bonds are not so pro- tected. Furthermore, if the roads _col- lected a return artificially adjusted to the 100-per cent dollar they could pay their debts in depreciated dollars and the result, according to Eastman, “would so conflict with principles of justice as to horder on the ludicrous.” Summing up the commission's at- titude toward the reproduction theory as expressed in the prece- dent-making order in the O'Fallon case, Eastman says: * Teport here gives our rea- sons for believing that such a rate ise would be nothing short of a public calamity; that it would at the present time be sly unjust to the public served by the railroads; that it is likely at some future time to be equally unjust have invested their. savings in the railroads; that it is without founda- tion in sound reason, and that it is deficient in both stability and prac- ticability. Demands Bigger Return Some students of the situation express the belief that a supreme court ruling allowing the railroads reproduction cost valuation would so increase the rates that railroads and other utilities would oftener and oftener be taken over by the na- tional and municipal and state gov- One of the loud o! lest. voices rai: eos reproduction theory seat ‘ism and a desire for government ownership. In referring to the O'Fallon ord the Railway Age said: “Nowhere is there any recogn tion of the fact that it is just and} desirable for the owners of railways | to receive relatively as large returns on their property as the owners of! other kinds of property. | It is that “fact” for which the railroads now demand recognition. No one needs suppose, however, that the railroads are going broke. The national bureau of economic re- search has found that railroad stocks have increased! 230 per cent in value in 70 years. Last year was the biggest revenue yer~ i~ railroad history. ‘Net revenues were $1,232,- 000,000 as against $1,139,000,000 in 1 an increase of 8.2 per cent, Profits jumped twice as much proportionately as did total rev- enues, Belgian Prince Is Guest at Stock Show Chicago, Nov. 29.—(AP)—An en- voy of royalty and an envoy of de- mocracy—Prince Albert de Ligne of Belgium, Ambassador to the United States, and William M. Jardine, United States secretary of agricul- ture—were among the thousands at- tracted to the International Live- stock Exposition today. The Belgian envoy is here to award the King Albert trophy Thursday to the exhibitor of the best Belgian horse at the exposi- tion, Mr. Jardine was to accom- pany the party on its tour of the grounds, Although en American, P. E. Smith of Montana was chosen wheat king of the continent yesterday. Canadian exhibitors won 21 out of 35 hard red spring wheat prizes. The American awards. went to growers in Wisconsin and Montana. Several grand champions and ny- merous class champions were crowned yesterday, the judging be- ing watched by more than 30,000 persons, a new exposition record. -|The weather was not conducive to crowds, being cloudy and marked - occasional rain storms of inten- sity. Hundred-thousand-dollar Skypiece 3ome bonnet you see here gracing the capable curls of Janet MeVeay, who, as “Miss Oriental,” is to reign supreme at New York's forthcoming 2xposition! It was once the regal skypiece of an Arab potentate—and is valued at ONCE WEALTHY WOMAN GIVEN PRISON TERI Mrs. Genevieve Paddleford, Adventuress, Is Convicted of ‘Grand Theft’ San Quentin, Cglif., Nov. 29.— (AP)—Mrs. Genevive Paddleford, international adventuress who once presided over one of the most pala- tial homes in Cairo, Egypt, as the wife of a wealthy shipowner there, today Settled ¢»wn to another ad- venture — one to 10 years in the penitentiary here. Mrs. Paddleford arrived at the prison last. night after she was sen- tenced yesterday at Salina upon conviction of a charge of grand theft, resulting from her purchase on credit of wearin apparel valued at $225 from a Carmel Calif., shop keeper. Mrs. Paddleford way con- victed of falsely representing that she would have money with which to piste the obligation on a fixed late. Husband Divorced Her Several year. ago she was mar- ried to a wealthy Los Angeles man, George T. Paddelford. Stories of Mrs. Paddleford’s. previous adven- tures in Eurone led to their divorce. It was said Paddleford settled a large sum on her. , Mrs. Paddkior! nex: was heard from in jail at Lucerne, Switzerland, while her daughter, Cynthia, sought funds in France to bring about her $100,000. amounting to 27,000 francs at Lu- cerne. R hat “Bs gored pt: inh . Howells, a wealthy shipowner Cairo, Egypt, and was re} to have received $1:,000,000 from him besides the right to ‘preside over three_valaces on the Nile. « Had Husband in Minnesota . Mrs. Paddleford also was the wife of William C. Toomey, fro-- whom she was divor in Minnesota. Paddleford rorce petition de- clared that his vife had been sen- tenced to Blackwell's island in 1908 for conspiracy under the name of Margaret Teal. She had been mar- ried to Ben Teal, prominent theatri- cal man and producer o: “Ben Hur” on the stage. —— a LIQUOR STORES PROSPER 4 Toronto, Ont.—In ihe five months of their operation, the Ontario gov- ment liquor yee have paid a net profit of $4,500,000, almost $1,000,- 000 more than had been e;timated. The gross revenue for the same pe- riod was $12,000,000, twelve times as much as was received last year under the Ontario Temperance Act. In What Month . Is Your Birthday? On your Birthday send your Mother Flowers Hoskins-Meyer release. Mrs. Pa “‘eford then was accused of having incurred debts the man’s ~ the woman’ Home of K-F-Y-R flavor — Preference FLOOD DE ATH: '|Death Rate Lower ‘Since Prohibition |, ti '\msriese ceradie-aged ma TOLL IS HEAVY Catastrophe in Northwestern Algeria Worst Experienced in 50 Years Oran, Algeria, Nov. 29.—(AP)— ‘With every hour bringing fresh tid- ings of disaster it was estimated that the total loss of life in the | floods which swept northwestern Algeria would exceed 500. The ca. here in 50 years. The situation throughout the dis- trict is still grave. The weather is bad. The water, while receding in: some places, is rising ‘in others. Aj torrential rainfall continues. Communications have been cut everywhere. Rescue work is thus extremely difficult, Efforts have been made to drop food from air- planes to the stricken villages of the ‘country. At Mostagaflem, where the worst! damage was caused, 150 persons, including 60 Europeans, perished. | Several hundred are thought to have tion has lowered the deat’ tastrophe is the worst experienced | drowned in the outlying districts. Mostaganem is crowded with refu- gees from these districts. ‘Tribune want ads bring results. rr The treasure chests of Captain Kidd were as nothing compared with the millions ‘that are stolen and forever buried by the Fire Demon. Observe com- . mon sense fire pre- vention measures and make sure of your in- surance, This is your agency of the Hartford Fire Insurance Company MURPHY “The Man Who Knows Insurance” . £18 Broadway Phone 577 BISMARCK, N. 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