equitable and just for the purpose, to wit: that the amount of the capital stock and of the funded and other debts of each corporation or person taxable under the act aforesaid, should be ascertained, and that the value thereof should also be ascertained; and that in all cases where the aggregate amount of the value of the capital stock and of the securities representing said debts, exceeded the value of the entire amount of the tangible property of such corporation, the value of the franchise should be ascertained by deducting from the aggregate amount of the value of such capital stock and of the securities representing said debts, the aggregate amount of the value of said tangible property, and that sixty per centum of the amount remaining in each case should be taken and held to be the value of the franchise of such corporation; and that in all cases where the amount of the value of the capital stock and of the securities representing said debts was less than the value of the entire amount of the tangible property of such corporation, the gross earnings of such corporation should be ascertained, and that twenty per centum of such gross earnings (being an amount which would make the tax upon the franchise of such corporation a sum equal to one-tenth of one per centum upon such gross earnings) should be taken and held to be the value of the franchise of such corporation."

These rules have been challenged as unconstitutional, unequal and unfair, and therefore illegal and void, and this is now one of the grave points at issue in the judicial investigation before the Supreme Court heretofore alluded to. In dealing with this question before the court, in the case of the Central Railroad Company vs. The State Board of Assessors et als., one of the counsel for the State discusses these rules in these words:

"In finding the value of the franchise of the Central Railroad of New Jersey, the State Assessors first found the value of the stock and debt of the corporation, as it stood on the first day of January, 1884, to be $53,100,000. They then found the value of the angible property of the company to be $32,000,000, which, being deducted from the value of the stock and debt, left a remainder of $21,100,000. Assuming these figures to be correct, what does that remainder represent? On the first day of January, 1884, in open market, the world was bidding $53,100,000 for the ownership of this road. Let us, for convenience of argument, suppose that a single purchaser had secured all the stock and debt on the first day of January, 1884. He would then own the tangible property and the franchise. The tangible property was worth $32,000,000, and he would pay $21,100,000 for the right to collect toll, to condemn property, etc., etc.-i. e., for the franchise. When we take from the market value of a railroad the true

value of its tangible property, the remainder is evidently the market value of the privileges which are sold with that property.

"The prosecutor admits that the value of its stock and debt, as found by the State Board, is less than could have been obtained in open market for such stock and debt on the first day of January, 1884, and with this admission couples the assertions that its franchise has not any ascertainable value, and that its tangible property was not worth, by several millions, the value fixed upon it by the State Board. What, then, gave the value to the stock and debt? What, save the privileges granted to the company by the State? It is reasonable to suppose that the shrewd capitalists who invest their money in stocks and bonds would not be willing to pay sixty millions for property worth but twenty. If there is not any value in the franchise of the Central Railroad, then the State Board has undervalued the tangible property of this company. It would be difficult to establish a better standard of value than the price which a house, a horse or a railroad will bring in open market, where the attendance includes the willing buyer and the willing seller. What the willing buyer was ready to give for the Central Railroad of New Jersey on the first day of January, 1884-and what he has ever since been willing to give-is, in round figures, $60,000,000. Then, since and now, the prosecutors can obtain in open market, $60,000,000 for property which they declare is not worth half that amount. This value must exist somewhere. It is not in the tangible personal property. That can be purchased and constructed at standard market prices any day. It is not in the property outside of main stem or road-bed, for the value of that is sharply defined by the standards of valuation fixed by adjoining property. There is nothing in the use to which the greater part of this class of property is put which enhances its value. The willing buyer must therefore be taken to offer his money mainly for the roadbed or the franchise of the corporation. He does not offer it for nothing. If it is for the road-bed-for the railroad considered as a tangible thing-the deduction of the value of all property outside of the main stem' from the amount bid, will give, as the remainder, the value of the main stem' as it existed on the first of January, 1884. The State Board did not adopt this view. Coming to the valuation of a depot, the Board evidently considered the cost of labor and materials, the condition of the building and its use. Coming to the valuation of a road-bed, the Board said, following the directions of the act, this continuous strip of lands, with its rails, sleepers and depot buildings, was worth on the first of January, for use as a railroad, a certain sum. The assessors did not include in this figure the value of the privileges given by the State to the owners of the land, because they were directed by the law to make a separate valuation of those privileges.

"Objection is made that the State Board adopted two rules for the valuation of franchises. In cases where the value of the tangible

property of a company exceeded the value of its stock and debt, the State Board deemed it improper to say that there was not any value in the franchise of the corporation, and assessed that franchise at an amount equal to twenty per centum of the gross earnings of the company. The amount assessed upon this class of corporations, throughout the State, is small, as will be seen by the statement that the total tax imposed under what is called the 'Second Rule,' upon all the railroad corporations of the State is less than $2,000.

"The fact that the State Board, in a few instances of very slight importance, so far as the revenue to be derived from the companies is concerned, adopted the Second Rule, will scarcely justify the praise which Mr. Williamson (page 23 of brief) bestows upon the proposition that the value of a franchise should be determined by the amount of gross receipts. However meritorious this rule may have been found in the other States, its application in New Jersey would be attended with no end of difficulties. The question of apportionment of terminal charges would alone create no end of disputes. To credit New Jersey with only that portion of receipts which could be based on mileage would do injustice to a State the great value of whose railroad property is found in what are designated as its terminal lands. The Board might as well be instructed to assess the franchise of each company at such an amount as the company should decide upon. Counsel for the prosecutors are all positive that, if a franchise tax can be levied at all, it must be upon the basis of gross receipts. It is fair to presume that when the companies in what is known as the 'Central System,' made their reports to the State Board, this opinion was imparted to the officers making such returns. The companies then anticipated that their franchises were to be assessed upon a basis of gross receipts, and it is instructive to look at the statements. made by them on this point. I quote from the returns of the companies, as contained in the return of the State Board to the writs of this Court:

“ 'CENTRAL RAILROAD OF NEW JERSEY RETURNS.

"Gross earnings year ending December 31st, 1883, $6,268,440.47. The gross receipts as stated are estimated and approximated upon the hypothesis that the earnings of the branch lines have the same relation to aggregate receipts of the Central New Jersey lines for the year ending December 31st, 1883, as for the previous year, when separate accounts of same were made; for the reason that the earnings of the Central lines have not been subdivided on the books of the lessee company.'

"A similar statement accompanies the return of every railroad in the 'Central System,' and when it is remembered that the 'Central System' and the 'lessee company' have been unable, in over a year's litigation, to settle the question of whether the 'lessee company' has

paid the 'lessor company' the rental agreed upon in their lease, it is painful to contemplate the labor which would devolve upon a State Board directed to ascertain the value of a franchise from its perscrutations of 'the books of the lessee company.'

It is a source of regret to the Board that they could not be favored with the instructions of the court upon this and other points at issue, to guide them in the work of assessment for the current year. But, as this could not be, there was nothing left them but to adhere substantially to the rules and methods adopted last year, with such modifications as experience suggested, and with the greater care in the details which the increased time at their command enabled them to give.

RAILROADS AND CANALS-GENERAL STATISTICS.*
*

The total number of miles of railroads in the United States at the close of 1884, is shown to be 125,379, of which 3,977 miles were constructed during the year, as against 6,753 miles in 1883, showing a considerable reduction in the percentage of increase in 1884, and a less number of miles of new road than for any year since 1878, the average annual increase for the last six years being 7,258 miles.

The total share capital and indebtedness of all kinds of all the roads in the United States, at the close of 1884, was $7,676,399,054, an increase for the year of $198,533,272, being about $50,000 for each mile of new road constructed. The magnitude of the railroad enterprises of the country is apparent when it is seen that in a comparatively dull year the great sum of nearly two hundred million of dollars is added to the more than seven thousand million dollars previously invested in our net-work of railways.

The general depression in business which prevailed during the year, supplemented by a bitter war in rates between rival companies, has resulted in a considerable falling off in the earnings of the roads in the aggregate, the gross receipts from all the lines being $770,684,908 for 1884, against $823,772,924 for 1883, a decrease of $53,088,016, say about 6.4 per cent. So large a falling off must necessarily result in the reduction of dividends, and the statistics on this point show

*We desire to acknowledge our obligations to the compiler of "Poor's Manual of Railroads for 1885." Many of the figures used in our general statistics are taken from this valuable work, indispensable to those who have to deal with railroad statistics.

that from the net receipts of 1884, after the payment of the annual interest amounting to $176,694,302, there was left applicable for dividends only $93,244,835, being a fraction less than two and one-half per cent. on the entire share capital-accurately speaking, 2.47 per

cent.

Some of the regular dividend-paying roads ceased paying altogether, and some of the most prosperous lines in the country, such as the Pennsylvania Railroad and the New York Central, were obliged to materially reduce theirs. It is worthy of remark that this condition of things is not the result of the general business depression, as is generally thought, but comes of the cutting of rates through the rivalry of competing lines. The volume of business done by the railroads in 1884, both as to passengers and freight, was about the same as that of 1883, as we proceed to show.

The number of passengers transported in 1884 by all the lines in the United States was 334,814,529, against 312,686,641 for 1883. The increase for the year equaling 7.8 per cent. The number of tons of freight transported was 390,074,749, against 400,453,439 tons in 1883, showing a falling off of 10,378,690 tons, the rate of decrease being about 2.5 per cent. So it is apparent that the volume of business was nearly the same in the two years; but there was a reduction of rates, both passenger and freight, equal to about two-thirds of a mill per mile on passengers carried, and 1.12 mill per ton per mile on freight transported. These seemingly small reductions on rates reduced the gross earnings for the year below what they would have been if the rates of 1883 had been maintained, by the sum of $56,840,463, and instead of this large falling off of the earnings for 1884 they would have been greater by $3,752,447 than those of 1883, had the rates of that year been maintained. A careful examination of these figures will show that the decline in the earnings of the past year is due wholly to the reduction of rates, for which, of course, the railroad managers are alone responsible.

It is manifest from this statement of facts that the railroad enterprises have been pushed beyond the requirements of the business of the country, resulting in a competition between rival lines that has proved disastrous; and it is, therefore, a good omen that some check has been given to the undue expansion of the system. The magnitude of the capital invested in railroads is so immense that the results therefrom have a most important influence on the entire business in