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Basis
of the Lincoln Traction- Co.
When the consolidation of the two street
railway companies was effected, the officers of
the consolidated company announced in the
press that they accepted the previous valuations
of the two street railway properties by the
Railway Commission as the basis of earnings.
This position has been consistently maintained
by the Lincoln Traction Company everyday
since the consolidation.
Every fair . minded - citizen concedes the
right to a reasonable return on this .valuation.
EVery intelligent citizen . knows that such a re
turn is necessary to : invite capital to build new
lines:- of railway. Every citizen : knows that
street railway activity is the most important
factor in building the city.
When the United States Supreme Court
fixed the basis of earnings of the New .York
Gas monopoly it paid no attention to the bonds
and stocks. It held that it was confiscation to
reduce the income on the valuation below the
rate that capital commands in enterprises of a
similar character. It treated the capital allow
ed as a basis of earnings as an entirety, ignor
ing the rate at which the company could bor
row money by giving a first mortgage on its
plant. It imposed no restrictions on the distri-
bution of the income, notwithstanding the fact
that the par value of stocks exceeded the basis
of earnings.
Affirming the same principle, the Min
nesota Supreme Court says: "It is immaterial
how the property has been split up into differ
ent rights, interests and claims. For the pur
pose of fixing rates, holders of all these stand
in the shoes of the - sole owner of the property
unincumbered. "
When the basis of earnings has been fixed
the stock and bonds as between the public and
the company operate merely .to distribute the
income allowed on the valuation. A fair and
just return on this valuation is not rendered
unfair and unjust by distributing it among
stockholders even though the par value of their
holdings exceeds the valuation.
The paramount problem in this city is the
laying of an industrial and commercial founda
tion that will insure growth ; and, prosperity.
That foundation cannot be laid without the co
operation of every industry that is a factor in
building the city. A policy that reduces the
income of every large institution to the very
margin of confiscation is not the policy that
built Los Angeles, Seattle and Tacoma.
The Lincoln: Traction Co.
