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About Omaha daily bee. (Omaha [Neb.]) 187?-1922 | View Entire Issue (July 18, 1902)
THE OMAHA DAILY BEE: FTUDAY, JULY 18, 1002. RAILROAD TAXATION IN Arguments of Counsel on the Issues Raised, in Case Before Nebraska Supreme Court - - Argument for the respondents by John N. Baldwin of the Union Paclflo lit depart ment aa amicus curiae: , May it pleaae the court, I desire again to express my grateful i appreciation of tha favor (ranted ma by tha court to appear under tba pleasing title of "Its Friend," to discuss some of tba queationa Involved In thla controversy. By tbfs time It la clearly apparent to tba court thst tba railroads referred to In tha application for tba writ are particularly, Vitally and materially Interested In thla causa and thla court's determination thereof. ,Tbe Importance to tha railroads referred to la apparent becauae the record already discloses It and I bopa even within the limited time allowed me to abow that theae railroad companies In thla great state of Nebraska are Interested and have the right to appear here by their representa Uvea as the friends of Jjhe court to dlscuaa theae questions:; -Drat, becauae they pay IS 40-100 of all the taxes of the state; see nd, because tbey pay over 10 per cent of their net earnings In taxes to this state; third, becauae the atandard or ratio of val uation of all property, other than that of railroads In this state la between one ninth and one-tenth, and that of the rail roads between one-sfxth and one-seventh. The railroads hate1 no desire whatever to eacape taxation or their fall and fair bur den of the public tax. Tbey could not It they so desired. Their ' property la like land. It cannot be removed or concealed; It ts open, subject to Investigation. Tbs railroads have at heart the Interest of the communities they traverse and attempt to serve the same. They dealre applied to their taxation that dominating maxim, "uniformity of taxation,'' or the equal bur den' of taxation. A pinclple which waa announced by Canute the Oreat la 1035 In tbat wonderful declaration of hla to all of the nations speaking English. It has been but paraphrased In all of the constitutions and great, charters of liberty since that time. He aald:, Let those who are noble and those who are not, equally obtain their rights accord ing to the laws, from which no deviation shall be allowed, either from fear of me or through favor of the powerful, or for the purpone of supplying tny treasury, I want no money raised by Injustice. The railroads appeal to and Invoke tbat principle with reference to tneir eaae. l know 1 am appearing before the highest Judicial tribunal In one of the greatest states of the mightiest republic on earth. and knew before auch a tribunal as thla as sertions will not be tsken as testimony, nor mere assurance aa evidence. Logto and evl- tfenoe will figure much better than the dec laration' of those 'who assert and those who aesur. I say this becauae I ahall Insist and shall endeavor to show to the court before I am through that from the beginning to tka end ot tots controversy there has been an evident effort to prejudice, to stir. to agitate. We hear the wild cry of "crime," "grabber." "shark" and "shirker" raised against, state offlcerr and railroad officials. I have noted In my brief In commenting pen that of the relatora, that the railroad officials are charged with being dlahonoat men, . dishonestly serving their employers. It Is charged In that brief that every publle officials that has had anything to do with the assessments of railroads since March 1, 1867, have been' converted into "servants of the rallroada, and aa having been guilty of .fraud and misfeasance and malfeasance In their offices. X read, and I blush, aa I do,' that the people of the atate of Nebraska bare been charged with "stupidity" ana ' lndlfferentism." I have heard It asserted here before this court tbat tha terminal fa etlltlea of the Union Pacific railroad at Omaha are . worth $10,000,000, but your honors have heard no proof. Tou have heard It asserted here that the Union Pa c'flo Railroad company la worth $100,000 a mile, but your honors have heard no proof. It la aald that the Union Pacific hae made $4,900,000 ot Improvements and $3,000,000 In betterments and paid for them out of lta earnings, but . your honors have heard no proof. Theae are some of the statements that have been made before thla court by Mr. Harrington and are found on the pagea of the record that have been tranacrlbed. Can we Infer from wild gesticulation that there. Is some' testimony In It? I desire tbat this court shall consider this caae upon the record and the testimony. I know that when it retires to lta chamber that all of the sayings that are toundatlonless and without proof will, like Artel'a airy pageant, fade away Into "airy nothingness." ' In tha short time allowed counsel to 'pre vgent this esse they bave experienced em barrassment and annoyance In making a se lection 'of the different points tbey desire to present The subject ot taxation la a Very Interesting queatloa and there are very many pleasing phases ot It. I do? not claim that, aa one ot the oounael, I have created anything original relating to the queationa Involved In this caae. ' I can only say to the court that .1 have put. In aoma considerable time and study of the queationa involved, nd that t have,- with tba assistance of oth ers, found many Interesting facts, hut am compelled now simply In a few words to al lude to some ot them, as there are so many K would be Impossible for me to allude to them all. And I felt last eight, when going ever the points in the record to present, that 1 experienced the eame aenaatlon one would In going Into a garden to pick a bou quet of flowers. The pleasure ot aelecting and holding la tinged by the regret ef leav ing so maay beautiful onea behind, Thoae that are not re erred to In oral argument are touched upon In the brief. ' Let ua for a moment get back to the real v Isauea In this rase. Without re-statlng the character and the full averments ot the application for the writ and those In the answer and amended answsr. It Is charged Ta effect that tha board refuaed to aaaess the franchises ot these corporations. It hss been contended before the court '(and the court at the present time haa admitted evidence subject to further consideration aa to the extent of the plea), tbat fraud la ' charged. The averment that refers to fraud 1s "that the board grossly and knowingly violated lta duties to the people of the stats of Nebraska, and to thla relator, by dtaregardtng tha plain provlaion of the conatltution and lawa of tha atate of Ne braska la not aaaeaslng the franchlaee of all the said corporations at their fair value for taxation tor the year 1903." Now, what la the real fraudulent act charged? Tha refusal to assess the fran chises, grossly and knowingly, Ths gravamen or substance of the chargea are that It refused to assess the franchises. Let us remember that there Is no evi dence before your honora ot Inherent fraud; there la no evidence of corruption of any ot the officiate; there la no evi dence of circumvention or coercion. It la all negative and Inferential, and the howl of counsel against Mr. Weatoo and Mr. Btuefer that they bave been guilty of a "crime," and that tbey are corrupt, and that they have been "farmed." and tbat they have besn made-"servants of the rail roads," Is Just as unwarranted aa their at tack in their brief that all offlclala of thla atate since March 1. 1847, and there Is Just aa much proof la one caae aa there Is in ths othsr. , It Is true that the board did not assets the trsachlsee separately, aa it understood ' It. It la true that "Mr. Blmeral" ap peared before the board and told it that It ought tt da It. It U true that "I, even I Mr. Harrington," appeared before the board and told It what It should do and what a (franchise la. and that It ought to aaaeas It. It Is true that "I, even I Mr. Rosewater," appeared before the board and told It what It ought to do In this particu lar, and that It ought t assess the fran chises, and It la true tbat Abe hoard did not comply, aa la aald, with their re quests. Is tbat fraud T Perhaps It bad some doubt as to ths ability of these gen tlemen, or ae to their knowledge, or aa to their Information with reference to th question Involved. The tact ta they wanted this board ta assume all knowl edge and Information relating to what Is now one of the moat serious and debatable of questions. Publicists, Jurists, courts and boarda are all at "sixes and sevens" as to what a "franchise" really Is; as to whether It creates any value or not; as to whether It Is simply a mere power and not an element of property or value, or whether It oaa create any value. - The very cases these gentlemen rely upon and cite In their brief In the United States supreme court are but the result of a di vided court. ' And, farther, in the estima tion of aoma of the ablest members of the court. In one of the greatest dissenting opinions ever written, some of the princi ples contended for here are denied. The personnel of that court, which is subject to change at any time, may change that rule and change the application of these princi ples. ' So, when these gentlemen assumed all Information and all knowledge before the board and attempted to educate It, the board had the right to exercise lu Judgment In regard to that, and Its refusal wae not fraud. It had the right to queatlon the knowledge and Information of Mr. Rose watr. For Instance, there might have been something before the board at that time that It knew Mr. Rosewater was not Informed upon, aa we know now that he has appeared before thla court to give Informa tion In reference to certain properties and as to certain questions Involved, and yet, upon cross-examination here, this educator, aetlng as an Informer here and as one to advise, says, "I don't even know how the properties, the ahops or terminal facilities In tha city of Omaha are asssesed, whether locally or by the atate board," and gave hla opinion ar to the value of these terminals, and yet admitted that he had not seen the new shops. So, because this board refused to comply with their request, or said It doubted their ability and doubted the ques tions and objections that were ralssd, Is tbat fraud T Or Is It fraud because of It lack of Infor mation or becauae, aa Mr. Harrington has said, "Tou don't even know now what the value of a mile of any of these railroads tsT" No, It did not, and Mr. Harrington does not. No member of this court knows. No man In the United States known the value of any mile of railroad In asy state In the union. I would like to see the color of the eye of the man tbat can an swer tbat question' and subject him to a cross-examination. - He may obstinately and obdurately adhere to a statement that tt la worth $30,000 or $40,000 a mile, but he will do It In the faoe of the beat records and arguments and letters and dissertations and opinions of the wisest men In the land. It la simply a matter of opinion. Mr. Btuefer and Mr. Weston were right about It. They. flid the beat they eould. It waa a matter of" opinion. ..' It cannot be determined by any mathematical rules; there are no rigid tests or standard There is no rule to find the value of a mile of railroad. - There la no war fixed In any of the books. ' There Is no way that ran be fixed In any of the books. It Is all a mattsr of opinion. . Tou can take Into con sideration all Information that you can ob tain. Tou can take Into consideration the track, right-of-way. Iron, ties, superstruc ture, material, earnings, gross and net, stocks and bonds, tha action of other as sessors, all of this Information, and then you have to go back to a valuation of it, which is a mere matter of opinion. "Why," says counsel, "Just think of this brldgs at Omaha .costing at least a mil lion." It can abaolutely be reproduced for about $500,000, that Is the evldenoe here In the testimony of Mr. Berry. He says that all bridges of the Union Paclfip in thla state can be reproduced tor $1,106,643. Thla I evidence, not assertion. Of what more value, if the court pleaae, la the mile on the weat half of the Union Paclflo bridge at Omaha than a mile out In Kimball 'county T That mile out In Kimball oounty Is Just aa easentlat to tha Integral part of this company as the bridge at Omaha. The interruption in that mile out there Inter rupts the movement and operation of the whole line. What is Its value T How are you going to determine the value of the line If you simply figure up the weight of the Iron, the cost of the ties, etc. Tou eould not possibly get the value. Tou have to consider It In all Its environments and all Its ramifications." There is no fixed rule It all comes back to a mattsr of opinion as ths decisions aay as the courts ssy, as Mr. Steufer and Mr. Weston ssy, Tbey took Into consideration the assess ment of other aasessors and other hoards, and tbat Is an element to be taken Into consideration. They say ths market price of the stockr and bonds should be taken into considera tion. That la an unatable element. Ua demand that ths stocks and bonds, earn ings, or the capitalisation ot earnlnga, all these things are Items of evidence, but they cannot be metamorphosed ln,ta rules or standards of valuation. They are mere Iteme of evidence. The market quotations have been condemned by all the courta aa an unsatisfactory method and I ask oounael ' to atate one declaioa where stocks and bonds, or earnings, or any one of thess slements. Is taken as a rule to fix the value ot railroad property. There le none. Courta do aay that you can take them Into conalderatton In forming an opinion ot values. But It you should taks exclusively the net earnlnga, or capitalisation of the net earnings, or tha stocks and bonds, and tha proof should show that the valuation was placed solely thereon, it would be con demned becauae It would be unconstitu tional, becauae It could net be, or would not be, anything elae than aa Income tax. I am not aaylng you cannot take them Into consideration, but I do say you cannot as sess railroads according to any one ot these Items solely. Market quotatlona have been condemned by all the courta be cause tbey are not so much the reault of careful Investments of tsr-slgbted men aa ot the manipulation of speculators on mar gin. They are forced by stock exchange practices. Management, good will and bus iness standing are all covered by share stock valuea, and an aaaeaament bassd en such values, taxed as property to corpora tions, tbst which Is not taxed to natural person!. Hope of the future la an element which Inflates values of atock above the true value of the property. It expreaaM only the Judgment or opinion of Investors as to the walue of stocka and bonds. Counael haa aald. in loud, ringing tones, very effective, very impressive, "Why, you could sell the Union Paclflo tomorrow for $100,000 a mile." If you would place it upon the market and throw all ot its stocks and bonds upon ths market for aale, de you euppoee the common stock would be worth $104 and the preferred $($? The pre. terred stork ot the Union Pacific Is selling today at $89 and the common stock st $106, and yet not one dollar of dividends can be paid on the common until 4 per cent Is paid on the preferred. Why la the preferred selling at $89 and the common at $106? It Is the hope of the future; It Is atock ma nlpulatlona. It Is uncsrtsln and fluctuat ing. No, the rule Is that ths board csn tske Into conslderstton all of these different Items that I bave enumerated and then form their best Judgment from all the cir cumstances In the caae. I mean to aay tbat If. It was conclusively shown that the valuation was bared solely upon the net earnings, or capitalization of the net earn lnga, and no other elements taken Into consideration. It would be absolutely void, because It would be an income tag and be cauae It would be a tax upon the labor and good will. The labor Is what so largely contributes to the returns, Independent of the tangible property of the company. Be cauae tt Is an arbitrary method of dis tributing tbe earnings on the various divi sions and they do not correctly represent the net earnings ot Nebraska lines tn any particular locality. Because, It you should capitalise the earnings, you would Include all of Its localized property, and the value ot It does not appear and could not appear. Now, what are theae localized values? Mr. White, In his argument, clearly and forcibly ahowed to the court that from 62 per cent to 67 per cent of tbe operating expenaea of the roads were Incurred for lsbor. There are about 900,000 laborers In the employ of the railroads of the United, with 4,000,000 depending upon them. Nearly one-twentieth ot the people of the United States de pendent upon service in the railroads nearly 4,000 in the employ of tbe Union Pa clflo railroad In this state alone. Tou can not tax labor. Localised values also are the headquarters, the shops, the good will end the good management, and tbe skill and ability and business enterprise, all of which enter Into the net earnings. These cannot be taxed and are not taxed In the case of natural persons, and therefore could not be In the case of corporations. If the railroad permits Its road to run down In order to show large earnlnga, the property Is actually worth less. Yet on a capitalization on the basil of net earn lngs It would be worth more. On the other hand. If the company would exhaust Its earnings In Improving its property, a capitalization on the basis of the earnings would show It to be of less value. That would be nothing more or leks than an attempt to make an Item of evidence an arbitrary formuja for the aasessment of railroads. These are a few of the con siderations which show that a capitaliza tion of the net earnings Is not a rule and cannot be a rule, and there Is no court tn the land that haa said it can be a rule. Earnings can only be taken into consider ation. We come down to the next question. whtch Is one of the Important ones In this case. Did the board of equalization as sess the franchisee of theae corporations? We insist that it certainly did. That there was no way for It to make any assessment of the properties of these rail roads without taking Into consideration what la denominated "franchlae." "pre rogative," rights, stc. That it was a phys ical impossibility in the act of assessment ta separate It or segregate It, and that they did take Into consideration these franchises. The court will, of course, bear in mind It Is not a queatlon whether tbe board took It Into consideration In a man ner aatlsfactory to this court, or did it skillfully, or whether It did It In a way that thla court would have done It. Did they do It? If they did. that Is the end of this case. This court cannot substi tute Us Judgment for tbat of thla tribunal. If It will, tbess applications upon such a showing as appsars here now, the first thing we know It will be running all of tha departments of tbe state, which are not within the Jurisdiction of this co ordinate branch of tbe government. Did it assess tbeee franchises? It would bave been impossible for the board to have done other than assess the franchises, be cause it eould not say tbat It assessed the rails aa Iron, the ties as wood, ths super structure as material and the whole prop erty as dead. Inanimate and lifeless. The respondents state in their answer, and state before you, that they assessed the railroad corporations as going, live concerns, snd that theae Inanimate properties wsre being used. If they did not take these thlncs Into consideration, then, if your honora pleaae, the assessment that was placed as upon dead and Inanimate property was ex tortionate and could be set aalde upon that ground. i Let me give a few Illustrations, taken from the evidence, to show that they neces sarily took Into consideration tbe fran chises. Tbe assessment of the Burlington ft Missouri main line from Plattamouth to Kearney was fixed at a valuation of $10,530 a mile, while the assessed valuation of the Grand Island. Wyoming ft Central divi sion of the same company was assessed at $3,400. I bave selected these two lines because between these two points they are praotically of the aame phyalcal value, that Is, neither of. these lines hss any very expensive or valuable improvements, except at Lincoln. possibly. In other respects they are about the same, the same weight ot rails, the ssme ordinary Improvements, the aame shops and the same stations. Ths Grand Island, Wyoming ft Central road also does a transcontinental or through business. carries through trains to the Northern Pa clflo and Is used for similar purposes as the line from Plattamouth to Kearney. Tbe difference In ' the aassssed valuation be tween theae two can only be accounted for by the fact that the report of the audi tor ot public accounts shows tbat tba net eaarn- log per mile Is $12,860 on the main Hue, while the Grand Island, Wyoming ft Central ahowa tt was operated at a loaa ot $346 for the aame year. One operated at a proflt and the other at a loss. Did tbey aeaess tha same phyalcal propertlea? Tbey took Into conalderatton the earnlnga and the ca pacity to earn, that they were moving con cerns, or else thsy could not rlghtf.ilfy bavs assessed these roads similarly tttiiated In the same atate, with like tangible jrop erty and doing a like business, wl'h sicb marked disparity. They took into con sideration the earnings.. What are (he earnings? Is tbat tangible property? What la tha capacity to earn? Is that tangible property? No, if -your honors please, It Is Intangible, It partakes of the nature of prerogative or a franchlae or whatever It may be denominated.' Now, take the cost of reproduction. We do not lnalat that the coat of reproduction ahowa the value ot the road. We eimply say that the coat of reproduction Is one of the ttema of evidence. This Is the view that waa expreaaed In the Amoa case, that went up from thla atate, with which, of course, your honora are familiar. Tbe su preme court la that caae says It ia all a matter of opinion. There ia no arbitrary rule. As to the cost of reproduction I al lude particularly to tbe Union Pacific, be cauae we bave here evidence relative to the property. I have evidence which waa placed before thia board In the testimony of Mr. Berry, and which m given In the COURT the Mandamus ' vm suit of the state t Nebraska to collect the penalties for violation ot the maximum schedule of ratea. There was no desire to put this value either up or down. It was the desire of Mr. Berry to tell the truth, and he told the truth. It made no differ ence to htm whether it waa a rate cass or whether it waa an asaesament caae, hs sim ply had his facta and figures, which he had taken tbe nereeeary time to prepare. He swore tbat tbe cost of reproduction ot the Union Pacific railroad In the etats of Ne braska would be $21,653,057, or $30,239 a mile. That Is the entire cost of the repro duction ot the physical property ot the Union Paclflo In the state ot Nebraska. There are 947.66 miles of tbe mala line and branch line of 'the Union Pacific in the state, and the property Is assessed at $9,847 a mile for the main line and $3,500 a mile for branches, being an average of $6,572 a mile. It It la assessed as we claim all other property In the state of Nebraaka Is, on a ratio or standard of one-ninth or one-tenth of the value, the value of tbrft per mils would be $3,024 instead of $6,572 a mile. On the basis ot one-sixth, the dif ference would be $1,611 a mile. Now, what la this difference? $3,024 a mile on the basis of one-tenth and $1,636 a mile on the basis ot one-sixth was necessarily the amount the board asaessed for the franchises, for the going, moving concern, for earnings and earning capacity. We bave heard in this room charges hurled against the board and against rail road officials, that tbey are In a eomb'ne to rob the people, that they are dishonestly working for their employers, and they Charge that Mr. Weston and Mr. Btuefer are moving about In the darkness of Egyptian midnight. Mr. Harrington hie aald to this court' I will prove to the satisfaction of the court bv the stock and bond Issue that the Union Pacific Is worth $100,000 per mile. I have studied the question. - I am Informed. It haa been interesting to me. I have appeared before these boards and expect to appear again, and I know what 1 am talking about. Let us see It Mr. Harrington ta moving In the bright light of Intelligence. I as sert that the darkness which, Mr. Sltneral says that Mr, Btuefer and Mr. Weston are wandering In Is aa a halo of light to tbe darkness In which Mr.. Harrington gropes. He moves as It he waa In the Impenetrable darkness ot the deepest dungeon that oould be found during the reign of the Spanish Inquisition. I would like to have the court look at these tables. The bond and stock Issue of the Union Paclflo Is lndlssolubly connected with the bond and atock Issue of the Bhort Line and the Oregon Railroad and Naviga tion company. There Is no war tind no man, Mr. Harrington or anyone else, can segregate them, because these properties are Intertwined and interwoven. Because whatever stock and bond iasue of the Union Paclflo there la covers all of theae properties. First, what is that issue, and what does It cover? It covers many, many properties, not only the mileage of the Union Pacific, but the Short Line and the Navigation com pany. . The Union Paclflo with thla Issue haa become the owner by purchaae of a large number of "other propertlea, depot companies, elevator' companies, water works companjea,' stock and bonds In other railroad companies' feeders to Its lines, all operated aa Independent companies and corporation. It purchased them at the sale, purchased the stock of these differ ent corporations with these lssusa ot its stocks and bonds. " It purchased tock in the Oregon Short Line. It purchased stock In the Southern Paclflo. It purchaaed stock In the Northern Paclflc. It purchaaed some eight or nine water works companies, in dependent companies. The elevator ' at Council Bluffs, ths elevator at Omaha, union depots at Denver, Cheyenne, Ogden, Atchison and Leavenworth, coal compa nies. These are ' Independent companies with Indepsndent property, and are sub ject to assessment in the different states in which they exist. Will your honors turn to the map, please, found In the back of this report, as an evidence of this state ment'' The red W the Union Pacific - The blue Is the Oregon Bhort Line. The orange is the Navigation company. Tbe "green is the . Southern Paclflc. Their bond and stock Issues cover all of these properties, and it covera the land grant lands. In addition to the enumeration of the com panies which appear upon pages IS and 19, from which Mr. Harrington makes hla de duction, and asserts to this court tbat hs figures out the stock and bond Issue at $100,000 a mile. The companies are there enumerated, depot companies, water works companies, coal companies and land com panies. I have prepared two statements, one ot which appears In my brief (and I thought that was aa clear and pellucid as a moun tain strsam), hut It brought about ao much muddlneas and obscurity on ths part of Mr. Harrington that I . prepared another statement in another way. Take the total amount of the bond laaue of the Union Pa clflc, Oregon Bhort Line and Oregon Navi gation company and you will find that In tbe first column at tha top of page IS, the total outstanding of the bond issue. It is figured down to a total, Union Paclflo and auxiliary lines. $331,279,809; that U the total outstanding bond lssus. This, to gether with the stock laaue covers all these properties that are shown upon the map; covera all ot these properties and was used to purchase these different properties; use4 to purchase an interest in the Union eleva tor at Council Bluffs, Union Elevator at Omaha, the Boseman Coal company, Green River Waterworks company, Leavenworth Union depot, Rattleanake Creek Water com pany. Union depot at Denver and at Kan aaa City and many others, and all Inde pendent companies having their propertlea In different states and subject to taxation in the different etates, but owned by the Union Paclflc and purchaaed by the bond Issue of $331,279,800 and stock Issue of $263. 999,000. The stock issue la shown on the page below and is $263,999,000. Add those together and we find we have $595,278,800 aa the total atock and bond Issue for all ot theae purposes. Is that bond lssus to cover simply the 1.000 miles 'of the railroad sys tem ot the Union Paclflo? No. Underetand. please, your honors, we do not say thla ia the way to find the value and we have not insisted upon It. But Mr. Harrington aays "this is the way to find tbe value of the road." We aay It la not the value of the road at all. We simply say the stock and bond lssus Is an Item of evidence merely. We do not say that Is ths only way to find the value of a rail road or the real way. All of that $595,000, 000 of stocks and bonds Is Issued and here It shows what waa done with It. It pur chaaed all of theae properties, ao that now the Union Pacific, Oregon Short Line and Oregon Railroad ft Navigation company have In their poeaeaslon and own, theae different securities, which amount to $332, 631,259.17. Tbe value of these securities must be deducted became, if you are adopt log a method of finding the value according to the atock and bond laaue, you muat eon fine the amount of the stock and bonds that are laaued aolely and simply to ecver tbe railroad mileage. Tou cannot apply the amount of value of slocks and bonds Is sued, which are used for the purchase of other properties. We have taken out the land aaaets, valued at t5.3S0,V.3.96, and we are charged with bad faith In doing so. The lande are sub ject to assessment locally, and outside ot the railroad property, and then, aa the schedule shows, the companies own water rights and boata from Portland to San Francisco, and we have made the beet esti mate we can ot tbe value ot thoae at $3,000, 000, becauao they are subject to asseesmeat locally and outside of railroad property. These two Items, amounting to $8,350,153.93, must be deducted. This leaves $254,297, 186 63. How la this to be divided? it would be ridiculously and manifestly wrong to sp ply this to tbe 8,000 miles of the Union Pa cific Railroad company. It covera the en tire mileage ot all three of these roade. It covera all ot thla railroad property, the railroad property of theae three eompanlea. We deduct the value of the securities of ths other companies, and to find, under their theory, the value of the road, according to the atock and bond Issue, you must divide tble $254,297,186.68 by the total mileage of the three roads, which is 8,679.8, and this gives us $46,674 aa the amount ot bonds and stocks per mile. Mr. Harrington haa charged the Union Pacific as tha worst alnner of all, guilty of fraud, and other counael have charged the public officials and railroad officials with fraud and crime. This he says Is because the stock and bond Issue Is $100,009 psr mile! Why, these gentlemen are not even stately murderers or graceful assassins ot the characters of men they are bungling butchers. How supremely ridiculous Is their contention! Suppose tbe Llndell hotel In Lincoln wss owned by a corporation, capitalized for $100,000, and the corporation called the "Llndell Hotel company;" and the Lincoln hotel was owned by a corporation, capital ized for $100,000, and called the "Lincoln Hotel company." Tbe Llndell Hotel com pany desires to buy the Lincoln hotel and can get It for $100,000. It holds a meeting of the stockholders and board of directors; records are made; they take corporate ac tion, increase their capital atock $100,000 and with that buy the capital stocw. of the Lincoln Hotel company and become the owner of that property. Mr. Harrington contends that ths liabilities ot the Llndell Hotel company are $300,000 of stock Issue. and that the additional stock Issued by the Llndell Hotel company and the additional stock which it purchased from the Lincoln Hotel company are liabilities Instead ot as sets. And. If we desire to find the value of the Llndell hotel by this stock and bond leaue he would aay the Llndell hotel Is worth $300,000. These mathematlca are per fectly rldlcuous, and yet this Is tba basts of the cry of fraud. When you want to find the mileage of all the roads upon te stock snd bond Issue you cannot confine It to Union Paclflo mileage, it must extend over will uiu jyi UfCI t Je '11 Let us make another compilation. Take the last column on pagea 18 and 19. It' shows "balance afloat." That means out side, not In the treasury ot the company, not owned by the company, but owned by out-' alders and afloat. Tou will find that the Union Paclflo and lta auxiliary companies nave bonds afloat outstanding of $248,220,000 and a total of stocks afloat of $201,638,744. These added make a total of $449,859,744 of stocks and bonds of these three companies outstanding. What do these three companies have for' that? They have the bonds and atock of all theso othsr companies. Tou will find In the column headed "Total owned by the three companies" the following: Bonds of other nil pames $ 4.876,904 00 n vi oumr companies U.SZ1.700 00 Ol" t A t a 1 a tn in, uv. aa stocks of other railroad com panies 187,290.00 00 Stocks or other companies 9,773,298 67 Or a total nf ai 7 m i ooa 7 Grand total of ; I87i212.'202 61 whloh these three companies have in thetr possession aa assets and which represent properties other than the railroad mileage of these three companies. So to arrive, if you desire, at the valua tion of the railroad property, according to the atock and bonds, you must deduct from the total stock and bonds afloat, of $449, 859,744, the amount ot the bonds and stocks representing the values of the other prop erties, $187,212,202.67. which leaves $262,647, 641.13, and from this must be made a fur-, ther deduction of the land aaaets and water line assets amounting to $8,860,853.95. And you have a balance of $254,297,187.38, repre senting the railroad mileage of the three companies. Divide thla by tbe mlleaa-e. 6,679.83. and it gives $45,674. This Is another way of ahowlng that tha stock and bond issue of . this company is $45,674 per mile. If your honora please, I ask you to take this fourth annual report and examine It In. every feature and In every way. It has besn put In evidence by the relators for the purpose of showing the stock and bond Issue. All of the courts and counael for relatora say that the maximum valuation la tha atock laaued and bonded Indebtedness. Tou take the Issue of stock and the bonded debt, not the current expense debt, and mat represents the extreme value of the property of the corporation, and so for that purpose they have taken the stocks and bonds of the Union Paclflo for the purpose of showing that It Is worth $120,000 a mile. But It Is not so. It Is not In tbe figures. I call attention to page 4 of tbe annual re port, where reference Is made to the Issue ot ths convertible 4 per cent bonds. "Of these convertible bonds $6,043,000 have been converted Into common stock, leaving out standing $93,957,000, agalnat which an equal amount of unlaaued common stock ia re served," and now in ths hands of tbe treasurer. Mr. Harrington, In hla queatlon to Mr. Weston and Mr. Btuefer,. complained and aaaerted tbat $10,000,000 of the bond Issue of the Union Paclflo Land company had been deducted in our statement. Theae bonds are owned by tbe Union Paclflo Rail road company and are deducted from the total atock and bond lasue because the lands arc assessed separately. Tou will find In our statement that the Union Pa clflo Railroad company's lands are also deducted. They are not returned to the state board for assessment. They are as sessed locally tn ths different states in which tbe lines run and In which the lands are situated. Mr. Harrington, In tbs examination ot Mr, Weaton, aays, "Didn't you know, Mr. Weston, that theae Improvements and bet terments were paid for out ot tbe earnlnga ot tbe company? Didn't you know that?" Mr. Weston said: "No, I did not know that." Is there any proof ot that? He asserts that. What did be want to have this court understand? Waa that for tha purpoae of being vicious in addition to charging crime upon tbe part of Mr. Wes ton? Pags 6 of this document, that they put 1a evidence themselves, being the fourth annual report of the Union Paclflo railroad, states aa follows: The proceeds of all securities sold havs been applied toward the building of new lines, tor betterments and new equipment, snd for the acquisition ot stocks of the Southern Paclflo and Northern Paclflo com panies, as stated below. Our improvements and betterments were paid for out of the stock and bond lssus, and not out ot the earnlnga, and I ask counsel and the representatives of ths relators to prove their statement. I can only very hurriedly and very briefly state our poattloa with reference to section 12. I have abstracted It and would like ta argue It, but must give way to my asso ciates and ths othsr friends of tbe court. Section 11 Is not applicable to railroad corporations at all. It your honors, please, that is the section which demands the re port and return of the capital atock ot all corporations Incorporated In the state. It Is not applicable to railroads at all. I deny the proposition that there baa ever been any legislative enactment tn pursuance ot tbe ronatltutlonal mandate fixing a rule for ascertaining ths value, of ths franchisee of railroad. It Is all now in a chaotic con dition. But, for ths purpoaea of thla argu ment, I will assume that some place, some where or somehow In the different statutes of ths state ot Nebraaka tha board has the right to aseesa the franchlaee of the rail roads, or rather to take the franchlae Into consideration In determining the value ot rallroada. We must keep clearly In mind ths mode ot ascertaining the value of the property and the mode of assessing that property. There are two distinct propoal tlons. At the time of the passage ot sec tion 81, tn 1879. It was then a very doubtful question as to whether frsnchlses In any way separately and apart could be taken Into consideration with the assessment ot properties. Bo It wss very clear that the leglatature never intended aection 82 to apply to railroad corporatlona or corpora tlona organised outalds of thla state. Fur ther, section 1, 1 think It Is. ot the revenue act relates to capital stock of corporatlona Incorporated under tbe laws of the atate. Ia section 12 It enumerates all ot the cor porations, steamboats, express eompanlea, street railways, etc., but there Is no men tion ot railroads at all. "The inclusion of one Is the exclnsion of all others." By this process of elimination the railroads are excluded, and section 33 Itself says corporations "Incorporated under tbe laws of this stats. Bo that wherever there Is a reference to the capital stock of a corpora tion for the purpose of assessment In any of the statutes of Nebraska, tt refers to corporatlona organized under tbe lawa ot the atate of Nebraska and not corporations Incorporated elsewhere. And how striking is this fact When w get to aectlon 19. where the legislature used the peculiar phrase and language including "corpora tions Incorporated In other states, whether Incorporated under the laws' ot this state or not," desiring evidently to give peculiar significance and emphasis to that phrase, because in aection 39 It Is "whether In corporated under the laws of this state or not." ' So that If there Is any rule or any statute .for the . aasessment of tbe fran chises of railroads it must necessarily be by Sections 39 and 40, and ws say for the purpose of this argument tbat the board, being an assessor, assessed all of the prop erties of the ratlroada. We say. It the con tention Is that the assessment Is mads under sections 19 and 40 because that power Is given to the board, there Is where the power Ilea and la lodged. Well, how la that to be exercised? How are they to assess the -capital atock? There fcs no rule-. We have in aection 12 a proceeding somewhat explicit and definite, but In refer ence to railroads, there Is no ruls at all. The leglslaturs then, at least having a doubt aa to the power and ability or au thority to assess franchises, left the power of assessment -to the . board to fix In its own way by no fixed or arbitrary rule. It is left with the board tor assessment in Its own peculiar way, by no rule: To recapitulate my proposition, I aay under section 32 It is applicable to cor porations organized in tbe state of Ne braaka. It was not, meant to apply to rail road corporatlona, because they are not mentioned, and because confined to cor porations incorporated in thla state. While again section 19 particularly refers to cor poratlona whether Incorporated in thla atate or not If it ia under section to it is leu to the sound discretion ot the board and the board has told this court that it took these things Into conalderatton; that It exercised Its beat Judgment and made the aaaeaament accordingly. We oome next to the particularly Impor tant cry and the charges are rung upon It. Don't you know the Union Paclflo was a bankrupt corporation? Don't you know it wasn't earning anything? Don't you know Its franchise was taken away from It? Now it la a new. corporation, with a right of franchise, the right to collect tolls and make charges." Tbe Union Paclflo never lost lta franchise. It has always collected tolls, freight and pasaengers. There Is no difference now. It went along Just the same. Ihey aay, .'.'Look at lta- Improvementa. Look at- lta betterments and lta earnings and the assessments are the aame now as ten years ago no increase," and that la taken up in every varied form that can be Imagined and It is poured down from the lips 'of counsel aa It In a lava torrent ot fevor frenzy. He was so agitated about It he could not control his conduct in assail ing good and upright men who have borne good namea in' the communities in whloh' they have . lived. . Who have never before been accused ot wrong doing and who have discharged, all tbe dutlea of their station to the best of their ability for tbe last twenty-five years. I will show In a fsw minutes why It has not been Increased. Be cause there has been auch a marked In crease ot all the propertlea ot thla great and growing state of Nebraaka; that there has been and had to be to conform to the dominating maxim of uniformity a reduc tion in the assessment and consequently In tbe taxation. ' But la that reduction, if your honora please, the railroads have not had their fair share and proportion. These gentlemen absolutely - seem to ex clude from thetr : reasoning tbat element in their arguments. They fall to think of it when" they refer to tha condition of the propertlea in thia atate. These figures are from the auditor's re port and from tbe Interstate Commerce commission;' they are In evidence, every item ot thorn, and prove conclusively that there la nothing . whatever ,ln their com plaint. The decrease in the last eight yeara In tbe assesanisnt of all kinds of property other than railroads haa bsen 11.5 per cent. If you have 1.000 farms ia 1891 and have 6,000 farms in 1901, you have more prop erty to assess, consequently you csn re duce your levy. It wss reduced 13.6 per cent on all property other than railroads. Rallroada in this time were only reduced 7.6 per cent in their valuation. Now, on tbs otbsr hand, the increase ta lands assessed in the state of Nebraaka was 12.1 per cent; cattle, 60 per cent; sheep, 140 per cent; hogs, 10 per eent, and the in crease In railroad property, 1.1 per cent. Bo, while there haa been a decrease In the assessed valuation of all property othsr than rallroada of 12.5 per cent, there has been a decrease In aaaeaaed valuation ot railroads of only T t per cent. There hss been an Increase ot from 60 to 140 per cent of other property. In the state, and only 2.1 per cent of railroads we are talking now of tangible property. To illustrate It again by these remark able figures, taken from tbe census from roa jQ Cxi STB DRINK Natural Laxative ConyacMcinoij When buying be sure and ns Otherwise If yen ask simply for Hunyadl Water, yon may be imposed npon. LABEL ON BOTTLB 14 the year 18M to the year 1900. Tbe farm propertlea In the state of Nebraaka In ! 1SP0 were worth $51l.7!Min. In lon. $747.- I (60,057, or an Increase of $236,150,247, or 46 per rent. Farm lamia and Improvtmenta In 1890, $402,358,913: In 1900. $f.77,66,0:o. an Increase ot $:75,1'T1,170, an lnrree.se of 47 per rent; farm Implements and machinery, tn 1890. $16.46S.977: In 1900, $24,940,450, an Increaee of 61.4 per rent; live stork on farms $92,971,920 In 1890. and In ii'OO $145, 149,667. an Increaae of $52,377.6(7. or 66.1 per rent; farm producta In 1890 $16,83?,612. In 1900 $162,698,356. an Increase of $95. 858.769, or 143.4 per cent. And jet the asseaamenta for 1900 on thoae properties were less than the assessment for 1890. These are the facts and figures before this eourt. Tou have for the farm products an Increase of 143 per cent, very nearly, and the whole averaging 45 per cent on a'l piopettlea in this state, and yet the aa aeaament was less In 1900 than It waa ta 1890. This must all be considered rela tively. One member of thla court was on ths bosrd tor tour years, and he caa readily appreciate the force of tbat. Ton cannot fix It In any arbitrary way. Tou bare to take Into consideration all of theae things, and 'therefore you have to do it relatively. If they reduce for other prop ertlea, they muat reduce tor railroads. There la no evidence ot abaolute fraud, aa I have said. The only possible way any fraud could be claimed would be, aa haa been ssld In some ot the authorities, where there la such a striking disparity In ths as aeaament aa that a legal fraud could be found. For Instance. If the board aaaeaaed thesa railroads at $100 a mile such a etrlk lng disparity In the aaaeaament might be held fraudulent. It ka now my purpose to show that the Integrity of this aasaaament. ths reault of thla aaaeaament. Is fair, meaa ured by any rule you want to take, or measured by any criterion you want to es tablish. It was tn fair proportion to all the other assessments. It does not make any difference If theae gentlemen cannot figure It out the way counsel would like to have it figured out. What waa the final reault? The claim that the valuation la lower than It waa la almply due to the fact rnat of the Inoreaae tn the volume of the property which Is subject to taxation. Ws have said tbat tbe ratio ot aaaeaament on property la thla state ta now lh the neighborhood of one-ninth and one-tenth and of tbe ratl roada between one-fifth and one-atxtb. Relatora to disprove thla put In evidence the letters from the coanty clerks. I oan only aay to your honors that It does not make any difference what the county clerks reported cr what they agreed to do. It la what they did do, and these very letters show what they agreed, to, do and then what they did do, Mr. Harrington haa read you the compilation Ot these letters. I have taken the time to select a few and I will read those to show you Just what they did do. Tour honors know that tn 1891 the lands In this atate were assessed at $3.61, horses at $7.01.. cattle at $4.43. mules at $8.07, hogs at $1.06 and sheep at 68 cents, and down in your innermost heart and In your conscience you know that that ta not more than one-tenth of the value of theae properties. The board knew this, for it had the reports before It. We picked out twelve or fourteen ot these letters to Illustrate. The assessors of Butler county agreed on one seventh. When they met It was moved and seconded that all property be assessed at ons-aeventh of the full value. That was carried. Then it . was "moved that $26 worth of household furniture be exempt from taxation. Carried." Then it waa moved that 600 bushels of corn be exempt and all over (00 bushels be assessed at S cents' less than market price the first day ot April. Carried." Then it waa "moved that wheat and rye being held for market be assessed. Lost' How perfectly ridiculous la this all. Here la one from Sidney, Chey enne county, aaylng. Mi regard, to the valuea fixed by assessor they were aa given In my former letter and one-4hird of that amount was to have been the true basis on which the assessment wse to have been made. This waa the motion carried at their meeting. But I can't tell what course they may take when they assess. Banner county reports that all lands and personal property la listed at one-third cash value; that la, that Is what they aald they would do, but what did they do when they came to assess? -Improved lands, -5 cents; unimproved lands, 66 cents, horses, $12, $8 and $6; cattle, $6. $5 and $3; sheep. 60 cents and 90 cents; hogs, $1 per hundred; yet they said they would assess at one-third the cash value and they say from $5 to $11 on horses and t to $6 on cattle, but In every instance they took the lower price. Saline county- aays Improved and unim proved lands In Saline oounty to average $4 per acre;' horses, imported,. $50 straight; common one-fourth of $40, one-fourth ot $20; cattle, $1 per hundred; sheep, 60 cents psr head; hoga, $1 per hundred. I con tend that relatora own proof ahows about . ne-fourth valuation. . . There waa submitted here a statement of the lands, prepared for the years 1890 and 1891 In a number of tbe counties ot tbe atate of Nebraska. Tor instance, for Dodge county the record ahows the conslderstton Is $111,850 and the assessment wsa $9,334, which Is about one-twelfth, and the agree ment was one-fourth. These are taken from tbe record. Saunders county, considera tion $54,550, assessment $4,680, or about one-twelfth, and the agreement was one fifth to one-tenth. Butler county, consid eration $97,098, asaessmsnf $7,204, or about one-fourteenth; the agreement was one seventh. York county, $110,720, aasessment $11,401, one-tenth; . one-seventh waa the agreement. Adams county. $63,000, aa sessment $8,975; about one-seventh, and the agreement was one-fifth. Fillmore county, $35,960, assessment $2,800; about one eleventh. Cuming county, $94,860, as aesment $8,898; about one-eleventh, and the agroement was one-fifth. Antelope county. $42,425, assessment $2,780; about one-fifteenth. Colfax county, $98420, as sessment $8,986; about . one-eleventh. Platte county. $69,846, assessmsnt $5,687, about, one-twelfth. Boons county, $79,50f, aasessment $7,271; about one-eleventh. Seward county, $65,100, assessment $5,942; about one-eighth, and the agreement was one-fifth. Total, $903.61$. Total assessment, $88,908, or about one-eleventh. I contend that these records show that all othsr property is assessed In this state from one-ninth to one-eleventh and we have endeavored to show your honors that tbs assessment of railroads la on ths basis of one-sixth to one-seven tb. Tbe Indis putable, uncontradicted and unimpeachable record Is that they pay 16.40 per cent ot all of the taxea ot thla atate. If they do, tbey should own between cne-aixth and one seventh of this great stste of Nebraska, be cauae, if they pay 15 per cent ot tbe tax (Continued on Ninth Page.) PAT D M Mineral Water. the full nsme Hwsayskslf Jano. BLUB, WITH RED CENTRE. X 1 1