People Ex Rel. Manhattan Railway Co. v. Woodbury

Gray, J. In this proceeding the relator, the Manhattan Railway Company, in the city of New York, has sought to review a determination of the state board of tax commissioners assessing its special franchises in the borough of Manhattan at $75,000,000, and in the borough of the Bronx at $3,500,000. ' The trial court has reduced the assessment in the borough of Manhattan to $66,661,930.05 and has confirmed the assessment in the *234 borough of the Bronx. In fixing the values of the relator’s, special franchises, the court applied the net earnings rule to the evidence, as it was laid down in the case of People ex rel. Jamaica Water Supply Company v. State Board of Tax Commissioners (196 N. Y. 39). The Appellate Division has affirmed the order of the Special Term. With respect to all the items, except those which will be referred to, I am of the opinion that the determination below was right. I think, in ascertaining the value of the relator’s tangible property, upon which a return of six per cent, should be allowed, that there should have been included the value of the relator’s interest in the subway, or subservice conduits, through which its power and light cables pass. .While it is true that this subway property, or structure, was owned by another corporation, the Consolidated Telegraph and Electrical Subway Company, nevertheless, the relator had invested in it the sum of $936,879. This investment was essential to the operation of the relator’s road and there is no good reason why it should not be entitled to a return upon it. I think, also, that there should have been included in the tangible property the sum of $537,139, consisting in cash and other cash items on hand. This item may, properly, be considered as a part of the relator’s working capital, which it was entitled, in the prudent management of its business, to keep on hand. Whether or not it was, in fact, essential to the operation of the railroad is not material; but it was, nevertheless, an item of its property, which it may fairly claim to have considered with the rest of its tangible property, upon which the return should be estimated. The inclusion of these two items in the relator’s tangible property, of subways and of cash, would result, by the methods of computation adopted, in reducing the value of the special franchises • in the borough of Manhattan from $66,661,930.05 to the sum of $65,350,060:26. In *235 the borough of the Bronx the reduction would he from $4,907,652 to $4,805,399. This difference, however, in the case of the borough of the Bronx, is not material and does not affect the determination; inasmuch as it was, very properly, held, as the sum fixed by the tax commissioners at $3,500,000 was less than the full value of the special franchise, that the relator was not aggrieved and that no allowance should he made for equalization. Whether the rate of return to he allowed to the relator upon its tangible property, or whether the rate at which the net income should be capitalized, should be six per cent., as determined below, was a question of fact decided upon, concededly, conflicting evidence and is one with which, therefore, this court should not interfere. ■ In the Jamaica Water Supply Company’s Case, (196 N. Y. 39), the character of the plaintiff’s business affected the question of the rate of capitalization of net income; a consideration which, I think, does not obtain in this case. I think that the cost of the easements was properly included in ascertaining the value of the relator’s tangible property. The structures in the street, upon the acquisition of those easements, became lawful as to the abutting property owners. They, then, became appurtenant to the railroad property and, necessarily, enhanced its value. The courts below determined that the relator was entitled to make annual depreciation charges, amounting in the case of the borough of Manhattan to the sum of $360,613.65 and in the case of the borough of the Bronx to the sum of $37,435.67, for the purpose of creating a fund to provide for the depreciation of its various properties; upon which interest at four per cent., compounded, would produce a sum, at the termination of the ascertained physical life of the several classes of property, equal to the cost of the particular property. While I am, personally, of the opinion that the creation of such an amortization fund furnishes the best rule for adoption in *236 .such a case as this, in working out the value of special franchises, the majority of my brethren entertain a different view. They think that the annual allowance for depreciation should be computed by dividing the values of the various kinds of tangible property by the number of years of their respective estimated physical lives and that will be the opinion of the court. The orders of the Special Term and Appellate Division must, therefore, be modified and the proceeding is remitted to the Special Term for further action in accordance with this opinion; without costs as against either party.