"On April 1, 1923, the plaintiff was the owner of a large mill situate in the city of Lawrence, Mass., on the banks of the Spicket river, which flows into the Merrimack below the plaintiff's mill. The plaintiff on, that day possessed the ordinary riparian rights on the Spicket river at its mill site, together with a mill pond of an area of approximately 14 acres. It used the water from the Spicket river for various processes in the manufacture of its products; in other words, its use was one of 'process water.' The ordinary flow of the Spicket river at that time and for some years prior thereto, at some seasons, was insufficient to meet the needs of the mill. In order to insure the amount of water needed for its uses, when the normal flow of the Spicket river failed to make such provision, the plaintiff acquired flowage rights and storage on the Spicket and its tributaries above the mill.
"The first storage acquired was that on Island Pond, a large natural body of water situate in the towns of Hampstead and Derry, by which storage capacity to the amount of approximately 900,000,000 gallons was obtained. Subsequently, and in recent years, the plaintiff reconstructed an old dam and created a small storage pond in
Salem, known as Taylor Pond, on the Spicket river and below Island Pond, at a cost of approximately $21,000, and providing approximately 30,000,000 gallons of storage. Subsequently, in 1917, Millville reservoir was constructed on a branch of the Spicket in Salem, known as Flat Rock brook, at a cost of approximately $60,000, and providing approximately 100,000,000 gallons of storage.
"In 1917 and 1918, rights were acquired and a dam constructed on Hittit Pond in Salem, on the Flat Rock brook branch of the Spicket, at a cost of approximately $6,000, and providing about 50,000,000 gallons of storage. Late in 1918, the company began an investigation by competent experts of available reservoir sites on the Spicket river for the purpose of securing a dependable flow of water for its mill process use. This investigation covered a period of at least a year and a half, at the end of which there was selected what is known as the Wheeler reservoir. This site was selected, after mature consideration, as being at once the most economical and the most satisfactory. The plaintiff had no competition from any other prospective user in acquiring this storage.
"Real estate was acquired, the purchase price of which was $163,543. This real estate was purchased by the company after notice at a public meeting by the company's agent that the company proposed to purchase land in the neighborhood of the Wheeler site, and that it was ready and willing to pay the price necessary to obtain it. This land was purchased mostly in 1920 and 1921. Some of the land purchased was not necessary for the reservoir use, but was obtained as a part of other land and rights owned by various people which was necessary for reservoir use. The construction of the Wheeler reservoir was commenced in 1921 and finished in December, 1922. The reservoir was filled in the spring of 1923. The main contract for the construction was $222,070, from which should be deducted $32, 195 for the construction of a new highway, leaving $189,875. In addition to the cost of the land and the contract price for the construction, there is properly chargeable to the project $14,335 for engineering fees, $8,148.50 for real estate agents' commissions, and $18,269 for miscellaneous expenses in improvement of the site up to April 1, 1923, making a total cost, exclusive of the land and water rights, to April 1, 1923, of $230,627.50.
"I rule as a matter of law that interest on these expenditures, as claimed by the defendant, * * * should not be chargeable to the cost, nor should $10,000 engineering expenses in making the preliminary investigations, nor should $7,500 legal expenses for examining titles, procuring desired action at town meeting, etc., nor should the abovementioned sum of $32, 195 for the construction of a portion of a new highway to take the place of a highway which traversed a portion of the reservoir site, nor should $1,200 for moving electric fight poles from the old highway to the new. I find that these items, while they are not strictly cost items, and therefore a part of what might be called the purchase price, are nevertheless expenditures which, in acquiring and constructing the reservoir property, the company anticipated would have to be made; that it was willing to make them to acquire the property, and are therefore evidence of its belief that the value of the property when acquired was at least equal to its actual cost, and they have been so considered. The reservoir completed provides at the top of the dam, an elevation of 160 feet, for approximately 1,000,000,000 gallons of storage. The capacity can be increased safely by placing flashboards on the dam, raising the elevation to 163 feet, by which there would be obtained approximately 300,000,000 gallons additional storage. Such an increased elevation would require the use of the land to a maximum of a 170-foot level, which is as far as it would be safe to go.
"The combined storage of the Island Pond, Taylor, Millville, and Wheeler properties is at least 2,000,000,000 gallons, the minimum supply sought by the company when it embarked on the project. It built what it intended to build, according to its needs, under expert advice, and there was no overdevelopment, nor was there any waste or extravagance. If these various reservoirs in Salem have any value for power purposes, the use for that purpose is not their most valuable use, and I rule as a matter of law that the property should be valued on the basis of the most valuable use to which it can be adapted.
"The Hittit property I find to have been practically abandoned, largely because of certain controversies with riparian owners over the water rights.
"The Taylor property has some slight value for storage purposes for process water, but its valuable use lies in its control of the site which it occupies to protect the storage in Wheeler reservoir, and is a necessary part of the storage project.
"The Millville reservoir, while not as valuable since the construction of the Wheeler reservoir as it was prior thereto, is a valuable property, has been actually used by the company since the construction of Wheeler, and may be found reasonably to be a necessary part of the whole project in the town of Salem.
"The Wheeler reservoir is by far the most important property in the storage project, but in-arriving at a valuation of this reservoir, as of the others, I have considered the whole storage situation together. The purpose which the company had in acquiring and constructing these properties, and the effect thereof, is to insure the company a dependable and continuous sufficient supply of water for process use in its mills in Lawrence at every season of the year, under all conditions of business reasonably to be anticipated, which at least the present construction of those mills might demand, which it might otherwise lack. Such lack may exist because of insufficient rainfall, or an insufficient or unequal distribution of rainfall throughout the year, or because of normal or abnormal insufficient flow of the Spicket river, or because of demands for water by reason of stability of demands for production, or by demands for increased production, or by legal interference with the flow by the Methuen Company, which operates a mill on the Spicket in Methuen, two or three miles upstream from the plaintiff's mill, or because of its disposition of some of its supply to the adjacent Acadia Mill by contract, or because of demands made upon the mill for water to flush the stream below the mill, or because of insufficiency in the capacity of the plaintiff's mill pond in Lawrence, or because of a combination of any or all of these circumstances.
"In other words, the project was intended to be and is reasonably sufficient to act as insurance to the plaintiff that it will overcome existing obstacles and those which may reasonably be anticipated to arise, and enable the plaintiff to conduct its business without interference so far as its need for process water is concerned. The property and property rights, the tax on which is in question in this case, are all in the town of Salem. The actual physical regulation of the stored water is in the town of Salem. The actual flow of the water from the reservoir to the plaintiff's mill is in the natural channel of the Spicket river. The actual use of the...
