Lincoln Gas Electric Light Company v. City of Lincoln
| Decision Date | 19 February 1912 |
| Docket Number | No. 83,83 |
| Citation | 32 S.Ct. 271,56 L.Ed. 466,223 U.S. 349 |
| Parties | LINCOLN GAS & ELECTRIC LIGHT COMPANY, Appt., v. CITY OF LINCOLN et al |
| Court | U.S. Supreme Court |
Messrs Halleck F. Rose, Charles A. Frueauff, Edmund C. Strode, and John F. Stout for appellant.
[Argument of Counsel from pages 350-353 intentionally omitted] Messrs. Fred C. Foster and William M. Morning for appellees.
[Argument of Counsel from pages 353-356 intentionally omitted] Mr. Justice Lurton delivered the opinion of the court:
This case involves the validity of an ordinance regulating the appellant's charges for gas furnished to consumers, and forbidding a charge in excess of $1 per thousand feet. The bill assailed the rate as confiscatory, and therefore a taking of property without compensation. The ordinance rests upon legislative power to regulate the charges of such public-service companies.
The sufficiency of the price prescribed to produce a fair profit upon the value of the property employed in the business is to be strongly presumed. The burden of showing its confiscatory character rests, therefore, upon the complaining company.
The court below, upon a final hearing, held that the appellant had not made out its case, and dismissed the bill, with leave to renew the litigation if, upon actual operation under the ordinance, the returns upon its business should not prove reasonably remunerative. The ordinance was never put in force. Within a few days after it went into effect this bill was filed and an injunction, pendente lite, granted, which was continued in force down to the final decree, and when this appeal was allowed, was, by order of the court allowing it, continued pending the appeal, under a bond conditioned to account for all overcharges if the ordinance should be sustained.
The case was not referred to a master, as is the usual course in such cases, although there was a great mass of conflicting evidence relating to the value of the plant, cost of operation, and gross and net income. Neither did the court make specific findings of fact to which specific objection could be made. Such facts as may be said to constitute 'findings of fact' appear in the way of large conclusions in the course of the opinion found in the record.
In this, as in every other legislative rate case, there are presented three questions of prime importance: First, the present reasonable value of the company's plant engaged in the regulated business; second, what will be the probable effect of the reduced rate upon the future net income from the property engaged in serving the public; and, third, in ascertaining the probable net income under the reduced rates prescribed, what deduction, if any, should be made from the gross receipts as a fund to preserve the property from future depreciation.
The valuation fixed by the court is the main point of attack. That the company is entitled to a fair return upon the value of the property at the time of the inquiry is the rule. San Diego Land & Town Co. v. Jasper, 189 U. S. 442, 47 L. ed. 894, 23 Sup. Ct. Rep. 571.
The court, as one means of finding the present value of the gas-making plant, found that the present cost of replacing it would be $566,073.59. The items which enter into this valuation, and the reason for reaching this result, as stated in the opinion, are shown by the paragraphs here set out:
'In determining for what amount the plant could be reconstructed, I have accepted in the main the testimony of complainant's witnesses as being the most satisfactory, and I find that the plant could be reconstructed for the following sums:
Coal gas apparatus...... $ 80,605.00
Water gas apparatus....... 29,278.00
Mains in dirt streets..... 90,578.00
Mains in paved streets... 130,027.00
Gas services, etc........ 107,106.82
Gas meters in use......... 36,282.90
Meter connections.......... 6,304.00
Piping for gas ranges..... 16,500.00
---------
$496,681.72
Engineering expenses (2 1/2
per cent)................ 12,417.04
Real estate................ 4,000.00
Present value of buildings. 24,643.00
Contingent expenses in
construction............. 25,000.00
Cost of organizing company. 3,000.00
---------
$565,741.76
'While it is true that the testimony shows that the complainant has not such working capital, but has purchased upon credit the supplies necessary to operate, yet I think that, in determining what is a reasonable compensation, a working capital should be considered.'
But the appellant does not accept the valuation thus fixed. It contends that there should be added to that the following:
Steam boiler for water gas.................... $ 2,225.00
Underestimate of present value
of buildings.................................. 10,000.00
Underestimate of working
capital....................................... 10,000.00
Underestimate of meter
connections.................................... 6,102.00
Underestimate contingent
expenses of construction...................... 37,500.00
Interest on idle capital during
construction.................................. 40,000.00
Promotion of business, or going
value and franchise, as
elements in replacing value.................. $10,000.00
---------
205,852.00
Add court's valuation......................... 566,073.59
---------
$771,825.59
The appellee, on the other hand, in support of the general decree dismissing the bill, joins issue upon each of these items, and insists that if the court shall see fit to go into the evidence, it will find that the plant has been greatly overvalued. It particularly objects to the large item of $107,000 for gas service, and to the item of $50,000 added to the value of the property as 'working capital,' and says that the incorrectness of this is seen in the admission that the appellant has in fact no such working capital engaged in the business. Appellee further contends that the 'expense of operation' in 1907 includes reconstruction or replacement work, and that such items enlarge the operating expenses of that year unduly and correspondingly reduce the net income. If the expense of operating the plant for that year is to be accepted as the standard by which the operating expenses of future years are to be estimated, the objection is serious if the...
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