some checks. We know that the ordinary commission on stock transactions is one eighth of one per cent. Six per cent, is considered a fair return on investments free from unusual risk. Here, then, are upper and lower limits that may be considered reasonable for underwriting and promoting. The excessive commissions occasionally taken in promoting industrials are certainly unwarranted and should no longer be allowed. In valuating past performances of this kind, and allowing for due risks in the original scheme, it is doubtful if a greater promotion charge should be recognized than would be just and fair to-day. The fairness of this will further appear when we consider deficits and their place in valuation for rate-making purposes.
There is little or no dispute over the valuation of large single elements of the properties until we come to land. Here we meet the first troublesome detail of the subject. The question of land values has puzzled almost every commission to whom has been assigned the physical valuation of utilities. The chief point in dispute is the place of unearned increment. There is no doubt that the actual cost to the company of the land that had to be taken should be allowed. If the cost is a matter of record, it should be taken. This cost should include the necessary severance, damage, transfer and legal charges connected with taking the land. In most cases the records do not exist, and an approximation is resorted to involving the use of a factor to be applied to the present market price of adjacent land. In any case, however, the principle to be followed prescribes that the actual net cost of acquiring the land at the time it was purchased shall be approximated as nearly as may be. To this nothing should be added to represent the increased value since acquisition. This statement is most vigorously combatted by some, but its justice and fairness will, I believe, be made apparent.
The principal argument to support the inclusion of the unearned increment is that the public service corporation should not be denied advantages that flow to all the surrounding land holders. If a valuation were being made for sale, taxation or rental purposes, the inclusion of the increment would be right. But a valuation for rate making should not include it. In the first place, it is only a potential value. A homesteader can not live on his land, develop and use it, and at the same time realize a return on its unearned increment. He has to sell or rent to secure the advantage of it. If a utilities corporation chooses to rent or sell, it doubtless is entitled to take advantage of the unearned increment, if it can find a purchaser on such terms. Further, the unearned increment of the land does not represent an investment of the producer but of the user. The increment arises from the development of the land contributory to the railroad. It is greatest in sections where the development is greatest. It is in essence a contribution of the community. The community is nothing more nor less than the user in an aggregated
