Stevens, J.
These are cross appeals by Port Authority Trans-Hudson Corporation (PATH) and claimants Hudson and Manhattan Corporation (H & M) and Hudson Rapid Tubes Corporation (HRT) from the final decree entered June 13,1966, in a condemnation proceeding making awards for the Hudson Tubes Railroad and the Hudson Terminal Office Buildings, title to which vested in PATH. H & M is the fee owner of twin 22-story office buildings located at 30 and 50 Church Street, Borough of Manhattan. Special Term awarded $17,996,000 for the buildings based on a capitalization of projected net income. With that we are in accord and the award therefor is affirmed. Remaining for determination is the award to be made for the railroad, and what interest rate should govern.
Originally the Hudson & Manhattan Railroad Company (Company) owned and operated the realty owned by H & M and also the railroad owned and operated by HRT at the time of taking. Reorganization resulted in two separate corporations. Company continued its corporate existence as H & M, with HRT as a subsidiary. HRT became the owner of the damage parcels which constituted the railroad with the exception of three rights of passage and easement of which H & M was the record owner and HRT had the beneficial use. PATH took possession of this property September 1, 1962 by condemnation. Special Term awarded $55,000,000 for the railroad on the theory that its original cost should govern the determination of value. The original cost was $62,000,000. Special Term concluded that the tunnels represented approximately 50% of the value of the railroad and allowed the sum of $30,000,000 for the tunnels, $20,000,000 for the depreciated value of the remainder of the railroad property, plus $5,000,000 or 10% representing the going concern value. It was stipulated that approximately 65% of the railroad property was located in New Jersey. On such property the court alloAved interest at 6% and on the railroad property located within the State of New York Special Term allowed 4% interest.
The claimants urge that the award for the Church Street property was inadequate, the award for the railroad was inadequate, and the interest allowed on such awards is inadequate. PATH on the other hand contends that the award for the railroad is grossly excessive and that the interest on any award should be a uniform 4%. PATH urges that the award should not exceed the liquidation value of the railroad which it approximates at $3,500,000.
[36]*36HRT urged and urges that the award for the railroad should be based upon reproduction cost less depreciation. More precisely, HRT offered testimony that the present-day cost of constructing the railroad properties would be $521,763,469 and that the reproduction cost less depreciation on the basis of trended original cost would be $447,595,589. Using the unit price .method of estimating reproduction, HRT offered testimony that the present-day cost would be $563,168,028 and that such cost less depreciation would be $488,462,153. These cost figures were based upon testimony given by members of the firm of Ford Bacon and Davis. HRT on appeal urges that the award should be increased to $127,400,000 for the railroad. It reaches this figure by averaging the lowest estimate in the record of reproduction cost less depreciation, $447,600,000 and the original cost of $62,000,000 which make a total of $509,600,000. This figure is divided by two and the resulting figure of $254,800,000 halved, which amounts to $127,400,000. The difficulty with that approach is that it is founded on no sound basis and consequently must be rejected. Thus it will be seen that PATH’S approach of liquidation value and the claimants’ approach of reproduction cost less depreciation and the original cost trended less depreciation are diametrically opposed.
When private property is taken for a public use, as occurred here, the law requires that just compensation be paid (N. Y. Const., art. I, § 7, subd. [a]; N. J. Const., art. 1, par. 20; U. S. Const., 5th and 14th Amdts.). When the Port of New York Authority, the parent body of PATH, was created, it was envisaged that it might be necessary or convenient for it from time to time to acquire real property or other property. More particularly the States of New York and New Jersey authorized in 1961 the development of a World Trade Center by the Port of New York Authority. They found, inter alia, “ (2) that in order to preserve the northern New Jersey-New York metropolitan area from economic deterioration, adequate facilities for the transportation of commuters must be provided, preserved and maintained and that rail services are and will remain of extreme importance to such transportation of persons; (3) that the interurban electric railway now or heretofore operated by the Hudson and Manhattan railroad is an essential railroad company facility serving the northern New Jersey-New York metropolitan area; that its physical plant is in a severely deteriorated condition; and that it is in extreme financial condition; (4) that the immediate need for the maintenance and development of adequate railroad facilities for the transportation of persons between northern New Jersey and New York would be met by the [37]*37acquisition, rehabilitation and operation of the said Hudson & Manhattan interurban electric railway by. a public agency, and improvement and extensions of the rail transit lines of said railway to permit transfer of its passengers to and from other transportation facilities and in the provision of transfer facilities at the points of such transfers (L. 1962, ch. 209; N. J. Laws 1962, ch. 8; see N. J. Stat. Ann., §§ 32 :1-35.50-32.1-35.68 approved Feb. 8,1962; see, also, L. 1961, ch. 312, for earlier legislative findings). However, it was specifically provided in connection with the condemnation of property that ‘ ‘ the owner of any property acquired by condemnation or the exercise of the right of eminent domain for any of the purposes of this act shall not be awarded for such property any increment above the just compensation required by the constitutions of the United States and of the state or states in which the property is located by reason of any circumstances whatsoever ” (L. 1961, ch. 312, § 14). The law, both constitutional and statutory, requires that just compensation, and no more than just compensation be paid. In determining what constitutes just compensation several methods of approach are possible. A brief consideration of some of them will determine whether they are feasible or conducive to the desired result.
PATH acquired by eminent domain on September 1, 1962, a railroad which had undergone reorganization as a result of a petition filed August 11, 1954, by three of the railroad’s bondholders. The reorganization was terminated December 31,1961, and title was taken by PATH less than- one year later.
The Hudson and Manhattan Railroad Company (predecessor of HRT and H & M) admittedly was unable to meet its debts as they matured. In reaffirming approval of the petition for reorganization it was noted that assets available to meet the debts fell far short of the sums required, and prospects for the future were dismal (Matter of Hudson & Manhattan R. R. Co., 138 F. Supp. 195 [1955]). Insofar as the actual railroad operation was concerned, the railroad had failed to earn its interest and expenses for several years. The rolling stock was old, in some instances in a hazardous condition, most of the cars having been acquired between 1909 and 1911, the most recent being 20 cars acquired in 1928. In its opinion the court (Walsh, J.) stated there was no possibility of avoiding a default on bonds due February 1, 1957 (approximately $46,339,404.62). A property amortization fund, established as required by the terms of the mortgage indentures, had been totally exhausted in 1952, and only a small part of the fund had ever been used for the intended purpose. Additionaly, there was a combined deficit of $818,857.55 comprising $406,542.55, the deficit of current liabilities, plus [38]*38$358,295 representing the minimum program of authorized expenditures to maintain and permit safe .operation of the railroad. The reorganization plan proposed by the trustee in bankruptcy was submitted by the District Court, Southern District, to the Securities and Exchange Commission (SEC) for examination and report. The advisory report of the SEC thereon (38 S. E. C. Rep. 676 [1958]) approved the proposed plan with suggested minor modifications. The report discussed the continuous decline in passenger commuter traffic and noted even though fare increases had been obtained from time to time, resulting in increased operating revenues, operating expenses had increased also. Such expenses “ tended to reduce the margin of operating income, leaving the Debtor with operating deficits in each year for the period 1949-1957, with the exception of 1950 and 1952 ” (p. 702). The SEC report referred to a March 17, 1958 opinion report of Ford, Bacon and Davis (the same firm which testified as to reproduction costs for claimant on the trial herein appealed from) which placed a. value for liquidation purposes of “ $1,278,200 on the tangible railroad properties and of $525,000 on the tunnels, or a combined value of $1,803,200” (p. 707). Parenthetically, this report and a later report of Ford, Bacon and Davis dated March 17,1960, both submitted to the trustee at his request, were .excluded from evidence on the trial in this case. This was error for reasons hereinafter stated. Reference was made to $1,700,000 spent for the purchase of 20 new railroad cars, and the fact that $500,000 cash would be provided by the Company for the working needs of HRT. The SEC report concluded the over-all valuation of the assets to be acquired by HRT amounted to $3,500,000.
In a proceeding commenced in 1959, in the United States District Court, Southern District, for approval of the plan of reorganization proposed by the trustee in bankruptcy, the court (Dawson, J.) found .the debtor insolvent and approved the plan for reorganization (Matter of Hudson & Manhattan R. R. Co., 174 F. Supp. 148, affd. sub nom. Spitzer v. Stichman, 278 F. 2d 402). The court found “ the value of the assets to be acquired by the Railroad Company under present and reasonably foreseeable circumstances, apart from the potential values that might be realized upon a sale of the railroad to a public agency, is not in excess of $3,500,000, and that the amount that could be realized in the event of such a sale is no more than $40,000,000 ” (p. 166). The reorganization Avas terminated December 31, 1961.
In the condemnation hearings evidence of reproduction cost, less depreciation, and of original cost ($62,000,000) trended upwards, was offered by claimant HRT. Baldin, vice-president [39]*39of Ford, Bacon and Davis, and “ group seniors” from that firm’s staff testified as to estimates of reproduction cost new and less depreciation as of September 1, 1962. While subjecting Baldin to cross-examination PATH’S counsel sought to introduce in evidence portions of a document dated March 17,1960, entitled “ Beport, Present Value of the Bailroad Properties of Hudson & Manhattan Bailroad Company ’ ’, and to question Baldin thereon. The document had been prepared by Ford, Bacon and Davis at the request of the trustee in reorganization and submitted to him. Objections to the offer and to certain questions with respect thereto were sustained. Similar treatment was accorded a salvage report of the railroad, dated February 28, 1958, also prepared by Ford, Bacon and Davis at the request of the trustee, submitted to him, and the substance of which, if not the actual report, had been before the SBC and the Federal court. Certain questions with respect to the report were not permitted. The trustee at the time he requested and obtained the reports was under the supervision of the court and acted for and in place of the then debtor in reorganization (see U. S. Code, tit. 11, § 110). Exclusion of the reports and the undue circumscribing of cross-examination with respect thereto, as well as certain questions seeking to elicit whether Baldin considered certain factors in reaching stated conclusions, were errors. Having expressed certain opinions, inquiry should have been permitted as to data and factors considered in reaching such conclusions (United States v. Ham, 187 F. 2d 265; 3 Wigmore, Evidence [3d ed.], § 992). The reports were relevant to the issue before the court which was to determine the value of the properties. The testimony of the witness and the reproduction cost estimate reports were so inconsistent with the earlier reports submitted by the firm that cross-examination should have been permitted to impeach the credibility of the witness (Civ. Prac. Act, § 343-a, now CPLR 4514; Matter of City of New York [BrooklynBridge], 50 Misc 2d 478, 480; Larkin v. Nassau Elec. R. R. Co., 205 N. Y. 267; Kesten v. Forbes, 273 App. Div. 646).
The excluded reports also tended to prove facts differing from those asserted at the trial. If the views of the witness, Baldin, and the substance of the reports varied with the necessities of the case that could properly have been shown (Brooks v. Rochester Ry. Co., 156 N. Y. 244, 250). The reports could also have been received as admissions against interest. Certainly such reports contributed to the position which the claimant was attempting to prove in this proceeding. Not only had the trustee ordered and 'accepted the reports, but actual use had been made of the 1960 report in seeking State tax adjustments. It is clear [40]*40also that the 1958 report was adopted and utilized by the railroad company in the court proceedings (cf. People v. Burgess, 244 N. Y. 472; see 4 Wigmore, Evidence [3d ed.], § 1048 et seq., § 1073). Moreover, as admissions of value by the owner and the prospective amount of damages to be suffered made reasonably near the time of taking, the reports should have been allowed in evidence (18 Am. Jur., Eminent Domain, § 349; 20 Am. Jur., Evidence, § 583; Sparkill Realty Corp. v. State of New York, 254 App. Div. 78, 82, affd. 279 N. Y. 656; cf. United States v. Toronto Nav. Co., 338 U. S. 396). Since it is concluded the exclusion of the reports was error, they are hereinafter considered as received in evidence and reference to their contents will be made as necessary or deemed advisable.
Market Value
The approach frequently used in determining value of property taken by eminent domain is to try to ascertain its market value. As here used this should be construed to mean the price at which an owner could have sold the property to another if the property were not taken, or ‘ ‘ the sum of money a willing purchaser # * would pay and a willing seller would accept ” (Sparkill Realty Corp. v. State of New York, 254 App. Div. 78, 82, affd. 279 N. Y. 656). “ In order to arrive at an estimate of the fair market value of the property in question all those things which would be considered by a buyer and a seller, neither under compulsion, neither having an advantage over the other, must be taken into consideration by a witness competent to assemble, weigh and translate them into dollars and cents. All the facts and circumstances which a buyer and seller would consider in connection with the purchase and sale of a piece of property are relevant and material in arriving at a determination as to its market value ” (p. 82). The foregoing illustrates also a further reason why the excluded reports should have been admitted into evidence.
The difficulty in evaluating this property in terms of market value in the conventional sense, is that properties of this sort are in a sense unique and are rarely if ever bought and sold in the open market. Since the operation of the railroad, financially, was a losing proposition, any attempt to capitalize earnings as an element for consideration in order to fix a price is equally unsatisfactory. Such a method provides an alternative to market value. Past earnings would be especially significant if they tended to reflect possible future profitable operation, or if such earnings were the result of an artificial or forced restriction (cf. Matter of City of New York [5th Ave. Coach Lines], 18 N Y [41]*412d 212). The evidence indicated that the railroad was incapable of profitable operation. Under such circumstances the concept of a willing buyer in an open market must be discarded. Ordinarily no one will buy an unprofitable venture especially where, as here, there is a prospective inability to compete successfully against other available modes of transportation.
The Substitute Facility Doctrine
This doctrine has developed as an alternative to the market value rule. Courts have developed the doctrine “ [T]o meet the unique needs of public condemnees; damages will be awarded sufficient to finance a replacement ’ ’. It is also applied when there is no ready market for certain public facilities, when market value is inappropriate, or when “ the public property has a market value, [b]ut that standard is inadequate ” (Just Compensation and the Public Condemnee, 75 Yale L. J. 1053). It is pointed out, however, that the rule as to damages sufficient to finance a replacement is qualified ‘ ‘ by holding it is applicable only if a replacement is 1 necéssary.’ Some courts have demanded in addition that the necessity be ‘ legally compelled ’, and have granted compensation to replace only those facilities which the state or municipality was legally obligated to provide ” (ibid.). Sometimes the doctrine is defined to mean the obligation ‘ ‘ to provide such substitute facilities as are 1 necessary ’ to carry out the public function served by the condemned porperty ” (United States v. Certain Land in Borough of Brooklyn, 346 F. 2d 690, 695). Where there is no compulsion by law, and there is none in the case on appeal (though the facility is termed “essential”), whether the facility is “necessary” becomes a fact question. Implicit in the term “necessary” under these circumstances, is some possible recognition of social needs and values.
If there were no tubes available would it be necessary to replace them with a substantially similar facility in order to absorb the flow of passenger traffic carried by it between the States of New York and New Jersey? I think not. In the peak hours of early morning traffic HUT carries approximately 20 to 22% of such traffic. This is for a relatively short period. Thereafter much of the equipment remains idle until the next peak period. From 1948 when approximately 27.7% of commuter passenger traffic was carried, to 1964 when approximately 11.4% overall was carried, there is a decline of approximately 60%. Ferries and other railroads have also shown a substantial decline and the financial condition of some of the railroads which serve as feeder lines to HUT is poor. Other modes of transpon[42]*42tation, such as buses and automobiles, have shown a substantial increase. The use of the tunnels (Lincoln, Holland) and the bridges (George Washington and others) has increased. Each new tube addition for automobile and bus traffic was followed by a decline in passenger traffic carried by PIRT and its predecessor. Hudson County, New Jersey, which supplies 45% of claimant’s commuter traffic, has shown a population decline in recent years. A 20-25 year projection of population growth in the area serviced, of job opportunities, of the development of residential urban and suburban areas, of industrial complexes, highway construction and possible and probable expansion of existing facilities lead to the conclusion that replacement is not necessary. In fact, but for condemnation, this enterprise in all likelihood in the near future, would have died of malnutrition. Moreover, to make an award on the theory of a substitute facility would far exceed the just compensation required by law. It would mean the award of a sum sufficient to pay for the cost of acquiring an acceptable substitute property. It might be noted whether or not one agrees with the conclusion as to necessity, an award .premised upon the substitute facility doctrine, is likely to represent a negation of the fundamental principle of what the owner has lost, and be based instead upon what the condemnor has gained.
Reproduction Cost
This is the basis, somewhat modified, on which claimant seeks compensation. Reproduction cost, new and with depreciation, was offered as evidence of some indicia of the present value of the property. Obviously, at most, such cost would set the upper limit of valuation. Here the original cost was also trended upwards by applying to it a trend factor to bring the various included costs up to 1962. The original cost was so remote in time it is questionable if it is of real value here. (See Kinter v. United States, 156 F. 2d 5; 1 Bonbright, Valuation of Property, p. 144 et seq.) The hypothesis in using reproduction cost is that the identical plant is to be reproduced, and that present value equals reproduction cost new less actual depreciation. In property of this nature that includes both physical and functional depreciation. (See 2 Orgel, Valuation Under Eminent Domain [2d ed.], § 206 et seq.) In order for reproduction cost to have validity as evidence of value, it should be shown that the property would reasonably be expected to be reproduced (Matter of City of New York [Lincoln Sq. Slum Clearance Project—Maxwell), 15 A D 2d 153, affd. 12 N Y 2d 1086; affd. also sub nom. Matter of City of New York [Lincoln Sq. Slum Clearance Proj[43]*43ect — Schnurmacher Corp.], 16 N Y 2d 497). It should be shown also that reproduction at such cost figure represents a reasonable commercial investment (see Spitzer v. Stichman, 278 F. 2d 402, 410). “ Reproduction costs must be on the basis of the plant as existing at the time of the appropriation and not upon a supposititious value based upon the construction of a new plant and what it would produce.” (19 N. Y. Jur., Eminent Domain, § 237; cf. Matter of Board of Water Supply, 121 Misc. 204.) Here the taking is of an entire business enterprise shown to bo unprofitable. Operating income less operating expenses, plus depreciation, resulted in a constant deficit. Obviously, this is not such a good commercial investment as to provide an incentive for investment and reproduction. Since there was no reasonable showing this property could be reproduced as a good commercial investment this approach was unsound (United States v. Boston, Cape Cod & New York Canal Co., 271 F. 877 [1st Cir., 1921]). Evidence of cost reproduction by testimony of cost reproduction studies, if at all relevant, was of little value here. Conditions precedent to its application were not shown. At most and under proper conditions reproduction cost less depreciation would not have been conclusive but only a factor to be considered (Matter of Huie, 2 N Y 2d 168). Evidence of losses and expenses since condemnation, if permitted, would have been relevant in the issue of possible future profitable operation, a factor which could have influenced buyer incentive (cf. Matter of City of New York [East 42nd St. El. R. R.], 365 N. Y. 170, affd. sub nom. Roberts v. City of New York, 295 U. S. 264).
Valuation of units or elements by reproduction-cost estimates and totaling the resulting figures to reach an amount represented as reproduction cost for the whole, resulted here in a gross overvaluation. ” The replacement-cost method is theoretically applicable to the valuation of an entire physical plant whenever the plant, were it to be totally destroyed, would be worth replacing.” (1 Bonbright, Valuation of Property, p. 171.) If it were not to be replaced by a substantially identical property, “ the hypothesis that the value of the existing property is derivable from the current cost of constructing or buying a substantially identical property is always invalid ” (ibid, p. 163). The construction utilized here, with particular reference to the tunnels, would not be used today . These tunnels are much smaller in diameter than other commercial tunnels since constructed in the area, and are not readily adaptable, if at all, to modern improvements to meet present-day needs in order to make the enterprise a profitable one.
[44]*44
Just Compensation
In addition to the approaches heretofore mentioned, the securities valuation approach, the capitalization method, and consideration of cash throw-off are also sometimes utilized. Since neither of these methods is being discussed extensively, a brief reference to each is being made under the above general heading.
The term represents the constitutional and statutory mandate for indemnification of the condemnee. The property is to be valued as of the time of the taking.
“ The question is what has the owner lost, not what has the taker gained.” (Boston Chamber of Commerce v. Boston, 217 U. S. 189, 195; Roberts v. New York City, 295 U. S. 264, 282; Ringwood Co. v. North Jersey Dist. Water Supply Comm., 105 N. J. L. 165, 169.) “ What the owner is entitled to is the value of the property taken, and that means what it fairly may be believed that a purchaser in fair market conditions would have given for it in fact—not what a tribunal at a later date may think a purchaser would have been wise to give, nor a proportion of the advance due to its union with other lots.” (New York v. Sage, 239 U. S. 57, 61.) Since there was no ready market, or indeed any market for the subject property, market value in the ordinary sense cannot be used as a criteria of evaluation. But the basic principle of compensation to the owner to make him pecuniarily whole should control (Village of St. Johnsville v. Smith, 184 N. Y. 341; St. Agnes Cemetery v. State of New York, 3 N Y 2d 37, 41).
There was testimony (using the securities valuation approach) that the market value of the property actually condemned (including the Church Street property), with certain allowances deducted, was $16,997,782. The market evaluation of the railroad under such approach was $3,802,000. In this case, because of the relative inactivity of the stock for a period of time and the market fluctuations attendant upon prospective condemnation announcements, such an approach is less than satisfactory. (See, also, 1 Bonbright, Valuation of Property, p. 245 et seq.; 2 Orgel, Valuation Under Eminent Domain [2d ed.], § 220.)
There was testimony the railroad showed a constant deficit in both net income and operating income in the years prior to the take-over. Capitalization of realized earnings, or even of annual earnings reasonably anticipated (prospective income) while relevant and a proper consideration, is not a suitable criterion here. The earnings, less fixed charges, operating expenses and depreciation resulted, invariably, in railroad deficits. The realty, now owned by H & M, had to carry the [45]*45burden. Utilizing any reasonable rate to capitalize a deficit would not change this picture (cf. Onondaga County Water Auth. v. New York Water Serv. Corp., 285 App. Div. 655). When prospective income is used as a factor in capitalization there is an element of pure speculation involved. If the earnings can be reasonably anticipated the speculative factor is minimized but not eliminated. Certain extraneous factors such as business skill and proper management remain. When the past record is one of deficit operation there is little to capitalize unless an artificial condition is created by nonrecognition of essential, or important factors.
There was testimony on behalf of claimant of cash throw-off (exclusive of capital expenses and construction) for the years 1958-1961 inclusive of $241,000, $101,000, $80,000 and $117,000 respectively, for the railroad. Cash throw-off as there used eliminated amortization and depreciation. Since operating losses existed for each of the years, the cash flow figures presumably consisted of net profit, or deficit, plus items not requiring cash outlays in the particular years, but which items were charged to operations. The figures apparently included concourse rentals as revenue, offset to some extent by expense items. The source property was transferred to H & M in the reorganization and is no longer available to HBT. The cash throw-off figures here are of doubtful value and somewhat unrealistic. If fixed obligations are not met and proper maintenance and replacement of physical properties when needed, not observed, disaster may be postponed but it is inevitable. The whole operation will eventually collapse.
Using some of the same data, for like periods, as shown in claimant’s exhibit indicating cash throw-off, but including amortization, at least for 1958 and 1959, PATH offered testimony of present value as of August 31, 1962 of $1,209,134. That figure represented the witnesses’ view of what a purchaser would pay assuming the railroad operating earnings, before depreciation, could be expected to continue for 15 years,. without equipment replacement with an interest rate of 12%.
Returning to the principle deemed applicable here, i.e., what has the owner lost for which it should be compensated, we consider the rounded figure of $1,700,000, the cost of 20 new railroad cars. The takeover, in point of time, followed so shortly upon the acquisition that the full amount should be allowed. The cars should be readily salable, commercially, and there is little reason not to allow full value. Five hundred thousand dollars (a part of which was derived from realty funds) was given HRT to cover certain estimated operating [46]*46expenses. This also should be allowed as a full item, resulting in a total of $2,200,000. The further question is what should be allowed for salvage value for the other properties.
There was testimony by PATH’S expert that the highest and best use of the railroad as of September 1,1962, was to liquidate the property. His opinion was based upon the conclusion that continued operation as a private enterprise would result in continued monetary loss. His estimate based on the foregoing was approximately $1,022,000.
The principle enunciated in Matter of City of New York (East 42nd St. El. R. R.) (265 N. Y. 170, affd. sub nom. Roberts v. City of New York, 295 U. S. 264) is relevant here. In that case it was shown that an elevated railroad was incapable of profitable operations. The court held, where such is shown, that only scrap or salvage value should be allowed for its structures. Reference has already been made to allowance which should be given for the cash advance made to HRT and for the purchase of the new cars. It follows that something more than salvage value is warranted. Liquidation value becomes market value in the broad sense and is the standard properly applicable.
Claimant relied heavily upon the reproduction cost estimates prepared by Ford, Bacon & Davis as indicia of value of the railroad at the time of taking.' This same company in 1958 and 1960 had prepared and submitted to the trustee in reorganization reports widely and substantially at variance with its reports and testimony in the present case. The contention that such reports were prepared in different proceedings and for a different purpose, and consequently could not be utilized or considered in this proceeding for any purpose, must be rejected. Either the reports were honest and accurate as to the facts therein stated, and honest and sincere in the opinions reflected, as of the time of submission, or they were not. A like observation might be made as to the reports submitted in this proceeding. From our early discussion of the prior reports it is apparent that the reports of March 17, 1958 and March 17, 1960 were properly admissible, (1) not as proof of their contents, but for purposes of impeachment as affecting the credibility of its authors (Matter of City of New York, 50 Misc 2d 478, 480); (2) such reports should have been received in evidence for other purposes as well because of the circumstances under which they came into being (earlier adverted to) and because they were adopted and used by the trustee in reliance upon their contents and the opinions expressed therein.
The opinion expressed in the letter of Ford, Bacon and Davis dated March 17, 1958, addressed to the trustee, was that the [47]*47maximum value of the “ companies tangible railroad properties at February 28, 1958 ” was $1,278,200. To this figure, in their view, there could possibly be added a figure of $525,000, estimated economic value for continued tunnel cable usage by the telephone companies based on then current rentals.
The letter dated March 17, 1960, and accompanying report to the trustee, expressed an opinion of Ford, Bacon & Davis of an increased salvage value. The items, the basis for the opinion, were enumerated and their estimated values stated. The 20 new cars represented an added factor of value. Their opinion of total salvage value from liquidation was $2,573,800.
Ford, Bacon & Davis went further in their analysis of the situation, and expressed the view that the salvage value represented a minimum value because the public would not permit a cessation of operations and liquidations, and that the railroad’s value depended upon the price it could command in a sale to a public authority. Proceeding on certain stated assumptions and probabilities, chief of which was sale to a public authority, it was the opinion of Ford, Bacon & Davis that the ‘ ‘ present value of the H & M railroad properties, as an operating enterprise, is $8,000,000.”
No satisfactory explanation appears in the record for the difference between the figures above quoted and the indicia of value testimony on reproduction estimates, as indicative of the value of the railroad.
The figure of $525,000 (economic value based on continued cable rental use) should not be added to the $2,200,000 (new cars and cash advance). It was uncertain and contingent. The testimony at trial with reference to value at the time of taking ranged, depending upon the circumstances, from slightly above $1,000,000 ($1,022,000 liquidation value) to a figure of $1,290,134 as value deferred liquidation, plus $182,000 representing present value estimated at the end of 15 years.
Here the owner of the railroad properties was relieved of the burden of continued operation of an unprofitable enterprise. Such enterprise had lately, shortly prior to takeover, been adjudged insolvent and the outlook for the foreseeable future was not good. Maintenance and replacement of physical properties, where needed, would require substantial expenditures. Even a fare increase, if the pattern of the past was repeated, while affording income support, would result in a decline in passenger carriage. The process could be repeated indefinitely. The fact that the taker in condemnation would continue to operate the railroad because it had received a possible loss offset in the proposed World Trade Center, does not increase [48]*48the actual loss suffered by the owner, nor increase the liquidation value of the property taken. While salvage value cannot be determined with mathematical precision, a reasonable figure based on all the evidence received, and which should have been received, is $1,300,000 (rounded). Adding this figure to the sum previously calculated would result in a value liquidation of $3,500,000, and such is the figure now set. To recapitulate, new cars $1,700,000, $500,000 working capital, plus $1,300,000 salvage, equal the liquidation value, which is determined to be just compensation.
Evidence was received concerning possible benefits which might have accrued from the so-called Aldene Plan, when as and if it were brought to fruition. Not much evidence was received as to the possible cost and necessary expenditures involved. No value is attributed to the properties here (as of the time of taking) because of it. At the time of taking the plan was little more than an abstraction and its possible influence and results too speculative.
In urging that the court failed to give significant weight to reproduction cost less depreciation, and that the railroad award should be increased to at least $127,400,000, claimant HRT, inter alia, cites Matter of City of New York (5th Ave. Coach Lines) (18 N Y 2d 212) in support of its position. It urges that its approach as to reproduction costs finds support therein and since HRT, like the coach lines, is an operating enterprise, going concern value should be allowed.
Going concern value seems to refer to certain intangibles in an operating business where the entire enterprise is taken (see, generally, 2 Orgel, Valuation Under Eminent Domain [2d ed.], § 214 et seq.). The concept represents value for an existing established business as distinguished from value for the physical properties and “is allowed on the theory that a prospective purchaser would pay more for a ‘ live and developed ’ business than for the ‘bare bones ’ of the utility plant” (ibid., § 216, p. 123). It would seem that before the concept is applicable there should be a determination the enterprise is capable of profitable operation. (Cf. Matter of City of New York [Sixth Ave. El. R. R.], 265 App. Div. 200, 206.) In the cited case it was said: “If the court should determine that the Sixth Avenue Line was capable of profitable operation, then some fair measure of the value of the railroad as a going concern would have to be applied. Just compensation being required, the full and fair equivalent of the property taken is essential. (Monongahela Navigation Co. v. United States, 148 U. S. 312) ” (Emphasis supplied.) In Matter of City of New York (5th [49]*49Ave. Coach Lines) (supra), the court found that claimants were entitled to reasonable fares and such fares had been denied them. It found further that claimant’s capability for profitable operations, upon recognition of such right, was clearly demonstrated “ and they are, therefore, entitled to going concern value ” (p. 221). In the case before us it is clearly shown that HRT is inherently incapable of profitable operations. Therefore, an additional allowance for going concern value is not warranted, and the properties are entitled to liquidation value only. Going concern value should probably represent some relationship between cost of acquisition and cost of development into a profitable business. The business here seems to have been started under such severe handicaps, including its capitalized structure, that it has not been able to cast off the burden. To allow going concern value here is to place a premium on deficit operations. This should not be done. The profitable portion of the formerly united operations of real estate and commuter transportation is now being continued by H & M.
The remaining question has to do with the interest rate on the awards. The right to interest is an extension of the substantive right to recovery provided for by statute (L. 1939, ch. 585). The dispute here is as to the rate to be applied. The court fixed at 4% on the New York properties which represented 35% of the whole. We are in accord with that determination. (L. 1939, eh. 585; Matter of City of New York [Lincoln Sq. Slum Clearance Project—Maxwell], 15 A D 2d 153, 179, affd. 12 N Y 2d 1086; affd. sub nom. Matter of City of New York [Lincoln Sq. Slum Clearance — Schnurmacher Corp.], 16 N Y 2d 497.) However, 6% was allowed on the New Jersey properties. Sixty-five pér cent of the properties involved are located there. PATH and the Attorney General of New Jersey in his amicus brief recognize the right to interest (see State, by State Highway Comr. v. Seaway, 46 N. J. 376). Both urge, however, that the 4% rate should apply to the New Jersey property as well. New Jersey urges the interest rate, equitably, should be 4% for this unprofitable enterprise and that 6% would represent a windfall. PATH expresses a similar view. HRT urges the additional compensation, represented by interest, is indemnification for delay. Interest rates have increased generally and even the 4% provided by New York statute is outdated, unrealistic and unfair.
In the view here adopted no valid reason is shown for the difference in the applied interest rates. Equitably, a uniform rate should be applied, otherwise the New Jersey property is [50]*50subject to a penalty by reason of situs. New York law establishes a 4% rate. Four per cent should be applied to the award for the entire property wherever situated.
The enabling statute under which the property was taken required that New Jersey law be applied to the property located in New Jersey (L. 1961, ch. 312, § 14) with the requirement that just compensation be paid for the property acquired by condemnation or the exercise of the right of eminent domain. New Jersey urges that market value, which in this instance is the scrap value of the railroad, is the applicable standard under New Jersey law. That the approach of allowing an award based on any theory of special value to the condemnor has been expressly rejected (Currie v. Waverly & N. Y. Bay R. R. Co., 52 N. J. L. 381). Because of the discussion and conclusions heretofore reached, it is not necessary to discuss New Jersey law separately and at length. The principles used herein as bases seem to be in accord.
The final decree appealed from should be modified on the law and the facts to reduce the award to HBT for the railroad properties to the sum of $3,500,000, the liquidation value found for the properties, and to reduce the rate of interest on the applicable New Jersey portion of the properties to 4%, and as so modified the final decree appealed from should be otherwise affirmed, without costs and without disbursements to either party.