People ex rel. Fulton St. R. Co. v. State Board of Tax Com'rs

New York Supreme Court

People ex rel. Fulton St. R. Co. v. State Board of Tax Com'rs

146 N.Y.S. 80

CourtNew York Supreme Court

DecidedFebruary 23, 1910

StatusPublished

Cited by1 cases

This text of 146 N.Y.S. 80 (People ex rel. Fulton St. R. Co. v. State Board of Tax Com'rs) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

People ex rel. Fulton St. R. Co. v. State Board of Tax Com'rs, 146 N.Y.S. 80 (N.Y. Super. Ct. 1910).

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Opinion

O’GORMAN, J.

[1] These are certiorari proceedings instituted to review the special franchise assessments against the Fulton Street Railroad Company for the years 1901 to 1908, inclusive, in the following amounts: 1901, $101,240; 1902, $133,500; 1903, $133,000; 1904, $125,000; 1905, $125,000; 1906, $125,000; 1907, $147,000; 1908, $129,000. It is conceded that the relator’s road was operated by the Metropolitan Street Railway Company from February 19, 1896, to June 1, 1908, under an operating agreement by the terms of which the Metropolitan Street Railway Company paid the interest on the bonds of the relator, amounting to $20,000 annually. This $20,000 annual payment to the bondholders was over and above all [81]*81operating expenses, and must be regarded as the net profit and earnings of the relator by reason of its ownership of the franchise in question, capitalized at 6 per cent.; this gives as the value of the franchise the sum of $333,333.33, more than sufficient to sustain each of the assessments without taking into consideration the tangible property in the street.

[2, 3] The track owned by the relator was only 51% per cent, of the total tracks traversed by. its cars, and 48% per cent, of its line was operated over tracks owned by other companies. The claim made by the relator that its earnings should be correspondingly apportioned cannot be entertained. Whatever rents or charges were paid by the relator for the use of the tracks of other companies would constitute an item of its operating expenses. The relator was entitled to all its earnings above its expenses and rentals paid to other companies; such net earnings constitute profit to the relator, and were the result of the ownership and operation of its franchise. Deducting from these net earnings a fair and reasonable return on that portion of the capital invested in tangible property, the balance gives the earnings attributable to the enjoyment of the special franchise; and, if■ this balance be capitalized at a fair rate, the value of the special franchise is ascertained. People ex rel. Jamaica Co. v. Tax Com’rs, 196 N. Y. 56, 89 N. E. 581.

[4] The relator’s claim that the earnings applicable to the tangible property should not be reduced on account of the property’s physical depreciation is unsound. The net earnings are to be apportioned between the tangible and the intangible property. If profit may be derived from the use of the franchise with a depreciated plant, the resulting profit must be attributed to the franchise, after deducting a fair return on the existing" value of the tangible property used in the enterprise. In my opinion a rate of 6 per cent, as the rate of return upon the present value of the tangible property and as the rate of capitalization, and a rate of 4 per cent, for the sinking fund for depreciation, is reasonable and proper, and should be applied. People ex rel. Third Ave. R. R. v. Tax Com’rs, 136 App. Div. 155, 120 N. Y. Supp. 528 (Third Department, November, 1909).

The objections to the assessments are not sustained, and the assessments must be confirmed, with costs to the defendant.

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O’GORMAN, J.

[1] These are certiorari proceedings instituted to review the special franchise assessments against the Fulton Street Railroad Company for the years 1901 to 1908, inclusive, in the following amounts: 1901, $101,240; 1902, $133,500; 1903, $133,000; 1904, $125,000; 1905, $125,000; 1906, $125,000; 1907, $147,000; 1908, $129,000. It is conceded that the relator’s road was operated by the Metropolitan Street Railway Company from February 19, 1896, to June 1, 1908, under an operating agreement by the terms of which the Metropolitan Street Railway Company paid the interest on the bonds of the relator, amounting to $20,000 annually. This $20,000 annual payment to the bondholders was over and above all [81]*81operating expenses, and must be regarded as the net profit and earnings of the relator by reason of its ownership of the franchise in question, capitalized at 6 per cent.; this gives as the value of the franchise the sum of $333,333.33, more than sufficient to sustain each of the assessments without taking into consideration the tangible property in the street.

[2, 3] The track owned by the relator was only 51% per cent, of the total tracks traversed by. its cars, and 48% per cent, of its line was operated over tracks owned by other companies. The claim made by the relator that its earnings should be correspondingly apportioned cannot be entertained. Whatever rents or charges were paid by the relator for the use of the tracks of other companies would constitute an item of its operating expenses. The relator was entitled to all its earnings above its expenses and rentals paid to other companies; such net earnings constitute profit to the relator, and were the result of the ownership and operation of its franchise. Deducting from these net earnings a fair and reasonable return on that portion of the capital invested in tangible property, the balance gives the earnings attributable to the enjoyment of the special franchise; and, if■ this balance be capitalized at a fair rate, the value of the special franchise is ascertained. People ex rel. Jamaica Co. v. Tax Com’rs, 196 N. Y. 56, 89 N. E. 581.

[4] The relator’s claim that the earnings applicable to the tangible property should not be reduced on account of the property’s physical depreciation is unsound. The net earnings are to be apportioned between the tangible and the intangible property. If profit may be derived from the use of the franchise with a depreciated plant, the resulting profit must be attributed to the franchise, after deducting a fair return on the existing" value of the tangible property used in the enterprise. In my opinion a rate of 6 per cent, as the rate of return upon the present value of the tangible property and as the rate of capitalization, and a rate of 4 per cent, for the sinking fund for depreciation, is reasonable and proper, and should be applied. People ex rel. Third Ave. R. R. v. Tax Com’rs, 136 App. Div. 155, 120 N. Y. Supp. 528 (Third Department, November, 1909).

The objections to the assessments are not sustained, and the assessments must be confirmed, with costs to the defendant.

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146 N.Y.S. 80, Counsel Stack Legal Research, https://law.counselstack.com/opinion/people-ex-rel-fulton-st-r-co-v-state-board-of-tax-comrs-nysupct-1910.

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