Full text: Valuation, depreciation and the rate base

INTRODUCTION AND GENERAL NOTES 33 
Acceptance of this system of mains may bring no immediate 
increase of revenue. The development of the newly subdivided 
area may be slow. Some years may elapse before the sales of 
water in the district will be equal to the added burden of main- 
tenance, collection of rates, and depreciation. 
Shall part of the system thus acquired be included in the 
valuation on which the owner is to receive a return? Or shall 
such inclusion be deferred? And if deferred for how long a 
time? 
The inclusion of such property merely because it has “ value ” 
can perhaps be justified on the plea that it makes no difference 
what a plant has cost the owner and that according to the de- 
cision of the courts value alone should be considered. It will 
be held that it represents a necessary extension of the distribut- 
ing system that could best be made at the same time that other 
street improvements were made, and that it would be impracti- 
cable to attempt in the case of this considerable addition to the 
system to fix the time when the extent of the use of such new 
pipe and the addition of revenue resulting from such use would 
no longer add to the burden of the remaining, or rather, older 
rate-payers. But the fact remains that when considered as the 
agent of the public the water-works owner hasnot made the in- 
vestment. The investment has been temporarily made by the 
owner of the subdivided tract. He will be reimbursed by the 
purchaser of lots, for the outlay for this and all other improve- 
ments made on the tract will appear in some form in the selling 
price of the lots. 
If the municipality owned the water-works, in what situation 
would it now find itself? The same treatment should be ac- 
corded the owner as would be accorded to an agent of the mu- 
nicipality. Viewed from this standpoint, the owner, when he 
accepts the addition to his distributing pipe system as a gift, 
assumes at once also the obligation to keep this part of the 
system in repair and to replace the same when worn out or dis- 
carded for other reasons. The owner is therefore entitled 
(necessity for the extension of the system being admitted) to the 
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