68 VALUATION, DEPRECIATION AND THE RATE-BASE
has, however, one feature in its favor. The operator thereunder
can look with some confidence into the future and if circum-
stances justify, will find it to his interest and may be expected
to make suitable provision for the growth and future demands
of the community. Knowing that the prospective earnings
justify this course, he can build far ahead of the immediate
requirements. But this advantage is not of sufficient impor-
tance to justify the grant of perpetual privileges and such privi-
leges are now rarely, if at all, granted by any of the states.
The term of a franchise should not be too short. When the
evils of the perpetual franchise began to be fully realized, the
next step was to the other extreme and terms were in some of
the states restricted to 25 years. Usually several years are
consumed in the construction of works, 5 to 10 years or more in
the development of the business and thereafter there should be
ample time left within which to make some profit. A term of
40 to go years would seem to be about right, not alone to en-
courage reasonable development under a franchise, but also to
give the public opportunity to renew, at not too great inter-
vals, the conditions subject to which the privilege is granted.
Amortization During the Life of the Franchise. —In any
event suitable provision should always be made to amortize the
capital invested either by a purchase on an agreed basis at the
end of the franchise term or by the amortization of a part or all
of the investment during the life of the franchise with a view to
an acquisition of the property by the public. If the latter plan
is followed, there may be danger of neglect in the last years of
service, as it will be to the advantage of the owner to expend as
little as possible in upkeep, provided only that he can continue
rendering the service. The provision which must be made in
such a case to amortize the investment may cover the entire
term or only a portion of the franchise term.
The Indeterminate Franchise. — The indeterminate franchise
is fast finding favor. No definite term of life is fixed but pro-
vision is made that at any time after a specified number of years,
the community may take over the property either at an agreed