152 VALUATION, DEPRECIATION AND THE RATE-BASE
within reach, when streets are improved, when sewers are built,
when tunnels or bridges for better intercommunication are con-
structed. The addition of this value cannot always be imme-
diately capitalized but it is nevertheless an asset and should
not be entirely lost sight of when rates are to be fixed.
This point is here brought out in order that the reasonable-
ness of allowing the owner of the public utility a fair profit in
addition to ordinary interest on his investment may be realized.
Public Contribution to the Revenue of Public Utilities. — The
owner of real estate or other property even when not served by
the utility, may reasonably be required to make a direct contri-
bution toward its earnings. Not all of the revenue should, in
other words, come from the rate-payers. It is frequently prac-
ticable to secure a contribution from the property owner who
is not a rate-payer by establishing a high rate for the service
rendered to the public and thereby reducing the rate for the
service to the rate-payer, or by a remission of local taxes in
whole or in part, or by granting a bonus when a new installa-
tion is involved.
When an effort was made some years ago by a rival telephone
company to secure permission to operate in San Francisco, the
inducement of free service for all city departments was held
out. The advisability of accepting the offer of the outside com-
pany was passed upon by the author, who was at that time
City Engineer of San Francisco, and the disadvantage of com-
petition in the telephone service was pointed out. The new
company did not acquire the requested privilege at that time,
though it did so under a later administration. The acceptance
of the offer to render service free to the City, while attractive,
was unfair to the rate-payer who is thereby made to carry, not
only the full burden entailed by the telephone service of which a
part should be carried by the vacant lot, but also the additional
amount which is saved to the City by free service.
While it would be correct in principle and economically sound
to let a suitable part of the revenue of every public utility be
provided by a general tax, the application of this principle is
