162 VALUATION, DEPRECIATION AND THE RATE-BASE 
sum of intangible values, in excess, of course, of such portions 
thereof as have found a place in the rate-base. 
The Franchise Value and the Rate-base. — While recognizing 
that earnings may be so high that a franchise has value the 
Wisconsin Railroad Commission places itself squarely on record 
against the inclusion of such value in the value which is made the 
basis for fixing rates. The Commission in the Antigo Water Co. 
case (Wis. R. C. R., Vol. 3, p. 727) says in substance that though 
earnings may be high enough to yield a surplus that may be 
made the basis for determining a franchise value, properly sub- 
ject to taxation, this fact by no means implies that these earn- 
ings or any value based thereon should also be the basis for 
rate-fixing. Taxation, according to the Commission, is based 
on the ability to pay. Rates should be based on the cost of 
service (measured by expenses) including a fair return on the 
investment. The Commission apparently recognizes, what the 
author endeavors to make clear, that taxation value” and 
therefore “ market value ” really depends on the earnings and 
therefore, too, upon the rates. 
In the case of the City of Appleton vs. Appleton Waterworks 
Co. the Commission again says (Wis. R. C. R., Vol. 5, p. 282) 
that in estimating capital upon which return is to be made the 
franchise has no value, because franchise value is produced by the 
rates charged. It is proper, however, to tax the company on its 
franchise value which would be paid for if the business were sold. 
The Commission in the case of the State Journal Printing Co. 
os. Madison Gas and Eleciric Co. (Wis. R. C. R., Vol. 4, 
p. 586) declares franchises to be monopolistic in their nature. 
They belong to the community. Their value has been created 
by the growth of population and by economic and social devel- 
opments rather than by individual effort. Belonging to the 
public, the right of control and of the disposal thereof also rests 
in the community. Under these conditions according to the 
Commission, there appear to be no good grounds upon which 
the value of exclusive privileges of this kind should become 
private property.