ing the amount of capital invested by the company, it has been held that amounts expended or investments made by the company in experiments, which have resulted in nothing of value, cannot be considered any more than other unprofitable investments.79 However, if an expenditure of money for a part of the system seems wise at the time it is made but after a change in the system the part does not become as important as under the old system, it has been held in one case that the cost of such part of the plant is nevertheless capital entitled to a full return, where it was a proper purchase under the circumstances.80 A public service may, and it is its duty to do so, look ahead and provide for future needs, to a reasonable extent, and hence the value of property reasonably acquired for necessary use in the near future should be considered.81 But, in case of a water company, it was terferes with the other. So, also, lands may be employed at the same time both for water production and water storage. Neither use excludes the other." Spring Valley Waterworks v. San Francisco, 192 Fed. 137, 158. In Consolidated Gas Co. v. New York, 157 Fed. 849, 857, Judge Hough excluded from the valuation the present worth of leased, vacant, and unimproved lands to the amount of more than $2,000,000, because they were not then in use. 79 Capital City Gaslight Co. v. Des Moines, 72 Fed. 829. 80 Wilkes Barre v. Spring Brook Water Co., 4 Lack. Leg. N. (Pa.) 367, where cost of filtration plant was held to be capital, although upon reorganization of the system one source which formerly required an expensive filtration plant was assigned exclusively to manufacturing purposes in which filtering was unnecessary. 81"These considerations lead to the conclusion that the water company when it starts with new works, or a large addition to the original supply, is entitled to an income therefrom somewhat greater than what is due to the cost of work sufficient merely to meet the present demands. 'somewhat greater' for I do not mean to be understood as holding that capitalists ought to expect an immediate compensatory income from an enterprise of this character. But on the other hand it would be manifestly unjust to expect them to invest their money in a plant necessarily larger than present demands require and take as an income therefor such a sum as would satisfy an investment sufficient to meet present demands." Per Vice-Chancellor Pitney in Long Branch Commission v. Tintern Manor Water Co., 70 N. J. Eq. 71, 62 Atl. 474, 479, aff'd without opinion in 71 N. J. Eq. 790, 71 Atl. 1134. In San Diego Land & Town Co. v. National City, 174 U. S. 739, 757, 43 L. Ed. 1154, it is said that a fair return to which the owner of such property is entitled cannot always be based upon the total amount invested, because some portion of that which is acquired by the investment may be neither necessary nor presently useful for the public service. But the fair return is to be based upon the fair present value of that which is used for the public benefit, having due regard always to the reasonable value. I say said that "while the company should be in advance of the present demand, and provide for emergencies, for growing population, for unusual droughts, and for extraordinary conflagrations, it should not be too far in advance. If property is to be included in a valuation. for rate-fixing purposes, it must be shown to be either presently useful, or to be necessary for wants which are near at hand. If the rule were otherwise, the public might be called on to bear the burden of the company's investments, in addition to paying a reasonable price for the company's service. The courts are always open. Such lands can always be condemned, and reservoirs constructed and connected with the system, within a reasonably limited time before they are needed." 82 82 Spring Valley Waterworks v. San 'Francisco, 192 Fed. 137, 159. Mr. Justice Holmes says, in San Diego Land & Town Co. v. Jasper, 189 U. S. 439, 446, 47 L. Ed. 892: "If a plant is built, as probably this was, for a larger area than it finds itself able to supply, or, apart from that, if it does not yet have the customers contemplated, neither justice nor the Constitution requires that say two-thirds of the contemplated number should pay a full return." "The average daily consumption is about 33,500,000 gallons; the daily capacity of complainant's plant is 35,000,000 gallons; but it is alleged that with additional dams and aqueducts complainant's plant will be capable of supplying San Francisco with more than 110,000,000 gallons per day. In other words, the plant is sufficient, with reasonable development, to supply the needs of San Francisco when it has a population of 2,000,000. The company has looked ahead for 50 years; it has invested wisely and judiciously; it has a great property; but it does not necessarily follow that the water rates in question are confiscatory because they fail to yield an income of 7, or 6, or even 5 per cent on the full value of this property." Spring Valley Waterworks v. San Francisco, 192 Fed. 137, 155. In Long Branch Commission v. Tintern Manor Water Co., 70 N. J. Eq. 71, 62 Atl. 474, 480, a much larger reservoir site was provided by the company than was or would be necessary for many years to come. The original plans provided for a very large reservoir, including a high dam; but in carrying out the plans a lower dam was adopted, and but one-third to one-half the land was covered with water. The court deducted from the total value of the land about onethird. A dam was constructed at a cost of $89,500, of sufficient width to sustain one of two or three times its height. The court deducted $30,000 for excessive cost of the dam. It appeared also that a 36-inch main was used, when a 30-inch main would have been sufficient to perform the service required. This main, 8 miles in length, cost $300,000. The court deducted $75,000. In Brunswick & T. Water Dist. v. Maine Water Co., 99 Me. 371, 376, 59 Atl. 537, 539, Mr. Justice Savage uses the following illustration. "Suppose that a 500 horse power engine was used for pumping when a 100 horse power engine would do as well. As property to be fairly valued, the larger engine might be more valuable than the smaller one, yet it could not be said that it would be reasonable § 4536. Par or market value of stock and bonds. The capitalization or bonded indebtedness of a public service company ordinarily is no test of the value of the property.83 "So notorious is it that outstanding securities may have no relation to actual values, that their par value is hardly regarded by any one today." 84 The amount of mortgage bonds issued on the property is no reliable guide as to the true value of the investment,85 and the market price of the capital stock of the company is entitled to little, if any, consideration.86 The aggregate value of bonds and issued capital stock to compel the public to pay rates based upon the value of the unnecessarily expensive engine." "Lots may be required some time, but no man can determine the contingencies of the future, and it will not do to burden the patrons of today in order to provide for possible needs of those of five or ten years hence, at least when this is said not to be necessary in order to provide for equal facilities when demanded.'' Judge Ladd in Cedar Rapids Gas Light Co. v. Cedar Rapids, 144 Iowa 426, 48 L. R. A. (N. S.) 1025, 138 Am. St. Rep. 299, 120 N. W. 966. In Southern Pac. Co. v. Bartine, 170 Fed. 725, 767, the court said: "If a railroad is built into a new and sparsely settled territory, with a view" of serving a large future population and developing business, the Constitution does not require the few people and the small business of the present time to pay rates which will yield an income equal to the full return to be gathered when the country is populated and business developed to the full capacity of the road." Co., 80 Minn. 191, 89 Am. St. Rep. 514, 83 N. W. 60; State v. Southern Pac. Co., 23 Ore. 424, 433, 31 Pac. 960; Coal & Coke Ry. Co. v. Conley, 67 W. Va. 129, 67 S. E. 613. 84 Wyman, Public Service Corpora tions, § 1092. "The value of stocks and bonds is no test, for obvious reasons, and mere theorists only, at the present day, insist upon such as the valuation.'' Per Judge McPherson, in Des Moines Water Co. v. Des Moines, 192 Fed. 193, 197. 85 Griffin v. Goldsboro Water Co., 122 N. C. 206, 41 L. R. A. 240, 30 S. E. 319. "But we must not accept the amount of the bonded debt as a complete or accurate criterion of the value of the property. Reference to it may be had merely for purposes of argument." Montana, W. & S. R. Co. v. Morley, 198 Fed. 991, 1007. 86 Simpson v. Shepard, 230 U. S. 352, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916 A 18; Kennebec Water Dist. v. Waterville, 97 'Me. 185, 60 L. R. A. 856, 54 Atl. 6. But it is said: "True, the market quotation of stocks and bonds is not always a correct index of value; such prices often go up and down without much regard to the intrinsic worth of the property represented, yet it seems to be clear, under the authorities, that, in order to ascertain the fair value of the property being used by the company for the public 'the 83 Simpson v. Shepard, 230 U. S. 352, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916 A 18; Smyth v. Ames, 169 U. S. 466, 42 L. Ed. 819; Louisville & N. R. Co. v. Railroad Commission of Alabama, 196 Fed. 800, 820; Texas & P. Ry. Co. v. Railroad Commission of Louisiana, 192 Fed. 280; State v. Minneapolis & St. L. R. of the company at present market prices is not a reliable index of the value of the plant, because such prices often rise and fall from the operation of causes which have little or nothing to do with the real intrinsic value of the property, and the bonded or other indebtedness of the company may exceed the actual value of its property.87 Referring to the market value of securities, it is held that the value of bonds and stocks is wholly unreliable where there are assets and property not devoted to public service, since, of course, the latter is an element in stock valuation.88 A fortiori, the capitalization of the company should not have an influence in determining the valuation of property where it is considerably in excess of any valuation testified to by any witness, or which can be arrived at by any process of reason, as where all, or substantially all, the preferred and common stock was issued to contractors for the construction of the plant, and the nominal amount of the stock issued was greatly in excess of the true value of the property furnished by the contract since "bonds and preferred and common stock issued under such conditions afford neither measure of, nor guide to, the value of the property. 11 89 § 4537. Value as "going concern" as item. "Going value" is the value arising from having an established going business.90 Stated in another way, the value of a business as a "going concern' means the added value of the plant as a whole over the sum of the values of its component parts, which is attached to it because it is in active and successful operation and earning a return.91 It is not the equivalent of "good-will" but is of a somewhat similar nature.92 So far as such going value being an item in the valuation of the plant as the basis of a sale of the plant to the municipality,93 or in be considered where they are several 90 Cedar Rapids Water Co. v. Cedar 91 Knoxville v. Knoxville Water Co., 212 U. S. 1, 53 L. Ed. 371. For further definitions, see note in 48 L. R. A. (N. S.) 1092. 92 Cedar Rapids Water Co. v. Cedar Rapids, 118 Iowa 234, 262, 91 N. W. 1081. 93 Omaha v. Omaha Water Co., 218 condemnation proceedings to acquire the plant of a public service company, there is no question but that it is to be included. However, decisions permitting "going value" as a separate item of valuation where the property is valued for purpose of sale or condemnation are not necessarily an argument in favor of adding such item for rate-making valuation; 95 and while there are many decisions recognizing going value 96 as an item in valuing a plant for rate-mak U. S. 180, 54 L. Ed. 991, 48 L. R. A. (N. S.) 1084; Norwich Gas & Electric Co. v. Norwich, 76 Conn. 565, 57 Atl. 746. One of the leading cases so holding is National Waterworks Co. v. Kansas City, 62 Fed. 853, 27 L. R. A. 827. In that case it was said in the opinion by Mr. Justice Brewer: "Nor would the mere cost of reproducing the waterworks plant be a fair test, because that does not take into account the value which flows from the established connections between the pipes and the buildings of the city. It is obvious that the mere cost of purchasing the land, constructing the buildings, putting in the machinery, and laying the pipes in the streetsin other words, the cost of reproduction does not give the value of the property as it is today. A completed system of waterworks, such as the company has, without a single connection between the pipes in the streets and the buildings of the city, would be a property of much less value than that system connected, as it is, with so many buildings, and earning, in consequence thereof, the money which it does earn. The fact that it is a system in operation, not only with a capacity to supply the city, but actually supplying many buildings in the city, not only with a capacity to earn, but actually earning, makes it true that the fair and equitable value' is something in excess of the cost of reproduction. * * * The city, by this purchase, steps into pos session of a waterworks plant, not merely a completed system for bringing water to the city, and distributing it through pipes placed in the streets, but a system already earning a large income by virtue of having secured connections between the pipes in the streets, and a multitude of private buildings. It steps into a possession of a property which not only has the ability to earn, but is in fact earning. It should pay therefor, not merely the value of a system which might be made to earn, but that of a system which does earn." 94 Kennebec Water Dist. v. Waterville, 97 Me. 185, 60 L. R. A. 856, 54 Atl. 6; Gloucester Water Supply Co. v. Gloucester, 179 Mass. 365, 60 N. E. 977. 95 See Omaha v. Omaha Water Co., 218 U. S. 180, 203, 54 L. Ed. 991, 48 L. R. A. (N. S.) 1084; Cedar Rapids Water Co. v. Cedar Rapids, 118 Iowa 234, 262, 91 N. W. 1081. 96 Des Moines Gas Co. V. Des Moines, 238 U. S. 153, 59 L. Ed. 1244, aff'g 199 Fed. 204, reviewing earlier cases at some length; Landon v. Public Utilities Commission State of Kansas, 242 Fed. 658, 671; Des Moines Water Co. v. Des Moines, 192 Fed. 193, 197; Spring Valley Water Works v. San Francisco, 124 Fed. 574; Public Service Gas Co. v. Board of Public Utility Com'rs, 87 N. J. L. 581, L. R. A. 1918 A 421, L. R. A. 1917 B 930, 95 Atl. 1079, 94 Atl. 634, 92 Atl. 606, aff'g 84 N. J. L. 463, 87 Atl. 651; People v. Willcox, 210 N. Y. 479, 51 |