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Opinion of the Court.

291 U.S.

mate of one of its engineering staff, and the report of the result of an examination of appellant's books and records." The Court acted upon what it stated to be “the legislative mandate of the amendment of June 12, 1931, P.L. 530, that in an appeal of this character, we shall consider the record and' on [our] own independent judgment ... determine whether or not the findings made and the valuation and rates fixed by the Commission are reasonable and proper.'” It was in this view that the Court examined the “main controversies” between the parties. 108 Pa. Superior Ct. at p. 63.

Appellant attacks the finding of fair value upon the grounds that it was based solely on the original cost of the bridge property and that the amount paid by the appellant for the bridge was less than its fair value at that time and less than its fair value in 1930. It is not open to question that the reasonable cost of the bridge is good evidence of its value at the time of construction. And we have said that “such actual cost will continue fairly well to measure the amount to be attributed to the physical elements of the property so long as there is no change in the level of applicable prices.McCardle v. Indianapolis Water Co., 272 U.S. 400, 411; Los Angeles Gas Co. v. Railroad Commission, 289 U.S. 287, 306. in this instance, as the state court observed, the utility is not “a complicated system which has taken years to construct and enlarge, like a waterworks, or gas works, or electric light plant, or street railway system,” but is “one structure, a reënforced concrete bridge, built as it now is, without additions or improvements.” It appears that the bridge was built under a contract awarded in June, 1924, after competitive bidding, and was open to traffic in May, 1925. It is manifest that when the Commission made its first decision in June, 1926, the reasonable cost of the structure furnished a proper basis for determining its fair value. Of

227

Opinion of the Court.

the amount of the total valuation, at that time, of $767,800, the sum of $592,253 was taken as the construction cost on the basis of the actual outlay which included $566,301 paid to the contractor for the bridge and approaches. Appellant then insisted, and still insists, and it was shown, that the contractor sustained a loss. This was said to amount to about $143,000, that is, on labor and material, with overhead and depreciation of plant, as distinguished from a loss of profits. The evidence as to this was given by the contractor's auditor, who attributed the loss to an unusual flood. He said: “We would have made money probably if things would have gone along smoothly without any high water.” The Court accepted this explanation—the only one givenstating that "A sudden rise in the Susquehanna River during the course of the work was responsible for the loss; without it there would have been a fair profit.” The Court estimated that $20,000 additional, “spent on the coffer-dam construction,” would probably have obviated the loss, adding—“We have increased the coffer-dam expense to cover this amount.” Appellant complains that this statement was based on speculation and has no support in the record. But appellant's case is no stronger. The evidence gives no adequate ground for a conclusion that with reasonable care the loss could not have been prevented. The outstanding fact is that the contract was let in the usual way to the lowest bidder and the contractor received a substantial bonus ($22,050) for finishing the work before the stipulated date. To sustain the contention that the actual cost of the structure was less than a reasonable cost at the time, it was necessary for the appellant to give convincing proof. But such proof is lacking. We find no satisfactory basis for holding that the fair value of the property in June, 1926, was greater than $767,800 as it was then determined to be.

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The question is whether the proof shows that the value was greater in 1932. Appellant relies upon the estimate of engineers as to the cost of reproduction new of the physical property, as of September 1, 1929, together with "all additional expenditures required over and above the bare cost of the physical property, to put the bridge in operation as an income-producing property.” This estimate gave a total cost of reproduction new less depreciation (the estimate being exclusive of two other elements of alleged intangible value described as “ attached business value” and “location value ") of $875,644.30. The Commission's engineer made a similar estimate based upon prices prevailing during the last three months of 1930, which gave the cost of reproduction new, less depreciation, as $741,871. There were also charts showing the price trends for labor and materials for 1924 to 1930, inclusive. As summarized by the Court, the evidence shows “that in 1924, when the contract for the construction of the bridge was awarded, construction prices were reported as being 215% of the 1913 level; that in September, 1929, when appellant's reproduction cost estimate was made, they were 208% of the 1913 level; and that during the last three months of 1930 they fell to about 198%.” It would serve no useful purpose to review the details of the estimates of reproduction cost. The Court carefully considered them and properly concluded that the trend in prices from 1924–5, when the bridge was built, to 1931–2, when the Commission determined its present fair value, was “ downward rather than upward,” and that “in the absence of proof that the prices paid for the construction of the bridge were abnormally low there is no reason why in the short period of six years after its completion, with a tendency of prices for both material and labor being downward, there should be a radical increase in the fair value of the bridge for rate-making purposes. We agree with this conclusion.

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Opinion of the Court.

It does not appear that the Court made any deduction from the amount of the fair value as determined in 1926 by reason of the depreciation accrued during the succeeding years. There was controversy as to the extent of that depreciation. Appellant's engineers allowed for the four and one-half years which had elapsed to the time of their survey the sum of $16,282. The Commission's engineer estimated the accrued depreciation for six years at $41,403. The Court thought that the latter figure was

nearer the actual accrued depreciation than the estimate of the Company,” but the Court apparently treated such accrued depreciation as largely off-set by the “extra allowance, over the contractor's bid, for concrete and coffer-dams." The Court decided that no harm was done the appellant by leaving the fair value at $767,800.

A distinct question is raised by a claim for what is called “the special value of location,” in addition to the value of the bridge property thus far considered. This “special value was put at $100,000. It was based, according to appellant's engineers, upon the advantage that the location of the bridge has over any other point for miles in either direction because the river is narrower and the conditions of the river bed are more favorable. The engineers made their estimate upon what they thought one would be willing to pay for the present site, in preference to other sites in the vicinity, because of the additional cost of building a bridge elsewhere. It appears that the bridge is located in a rural area. It was originally constructed as a part of an extensive transportation system built by the Commonwealth in the first half of the last century. As the Court pointed out, the right to operate a toll bridge across the river at this point or elsewhere “is fundamentally the gift of the Commonwealth, contained in appellant's franchise, and to attach a value

Opinion of the Court.

291 U.S.

to it would be to capitalize the franchise contrary to the provisions of the statute and the frequent decisions of the courts.” In building its new bridge, appellant took advantage of the traffic customs which had already been established. In the determination of the value of its property appellant was entitled to be allowed the fair market value of its real estate for all its available uses and purposes, which would include any element of value that it might have by reason of special adaptation to particular uses. But it was not entitled to an increase over this fair market value by virtue of the public use. Minnesota Rate Cases, 230 U.S. 352, 451, et seq. The evidence, so far as it was properly addressed to the question of the fair market value of appellant's real estate, tended to support the amount allowed in the estimate of fair value reached by the Commission and the Court, and afforded no basis for a higher valuation. There is no warrant for an increase of fair market value by reason of opinions as to what it would cost to build a bridge elsewhere.

We conclude that appellant has failed to show confiscation because of the amount used as a rate base.

Second. Appellant complains that the amount prescribed for gross revenue is inadequate. Appellant contests the annual allowance for depreciation and the rate at which the fair return is calculated.

The Commission fixed the annual depreciation allowance at $7,678 and the Court approved it. This amount equals one per cent. of the fair value. Appellant contends that the allowance should be 212 per cent. of the value of the depreciable property on the straight line basis. The difference-on appellant's calculation of the fair valueamounts to $13,434. The Court approved the ruling of the Commission. There is no question as to the fact of depreciation.

It was established, as respondent admits, that concrete

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