# Appendix — Chicago, Burlington & Quincy Railroad v. State Tax Commission of Missouri > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385604_0441%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1969 - **Citation:** 393 U.S. 1092 ## Text ~ LIBRARY ae y SUPREME COURT. UO. & | JAN 1 1 1969 § | JOHN F. DAVIS, CLERK! No. a | IN THE Supreme Court of the United States Octosix TERM, 1968 CHICAGO, BuRLINGTON & QuINCY RaATLROAD COMPANY, Petitioner, U. SratTe Tax CoMMISSION OF MissourI, HUNTER PHILLIPS, Chairman, CARL E. Davis and J. RatpH HutcuHison, Members, J. R. Towson, Secretary, Respondents. APPENDIX TO PETITION FOR A WRIT OF CERTIORARI TO THE : SUPREME COURT OF MISSOURI a ¢ Tee 2a et 2 . | Se TABLE OF CONTENTS Page Opinion of Missouri Supreme Court .........-..-- Al Judgment of Missouri Supreme Court .........-.+-- Al5 Findings of Fact, Conclusions of Law and Decision of State Tax Commission of Missouri ...........--- Al6 ta + G}.e ¢. opt hee @ a APPENDIX IN THE SUPREME COURT OF MISSOUBI DIVISION NUMBER ONE No. 53,500 Curcaco, BurLtineton & Quincy Rattzoap Company, a Corporation, Appellant, Vv. State Tax Commission or Missourt, Hunter Pxtiiips, Chairman, Cart E. Davis and J. Raten Hurcutson, Members, J. R. Towson, Secretary of the State Tax Commission, Respondents. Appeal from the Circuit Court of Cole County The Honorable James T. Riley, Judge Proceeding under Section 536.100, et seq., V.A.M.S., for judicial review of a final decision of the State Tax Com- mission of Missouri. The circuit court affirmed the decision, and the railroad’s appeal involves construction of the revenue laws of the state. On June 23, 1966, the State Tax Commission of Missouri assessed the distributable property in Missouri of the Chicago, Burlington & Quincy Railroad Company for 1966 at $33,429,871. C. B. & Q. sought a review of that decision alleging, among other things, that the Commission had denied the railroad a hearing at which to present its theory of assessment. The circuit court remanded the case to the Commission with directions that C. B. & Q. be granted a hearing. C. B. & Q. filed Commission Form No. 1, ‘‘Statement of Taxable Property owned by the C. B. & Q. Railroad Com- pany on the first day of January, 1966, required to be made to the State Tax Commission, as provided in Section 151.020, R.S. Mo., 1959.’? Section 151.020, V.A.MS., oy i tend hata SCAR a a RASS et LP oe ia aS ined ene is Sc NS ably onanead NE Me Sereno © OPE DEL OLDER pA. tia is tesla ia, Me i mp Ng Whe tet act Pa Hct ees a Kdatilen de & AO te Ba et ~ BO sR ne i alk RR A aU ot, rahe IIR a NE ek end nn noe Mle VE eth” wate te en arte are OR A2 requires the statement to be made under oath and to con- tain ‘‘in detail the total length of * * * road * * * in- eluding branch or leased roads, the entire length in this state, and the length of double or sidetracks, with depots, water tanks and turntables, the length of such road, double or sidetracks, in each county (and other specified tax districts) * * *; the total number of engines and cars of every kind and description * * * and all other moveable property owned, used or leased * * *, and the actual cash value thereof.’’ At the hearing C. B. & Q. presented its theory of assess- ment of the property returned on Form No. 1 through wit- nesses Broley E. Travis, a consulting valuation engineer and former valuation engineer in the Valuation Depart- ment of the Public Utilities Commission of the State of California, and James P. Reedy, general tax agent for C. B. & Q. Their testimony and the railroad’s theory are summarized in this reproduction of C. B. & Q. Exhibit T: CEICAGO, BURLINGTON & QUINCY RAILROAD COMPANY 1966 Missouri Tax Value Based on Use of Three Factor Formula: (I) Capitalized Earnings, (II) Market Value of Stock & Debt and (III) Depreciated Investment in Road and Equipment System Missouri* “ , . (000) (000) (000) I Net Railway Operating Income: as reported to I.C.C. $ 22,553 (5-year average—1961-1965) Capitalized at 7% $322,186 $ 48,392 II Stock & Debt Value: (5-year average—1961-1965) Stock at Market Value ($152.61) $260,718 Mige. & Equipment Trust Debt 223,372 Total $484,090 Less Value of Non-Opr. Prop. 141,484 $342,606 $ 51,459 III Depreciated Investment in Transportation Property 12/31/65: $714,821 $107,366 Total I, II and III $207,217 IV Average Above 3 Factors $ 69,072 Vs Pull Value Equalized at 30%, $ 20,722 “* Allocation to Missouri is on Road Miles Operated Basis—15.02%. eh aligy ee. A3 Mr. Travis and Mr. Reedy were of the opinion that the theory presented by Exhibit T was the best method of valuing a railroad for tax purposes, and Mr. Reedy stated the request for a hearing before the Commission was to show the Commission indicators of value other than those employed by the Commission; however, Mr. John Street, of counsel for C. B. & Q. at the hearing, stated that the railroad did ‘‘not contend that you (members of the Com- mission) are required to use it.”” C. B. & Q. also presented J. Edward Connell, former supervisor of ad valorem taxes with the State Tax Com- mission of Missouri to establish the equalization factor of 30 percent. The Commission’s assessment of the property returned on Form No. 1. rejected the method suggested by C. B. & Q. and the method used was explained through the testimony of Carl A. Norfleet, supervisor of taxes for the Commis- sion. He made the Commission’s computations and stated that in assessing railroads and utilities market value is rarely known because there were rarely any sales of rail- roads between a willing buyer and a willing seller. There- fore, any assessment is an estimate under any method and no valuation will be scientifically exact. The Commission employs a method to meet requirements that an assess- ment be reasonable and nondiscriminatory. As with all railroads operating in Missouri, he (and the Commission) used a method under which a value per mile was placed upon each type of C. B. & Q. track reported by C. B. & Q. in Missouri; a value per acre was placed upon the number of acres of C. B. & Q. right of way reported to be in Missouri; a value was placed upon the C. B. & Q. buildings and other fixed property reported by C. B. & Q. in Missouri; a value was placed upon the rolling stock of Cc. B. & Q., Missouri’s portion being ascertained by calculating the ratio (15.02%) between the number of miles of first main-line.and branch-line track used by C. B. & Q. ~~ ‘ ice BN ALN ABN NN CORA GUM te | Rah wy Se Reap es bet RR! > GPM A aC aE A ahead tls Po titere dima on wh a Pe ee A4 in Missouri and these items in the entire system. The aggregate value thus determined was reduced by an economic obsolescence factor. The acreage value, $60 per acre, was the same as employed in 1964 and 1965 assess- ments. The railroad’s report of buildings and other fixed property was returned by C. B. & Q. at $384,859. This was adjusted to $399,913 and ‘‘trended upward’’ by the Commission by a factor of 226.566, resulting in a value of $906,067. The factor is used to bring reported values up to current reproduction cost and to offset lew values reported in Form No. 1.2 Main line value was first set at $22,625 per mile but reduced to $20,000 per mile at the request of Mr. Reedy. Valuation of other types of track was made using values per mile employed in previous years. Rolling stock reported by C. B. & Q., according to units, type, age, and original costs, was depreciated 5% per year unti! a base of 25% of original cost was reached, not to be reduced further so long as the wnit remains in service. The depreciated cost was then equalized by a factor of 47%, i.e., 47% of 25% of original cost after 15 years, an ultimate valuation of 11.75% of original cost of such units. The depreciated original cost of C. B. & Q. rolling stock, including leased rolling stock, was found at $205,649,935, and equalized at 47%, resulting in an equalized value of $96,665,469 for taxation on rolling stock. Application of the 15.021% ratio factor resulted in Missouri’s allocated portion of rolling stock at $14,518,618 to which was added $8,337 for leased cars, an ultimate value of $14,526,955. Addition of $19,350,233, value of roadbed, fixed property, 1 E.G., in testifying relative a particular depot building Witness Reedy of C. B. & Q. stated: ‘‘Where the building freight depot was built in 1961 at an original cost of $666,397, the depreciated cost was $664,021. I returned $95,000 as the value of that freight depot knowing that there would be a $223,000 assessment placed upon it utilizing the historical 226 point multiplier.”’ wn NE Naga Lae lake a TR ee a ak clei gS LED DTS AL RII LE IAL ag ES ARTERIOLE LIER ARK A5 $906,067, rolling stock, $14,526,955, less economic obsoles- cence, $1,353,384, resulted in an aggregate assessment of all distributable property of C. B. & Q. for 1966 of $33,429,875. The economic obsolescence factor was calculated from a consideration of the railroad’s total investment in trans- portation property compared to net railway operating income for 1965, as reported by C. B. & Q. on Form No. 1 in 1966. This calculation found net operating income at $20,423,802, subtracted the resulting percentage, 1.99%, from a desired income yield of 10%, which developed a factor of 8.01% for economic obsolescence. Mr. Norfleet stated that employment of the 47% equalization factor reduced the value of rolling stock to the level of 30% of value which the Commission tries to achieve in assess- ments. He stated also that the formula used for the entire assessment brought C. B. & Q., and railroad property generally, to the desired 30% level of value. Also in the opinion of Mr. Norfleet the assessment theory of C. B. & Q., based on stock and debt, should be rejected because C. B. & Q. is closely held by two other railroads and because only some 2,000 of 1,708,391 shares of stock had been traded in the previous year and these were not open market transactions. In addition to the $33,429,871 total assessment first cal- culated by the Commission from Form No. 1 as filed by C. B. & Q., the Commission developed unreported properties and additional values at the hearing. Through testimony of L. Glenn Key, general land agent for C. B. & Q., the Commission adduced evidence that C. B. & Q. had, in recent years, sold certain tracts of locally assessed real estate which it owned adjacent to its right of way in North Kansas City and in St. Louis, Missouri; that these tracts had sold for an average price in excess of $10,000 per acre and that, through use of these sales as comparisons, 224.47 _geres of right of way, located on similar land in the +. a ee ne ee ee RI ia el OL BO a hos, tne Pete U2 Fone Ue Re Ee allie Pree POR TS ie A6 C. B. & Q. yards in North Kansas City and 107.67 acres in the St. Louis yards should be valued at an additional $3,080 per acre based on a 30% level assessment, an addi- tion of $677,899. Unreported distributable property used in the railroad’s ‘‘piggyback’’ operation was assessed at an additional $731,791. Similarly twelve unreported diesel locomotives were assessed at $197,774. After application of the economic obsolescence factor, a total additional valuation of $1,777,824 was added to the previous assess- ment of $33,429,871. This resulted in the final assessment for 1966 of $35,207,695 affirmed by the circuit court on review. Appellant contends: Points I and II, that it was not given a fair, unbiased and impartial hearing, and was denied due procss by exclusion of testimony and exhibits; Points ITI, IV, and VII, that the assessment did not follow legal principles and was made without authority, con- trary to Chapter 151, RSMo., is not supported by com- petent evidence, and results from arbitrary, capricious and unreasonable conduct on the part of the Commission; Points V and VI, that the assessment is invalid because the Commission failed to receive and consider evidence relating to appellant’s method of valuation of railroad property and concerning actual cash value of its property; and, Point VIII, that the assessment discriminates against appellant. Pursuant to Article 10, Section 5, Constitution of Missouri, Chapter 151, V.A.M.S., provides for ad valorem taxation of railroad companies. Section 151.010 provides that all railroads and all real property, tangible and intangible personal property, owned, hired, or leased in Missouri, shall be subject to taxation, ‘‘and taxes levied on real property, and tangible personal property, shall be levied in the manner herein set forth, and the taxes on intangible property shall be levied and collected in the manner otherwise provided by law.’’ 4.2626 @.* AT The provisions of Section 151.020 concerning the rail- road’s report of its distributable property to the State Tax Commission already have been stated. Section 151.060 provides that the Commission ‘*shall 4 assess, adjust and equalize the aggregate valuation of the property’’ of each railroad in the state; shall have power to summon witnesses; and ‘‘shall have the power, upon : their knowledge, or such information as they can obtain, to increase or reduce the aggregate valuation of the property of any railroad company included in the state- ments and returns made by the railroad companies * * *, and shall assess, adjust and equalize any other tangible property belonging to said railroad companies, * * * upon which no returns have been made, which may be otherwise known to them, as they deem just and right.’’ The Commission ‘‘may arrive at its finding, conclusion | and judgment, upon its knowledge, or such information ‘ as may be before it, and shall not be governed in its find- ings, conclusions and judgment by the testimony which may } be adduced, further than to give to it such weight as the a commission may think it is entitled to; provided, that when any railroad shall extend beyond the limits of this state and into another state in which a tax is levied and paid on the rolling stock of such road, then the said commission : shall assess, equalize and adjust only such proportion of the total value of all the rolling stock of such railroad company as the number of miles of such road in this state bears to the total length of the road as owned or con- trolled by such company.’’ Section 151.090 provides that the Commission shall certify its action (assessment) to the railroad company. “The certificate shall set forth the entire length of the : railroad, including sidetracks, in the state, and the valua- tion thereof per mile; the total value of the rolling stock of the railroad; the total length of the roadbed, including _«-3idedvacks, in each county (and other specified tax dis- RAMADAN RT Re ok AAS hs meet A8 tricts) * * *; also the total value of roadbed and side- tracks and rolling stock as assessed, adjusted, equalized, and apportioned to such county, ete. * * *.’’ Section 151.100 provides that real property, or tangible personal property, including lands, buildings, goods, chattels and office furniture of the railroad shall be assessed by the proper assessor. In respect to appellant’s Points I and II, there is no question that the Comraission as an administrative agency owed C. B. & Q. a fair hearing, National Labor Relations Board v. A. Sartorious & Co., 2 Cir., 140 F. 2d 203, 205[2], Local No. 3, etc. v. N.L.R.B., 8 Cir., 210 F. 2d 325, 329-330, Jones v. State Dept. of Public Health and Welfare, Mo. App., 354 S.W. 2d 37, 39-40[2-6], 41[10], and due process, Donnelly Garment Co. v. National Labor Relations Board, 8 Cir., 123 F. 2d 215, 224[12-14], The Chicago Junction Case, 264 U.S. 258, 265, Morgan v. United States, 298 U.S. 468, 480. However, the statements which those cases pro- voked are not applicable here because the record and the Commission’s findings do not demonstrate a studied re- jection of or hostility to one side of the case before the Commission. It is true that the Commission gave greater and prevailing weight to the evidence of its own witnesses, but this is in accord with statutory authority. It is true also that the record and findings show that some of the testimony and exhibits offered by C. B. & Q. were received over Commission objection ‘‘for what it (or they) might be worth,’’ but this, too, is consistent with the authority given the Commission. The Commission’s findings demon- state a detailed recital and examination of the testimony of the railroad’s witnesses and exhibits, and upon such examination that evidence was found to lack the credibility attached to the Commission’s own presentation in arriving at the assessment. Appellant’s charges of refusal to con- sider its case and protestations of unfair treatment are refuted by this record of nearly 900 pages and the Com- A9 mission’s findings of fact of nearly 62 pages which provide graphic attestation to ample opportunity for C. B. & Q. to present its theory to the Commission and full consideration of that theory by the Commission. The hearing procedure was thus in accord with the provisions of Section 151.060, supra, and appellant’s citations. ‘‘The Commission could disbelieve plaintiff’s evidence of value, even without other evidence * * *, although it may not * * * act upon whim and without reason,’’ May Department Stores Co. v. State Tax Commission, Mo., 308 S.W. 2d 748, 761[16]; and the Commission’s findings make plain why it did not consider the railroad’s witnesses and exhibits credible in the cir- cumstances presented by this case. Cupples-Hesse Corp. v. State Tax Commission, Mo., 329 S.W. 2d 696, 701[12] ; State ex rel. Kahler v. State Tax Commission, Mo., 393 S.W. 2d 460, 465[7]. Appellant’s contention under Points Ill, IV, and VII, is-that the Commission’s assessment method does not follow Section 151.060, supra, to achieve ‘‘aggregate valuation,’? because it values separate parts of the rail- road; that it does not comport with Section 151.020, supra, requiring a railroad to report its distributable property at ‘‘actual cash value,’? and therefore fails to meet the requirement of construing taxing statutes in favor of the taxpayer. See Green Fire Brick Co. v. State Tax Com- mission, Mo., 277 S.W. 2d 544, 545; United Air Lines, Inc. vy. State Tax Commission, Mo., 377 S.W. 2d 444, 448; Union Electric Co. v. Morris, Mo., 222 S.W. 2d 767, 770; State ex rel. Halferty v. K. C. Power & Light Co., Mc., 145 S.W. 2d 116, 121; State ex rel. Moore v. Wabash R. Co., Mo., 208 S.W. 2d 223, 226. The argument is that the Commission failed to heed these citations in rejecting the railroad’s theory of assessment and employed a theory of assessment not supported by the evidence. It has already been demonstraied that the railroad’s theory of assessment was received, fairly considered, and Al0 rejected upon credibility findings, leaving for determina- tion whether the Commission’s method followed the statute, wae reasonabie, and supported by evidence. The theory of the Commission and the evidence in support of that theory have already been stated in detail in a review of the testimony of Mr. Norfieet. Again, despite protestation to the contrary, the steps followed in the method employed by the Commissior show that the Commission did arrive at an aggregate valuation of the railroad’s property 2s a unit in that valuation of the aggregate necessarily cannot be Lroken into divisible parts as by county lines, but is necessarily # valuation of the total of the railroad’s component parts,? i.e., a unit com- posed of ‘‘tracks, depots, water tanks, turntables, rolling stock, etc., known in common parlance and denominated in thie statute (now Section 153.060) as a railroad.’’ State ex rel. Murphy v. Stone, Mo. 28 S.W. 211, 213; State Railroad Tax Cases, 92 U.S. 575, 606; Hannibal & St. Joseph R. Co. v. State Board of Equalization, 64 Me. 294, 306; Eiliott on Railroads, 3d Ed., Val. 2, Sec. 883; and in respect to rolling stock in particular, see St. Louis South- western Ry. Co. v. State Tax Commissien, Mo., 319 S.W. 2d 559, 561[1}. In assessmenis there is ro such thing as an absolate “‘true value,’’ ‘‘true cash value,’’ or “actual cash value,’’ because an sssessmeni is at best an estimate and it is presumed correct unless preved by the taxpayer to be arbitrary or discriminatory. Civnles-Hesse Corp. v. State Tax Commission, supra, 329 &.W. 2d le. 700[3]. uezal eash vaiue ‘‘is the amount of cash that goods will bring on the market,** Bouvier Law Dictionary, p. 1209, and rarely, if ever, is a railroad assessed under circum- stances where such a cash price can be shown. Nashville, C. é St. L. Rhy. v, Browning, 310 U.S. 362, 370. 2 In order to certify its action to the railroad in compliance with Section 151.090, supra, the Commission necessarily must determine the value per mile of tracks, the value oi rolling stock, and the value of roadbed, etc., of the railroad. All In addition to the contentions in Points I and II relating to fair hearing and due process, appellant contends, Points V and VI, that the assessment is invalid because of refusal to consider evidence on the railroad’s theory of valuation and actual cash value. It already has been shown that the Commission did receive and consider such evidence. Yet this contention, despite the record and, more particularly, in the face of the previously quoted representation of Mr. Street as counsel for C. B. & Q., suggests that the railroad’s theory of assessment should have been used to the exclusion of the Commission’s theory. Appellant characterizes its theory as a ‘‘unii rule’’ which determines ‘‘actual cash value’”’ of a railroad ‘‘by consideration of the economic measures of value which are customarily employed in the market place, to-wit: (1) the net earnings of the railroad as a whole capitalized at some realistic rate determined in the light of then existing market conditions and (2) the market value of the out- standing shares of capital stock of the railroad plus the value of its debt— * * *. Sometimes consideration is also given by the tax appraisers in arriving at the value of the railroad to some form of cost, which must be tem- pered, however, by reasonable allowances for depreciation and economic obsolescence * * *.”’ Capitalization of earnings, stock and debt, depreciated investment, ard an average of these three items (as in c. B. & Q. Exhibit T) have been recognized as criteria for determining the value of railway property. See State Railroad Tax Cases, supra, 92 U.S. Le. 604-606; Adams Express Co. v. Ohio, 166 U.S. 185, 222; Chicago & N.W. Ry. Co. v. Eveland, 8 Cir., 13 F. 2d 442, 443 [1,2]; Batley v. Megan, 8 Cir., 102 F. 2d 651, 655[7]; City of Detrott v. Detroit & Canada Tunnel Co., 6 Cir., 92 F. 2d 833; C. B. & Q. R. R. Co. v. Dept. of Revenue, 17 Ill. 2d 376, 161 N.E. 2d 838; Chicago St. ¢ P., M. € O. Ry. Co. v. State Board, Neb., eres: a hee Alz 276 N.W. 391. However, in determining an assessment the Commission is not bound by any single formula, rule or method, but is free to consider all pertinent facts and estimates and to give them such weight as reasonably they may be deemed entitled, Great Northern Ry. v. Weeks, 297 U.S. 135, 139; and an assessment even if reflective of overvaluation will not be set aside unless shown by the taxpayer to be the product of ‘‘an intentional plan or design of discrimination’’ or ‘‘so grossly excessive ‘as to be entirely inconsistent with an honest exercise of judg- ment.’’’ Cupples-Hesse Corp. v. State Tax Commission, supra, 229 S.W. 2d lc. 700[6], which briugs this case to a consideration of appellant’s Point VIII, that this assessment does discriminate against C. B. & Q. An assessment whereby the property of one taxpayer is knowingly valued at a higher percentage of its value in money than the percentage of value at which another’s property is assessed cannot be allowed to stand because such would constitute unconstitutional discrimination. See Sioux City Bridge Co. v. Dakota County, 260 U.S. 441; People v. Union Station Co., 383 Tl. 153, 163, 48 N.E. 2d 524; Boonville Nat. Bank v. Schlotzhauer, Mo., 298 S.W. 732, 737; Jefferson City Bridge & Transit Co. v. Blaser, Mo., 300 S.W. 778, 785; Columbia Terminals Co. v. Koeln, 3 S.W. 2d 1021; Brinkerhoff-Faris Trust & Savings Co. v. Hill, Mo., 19 S.W. 2d 746; Koplar v. State Tax Commis- sion, Mo., 321 S.W. 2d 686. Appellant’s argument is that the Commission’s assess- ment is greater than the 30% level of value intended for assessment of all properties in Missouri for 1966, amount- ing to at least 51% of the actual cash value of the railroad’s distributable property in Missouri, and is thus approx- imately 70% excessive with relation to other property. This theory presupposes that the railroad’s theory of assessment is the exclusive method and that the Commis- sion is bound by its assumptions and values, and by the result, $20,722,00C, which it obtains. A13 The record demonstrates an absence of an intentional plan of discrimination and that the assessment is reason- able and uniform. In addition to those matters previously stated, there was evidence before the Commission on recent costs of construction of main track which would support track values well above those set for C. B. & Q. by the Commis- sion. A Commission exhibit showed that the value per mile placed on main line, second main line, branch line, and sidetracks of C. B. & Q., compared to 27 other rail- roads assessed by the Commission, was neither the highest nor the lowest and that the figures were near the average of all railroads and near the values placed on tracks of similar roads. A similar exhibit compared each railroad’s valuation of right of way per acre and again the same figure was used for each roai except for unique situations such as that of C. B. & Q. in connection with its North Kansas City and St. Louis yards. Other railroads were shown to have similar unique situations, such as Union Pacific in its Kansas City yards, and the various Terminal Railroad yards. An exhibit containing average value of distributable property per mile for each railroad showed an average for all roads of $31,238 compared to $26,035 for C. B. & Q. Mr. Norfleet also valued C. B. & Q. by its Three Factor Formula using figures taken from C. B. & Q. exhibits and arrived at a valuation of $36,612,877. By another exhibit, Mr. Norflee: demonstrated that under the Commission’s assessment, C. B. & Q. would pay 14.41% of its taxes on distributable property in Missouri where 15.02% of the C. B. & Q. system is located. By comparison, C. B. & Q. would pay 29.69% of its taxes in Illinois where but 19.15% of the system is located. Similarly, in Iowa C. B. & Q. would pay 13.99% of its taxes on 11.70% of its system. Another exhibit showed average taxes per mile in the fourteen states in which C. B. & Q. operates. Missouri taxes per mile paid by C. B. & Q. of $1,057 com- pared to the average of $150, and the highs of Illinois, Al4 $1,780, and Wisconsin, $1,938. The average was brought down by Kansas which has no C. B. & Q. main line. Appellant had no evidence to show any of the Commis- sion’s values to be inaccurate, excessive or discriminatory, or to refute Mr. Norfleet’s opinion that the values used represented a 30% level of valuation as the Commission would hope to achieve on all property. The same methods were applied to all problems of distributable property. Appellant complains of the formula whereby rolling stock is never reduced to 100 percent; however, it is elementary that a railroad car after 15 years, if still in service, is of some value as part of a system. These are not the circumstances indicative of an inten- tional plan of discrimination but, to the contrary, are those of a reasonable and uniform assessment. The judgment is affirmed, and the stay order previously entered by this court in connection with that part of appellant’s 1966 assessment in excess of $20,722,000 is dissolved. ANDREW Jackson Hicerns, Commissioner Houses, C., Concurs. Wetsorn, C., Concurs. Per Curtmam: The foregoing opinion by Higgins, C., is adopted as the opinion of the court. All of the Judges Concur. se hd. SiidLe WA sitn Sp Seth nL AIO ELE Ra i Sa READ ANNES OE aD diaesss Ait iasie Dbl biases =< Ald Judgment of the Supreme Court of Missouri And thereafter on the 9th day of September, 1968, the following proceedings were had and entered of record in said cause, to-wit: 53500 Chicago, Burlington & Quincy Railrcad Company, a Corporation, Appellant, vs. State Tax Commission of Missouri, Hunter Phillips, Chairman; Carl E. David and J. Ralph Hutchison, Members; J. R. Towson, Secretary of the State Tax Commission, Respondents. Appeal from the Circuit Court of Cole County. Now at this day come again the parties aforesaid, by their respective attorneys, and the Court here being now sufficiently advised of and concerning the premises, doth consider and adjudge that the judgment aforesaid, in form aforesaid, by the said Circuit Court of Cole County rendered, be in all things affirmed, and stand in full force and effect; and that the said respondents recover against the said appellant their costs and charges herein expended and have therefor execution. It is further ordered by the Court that the stay order previously entered by this court in connection with that part of appellant’s 1966 assessment in excess of $20,722,000 be dissolved. (Opinion filed.) — A16 May 24, 1967 BEFORE THE STATE TAX COMMISSION OF MISSOURI In the Matter of the Assessment of DisTRIBUTABLE Property of the Cuicaco, Burtineton & Quincy Ramroap Company, for the year 1966. Findings of Fact, Conclusions of Law and Decision Frnprines or Fact The State Tax Commission, pursuant to Chapter 151 V.A.M.S., did proceed to assess the distributable property of the Chicago, Burlington & Quincy Railroad Company, located within the State of Missouri as of January 1, 1966, and said Commission did place an assessment of $33,429,871 as the taxable value of the distributable property of said Railroad within the time required by law. Thereafter the Chicago, Burlington & Quincy Railroad Company, hereinafter referred to as Railroad, did file in the Circuit Court of Cole County, Missouri, a petition and the said Court did on July 8, 1966, in its Cause Number 23106 enjoin said State Tax Commission, hereinafter referred to as Commission, and its members, employees and agents from certifying any assessments to the various political subdivisions in the State of Missouri urtil further ordered by said Circuit Court. Said Order was continued until Octcber 17, 1966, when the aforesaid Court remanded it to the Commission for a hearing before it after due notice of the time and place of hearing. The Stay Order issued by the Court on July 8, 1966, remaining in full force and effect until the Court is advised by the State Tax Commission that such hearing has been held and final determination made by said State Tax Commission. BRE AL RRL IRB ATY es BLO bbe AE AMEE SAU A NGA Naat Same a A17 Thereafter the Order of aforesaid Court, dated October 17, 1966, was amended on November 21, 1966 by the Court on motion of the Railroad to read as follows: ‘Ty Is, THEREFORE, ORDERED, ADJUDGED AND DECREED that Plaintiff’s Motion for an order remanding this proceeding to the State Tax Commission is sustained. This cause is hereby remanded to the State Tax Com- mission for a hearing before that agency after due notice of the time and place of such hearing. The stay order issued by this Court on July 8, 1966, shall remain in full force and effect until this Court and the Plaintiff is advised by the State Tax Commission that such hearing has been held and a final determina- tion. made by the said State Tax Commission, and for further order of Court. S/C James T. Rizy Judge of Circuit Court Cole County, Missouri’ Pursuant to said Order, the Commission did on January 3, 1967, notify said Railroad that a hearing would be held at 801 Jefferson State Office Building, 100 East Capitol Avenue, Jefferson City, Cole County, Missouri, office of said State Tax Commission of Missouri, at 10:00 a.m., in the forenoon, on February 6, 1967, in the matter of the 1966 distributable property of the Railroad within the State of Missouri, for the purpose of taxation in assessing value thereof as of January 1, 1966. The Railroad appeared at the time and place designated in said notice, by its Attorneys, John Street, of Denver, Colorado; Richard T. Cubbage, of Chicago, Illinois; Clyde J. Linde, of Kansas City, Missouri; and Forrest P. Carson, of Jefferson City, Missouri; and officers and employees as hereinafter set out, and the hearing was commenced at said time and place. Virgil Wright, General Freight Agent and General Passenger Agent for Missouri, 153 SiG hs at ae PS A ce TS hie PEABO SIGE ERS A18 West 14th Avenue, North Kansas City, Missouri; and William Loos, Yardmaster in the State of Missouri, 107 Franklin Avenue, St. Louis, Missouri, appeared pursuant to ssubpoenaes duces tecum issued by the Commission, served upon them by the Sheriff of their respective counties. Subpoena duces tecum issued by the Commission for the appearance of Glenn L. Key, Real Estate Manager for Missouri and its Registered Agent, R. B. Langworthy, 300 Union National Bank Building, 900 Walnut, Kansas City, Missouri, ordered their appearance February 6, 1967, at 10:00 a.m., before the Commission and that they bring and produce at said hearing the record of Chicago, Burlington & Quincy Railroad Company of real property owned, improvements thereon, sales and acquisitions of real property within the State of Missouri for the year ending December 31, 1965. Said subpoena served by the Sheriff of Jackson County, Missouri and return made that he had served same by delivering to R. B. Langworthy, Registered Agent for the Railroad Company, a corporation, failing to find Glenn L. Key (employed in Chicago). Neither Mr. Langworthy nor Mr. Key appeared, nor were the records as aforesaid produced for the hearing, the same being Exhibit 5. The Commission issued subpoena duces tecum to the Railroad Company, and its Vice President and Comptroller, W. N. Wernzen, and its Registered Agent, R. B. Lang- worthy, 300 Union National Bank Building, 900 Walnut, Kansas City, Missouri, ordering their appearance Feb- ruary 6, 1967, at 10:00 a.m., before the Commission and that they bring and produce at said hearing the records of Chicago, Burlington & Quincy Railroad Company, . accounting for purchases and retirement of rolling stock for the year ending December 31, 1965, including, but not exclusively, locomotives, work equipment, miscellaneous equipment, cost of rebuilding 432 cars, and all other rolling A19 stock in 1965. Said subpoena served by the Sheriff of Jackson County, Missouri and return made that he had served same by delivering to R. B. Langworthy, Regis- tered Agent for the Railroad, a corporation, failing to find W. N. Wernzen (employed in Chicago). Neither W. N. Wernzen nor R. B. Langworthy appeared, nor did they bring any of said records as aforesaid, this being Exhibit 6. The Commission issued subpoena duces tecum to the Railroad Company, and its Chief Engineer, E. J. Brown, and its Registered Agent, R. B. Langworthy, 300 Union National Bank Building, 900 Walnut, Kansas City, Missouri, ordering their appearance February 6, 1967, at 10:00 a.m., before the Commission and that they bring and produce at said hearing records of acquisition and costs of right-of-way and roadbed, including ties and rails in Missouri, mileage of track including main line, branch line, side track, switch track, and lead track, in Missouri. Said subpoena served by the Sheriff of Jackson County, Missouri and return made that he had served same by delivering to R. B. Langworthy, Registered Agent for the Railroad Company, a corporation, failing to find EB. J. Brown (employed in Chicago). Neither Mr. Langworthy nor Mr. Brown appeared, nor were the records as aforesaid produced for the hearing, the same being Exhibit 7. The Commission finds that the refusal of the Railroad and its officers and registered agent to appear, was willful and arrogant and that the Commission was greatly hampered in attempting to ascertain the property of the - Railroad for taxation and the value thereof. John Street, General Attorney for the Railroad, 615 Johnson Build- ing, Denver, Colorado, a member of the Colorado Bar, and Chief Trial Attorney in this hearing, stated (Tr. 35) that he had not been in Chicago before commencing this De ee a Q AL ORTE Ns SES UME ee at TW) PET ae Ba SBN. SERA CITA 0 MNT ie leita NA Wa wae | OTL Th wien hearing and had made no effort to ascertain what the records of the Railroad were. The Commission further finds that the records sub- poenaed are kept in Chicago, Illinois and that the officers who did not appear and are in charge of the records are also in Chicago, Illinois; and that the Commission might have struck the Kailroad’s application for rehearing and sustained the assessment previously made, because of the willful and arrogant refusal of the Railroad and its officers. All records of the Commission were open at all times to the Railroad’s representatives and were examined and photographed by them at will, without and before motion to produce. The Railroad served subpoenaes upon State Tax Com- mission employees, Cecil B. Allison, J. R. Towson and Carl A. Norfleet and they appeared pursuant to subpoena. Broley E. Travis was produced by the Railroad and testified that he was a consulting valuation engineer, a resident of Sacramento, California since October 14, 1924, being employed by the California Railroad Commission, becoming Senior Valuation Engineer and later Assistant Chief until he retired in 1962 from State service; that he made studies cof railroads in California, Oregon, and was on loan for a very short time to New York State Board of Equalization, study of procedures in Colorado. Since retirement he had made extensive analyses of state assessing boards in the States of Idaho, Utah and Nebraska. The Commission finds Mr. Travis had not made a detailed study of the value of the Railroad in Missouri nor had he made a detailed study of any other railroad in Missouri, but arrived at his conclusions and attempted to testify from information supplied him by the Railroad, ‘and attempted to testify that the Commission should use the so-called ‘‘unit’’ method of assessment rather than A21 Chapter 151 V.A.MS. in arriving at its railroad assess- ments. The Commission finds that Mr. Travis was not qualified to testify as an expert on railroad taxation within Missouri; that though he stated he had examined the physical property of the Railroad in Missouri he had no idea of how many bridges the Railroad had across the Missouri River or their value in the State of Missouri; nor did he have any idea or knowledge as to the cor ‘truc- tion of any railroad righ. of-way by the Railroad within the State of Missouri made in the past fifteen years, or of the cost of construction; nor did he have any idea of the cost of rebuilt cars or Diesels or their value at any par- ticular time after being placed in service. The Commission finds that Mr. Travis’ assumption in the capitalizing of income that the remaining life of all property is twenty years, is unwarranted and inaccurate, and unworthy of belief. Mr. Travis testified that the Railroad had 208 leased — cars from information furnished him by Mr. Reedy. Mr. Travis later testified from Page 405 of the Form A Report, that there were 245 leased cars and stated he could not explain the discrepancy of 37 cars. His testimony is not worthy of belief. Mr. Travis testified he spent five days in calculations and three days in inspection in making the valuation of the Railroad and he did not have any estimate as an expert of the value of the land owned by the Railroad in North Kansas City; and that he was not interested in that detail. Mr. Travis testified that in California valuation of rail- roads since 1950, only two systems of approach to estab- lish value of railroads were used.—Capitalized income and stock and debt; that historical cost less depreciation of railroads, was not used. The Commission finds stock approach is not valid in its application to the Chicago, Burlington & Quincy Railroad Company. Only three percent being publicly held and in 1965, 2,116 shares wexe sed of a total 1,708,387 shares issued; and that the sali] percentage of sales does not constitute a market fv taxation valuation purposes, being 12 of 1% of the issued stenkk, The stock and debi aypipiexcth is not applicable to the Chicago, Burlingtom & Quite Railroad Company. Witness Travis testified (Nr. 164), practically all the securities including debi Were privately held by pension funds, insurance companies And nO prices are available, or are occasionally tieged ever the counter. His term ‘‘securities’’ covered beth Aebt and equity capital. Witness Travis testified (fi. 169), that the market value of the Railroad woud) he ¥558/000,000, being read from the Chicago, Burlingtem & Quincy Railroad Report of December 31, 1965, that it as expended in the last three years $308,874,388 om ned and general equipment; that in his opinion the Railiexd would only have a value of $50,000,000 more thar tex had spent in the last ten years. The Commission fxd this testimony is not worthy of belief. Witness Travis. testified (Ty. 177), for the purpose of his valuation of nen-opennitive property, that he computed the value of the steck @wned hy the Railroad and the Missouri-inois Bridge and Belt at $940,000; and on referring to the ICC neyeit, Page 210, investments shown by the Railroad at S4Q5Q00. He used the value of P & I Railroad Company ((f:. 178), $798,000, and on cross examination it show ‘he #1/678,000, the amount now carried. This is conyecied iy the Witness (Tr. 179) at the prompting of Mr. Reedy, it) $3,333,000, as book value of investments at the chess of the year. The testimony of the Witness with negand to walnes of the stocks for his computation purposes Wes HOt worthy of belief. The Commission finds the gugid total of the beok, undepreciated A238 book of the transportetion property to be $1,023,000,000 (Tr. 184). The Commission finds that the testimony of Broley Travis, as a whole, is not worthy of belief. J. Edward Connell was produced as a witness by the Railroad. He had been employed as a bookkeeper by the Central Utilities, Inc., St. James, Missouri, since September 1, 1965, and had heen employed up to that time by the State Tax Commission of Missouri, as supervisor of ad- valorem taxes since May 1949. The Commission finds that he was not required to have any qualifications as an assessor and that he did not qualify as an expert; that he was not employed by the Commission on January 1, 1966, the advalorem taxing date. The Witness, Connell, testified from memory that around the first of July, 1966 for three or four days he visited Bates, Cass, Ray, Henry, Carroll and Johnson counties. (Tr. 202). He had notes made for five counties. He stated, over objection, the level of personal property assessment in his opinion was twenty-five percent or less. The objection to his testimony as to the level of real estate assessments was sustained and he was not accepted as an expert by the Commission. Witness Connell, siated there was no ratio study of assessments on personal property made by the State Tax Commission of Missouri while he was employed by it, or for the purpose of any assessment purposes, The Commission finds that the Witness, Connell, did not make any valid study of assessments in 1966 and that his testimony, as a whole, is not worthy of belief. James P. Reedy, of Chicago, Tlinois, General Tax Agent for the Chicago, Burlington & Quincy Railroad Company, for eight years and previously employed by them since 1946 in the Tax Department, testified for the Railroad stating that the Railroad operates in eleven 434a@s states, pays advalorem taxes in ten states and gross receipts tax to the eleventh state, (Minnesota) in leu of advalorem taxes; that he prepares all reports to various state taxing authorities and local taxing; that he is charged with checking accuracy of the levy and seeing that the taxes are paid before becoming delinquent, including the State of Missouri; that as chairman of the National Com- mittee of Railroads and Utility Tax Representatives, which meets once a year to discuss the problems of taxation common to utilities and railroads; that. its purpose primarily is to exchange information and discuss new ideas in the field of taxation, litigation and legislation; that he is President of the National Association of Railroad Tax Commissioners which performs the same function as previously mentioned group, entirely in the area of rail- roads; that this group meets annually; that he is President of the Missouri-Arkansas Association of Tax Representa- tives, an organization similar to the other two previously mentioned, dealing primarily in advalorem taxation in the States of Missouri and Arkansas; that he is an officer of the Iowa Association of Tax Commissioners which is a regional organization dealing with matters in the State of Towa. No other qualifications of Mr. Reedy were shown. Mr. Reedy testified that he received a letter dated June 2, 1966 from the State Tax Commission setting the Railroad’s assessment from distributable property in the State of Missouri for 1966 at $34,817,172. Said letter was marked as Exhibit G and Mr. Reedy upon examining it said he didn’t nevessarily mean the word **tentatively’’ was in the notice. Exhibit G@ also notified that the Com- mission would meet with the Railroad at its office in Jefferson City, Missouri, on Monday, June 20, 1966 and Tuesday, June 21, 1966 for discussion relative thereto; this letter was replied to by Exhibit H, stating that repre- sentatives of the Railread would appear on said date; thereafter Exhibit I was introduced, dated June 23, 1966, notifying the Railroad that the Commission placed a final A25 assessment of $33,429,871 on the distributable property of that Railroad in Missouri for 1966; said Exhibit is stamped received June 24, 1966 by the Railroad’s Land and Tax Department. Thereafter Exhibit J was introduced, it being Objections to and Against, and Request for Oral Hearing on said assessment in the amount of $33,429,871 pursuant and following a hearing and discussion of the assessment of $34,817,172 dated June 2, 1966 by the Commission, being taxpayer’s Exhibit G. Exhibit J was sworn to by J. P. Reedy before a notary public in Cook County, Illinois on July 1, 1966. Exhibit K was introduced, it being a letter from the State Tax Commission dated July 5, 1966, notifying the Railroad that their request for a hearing received by them on July 5, 1966, is granted, stating: ‘*Your request for a hearing, which we have received today, July 5, 1956, is granted and will be heard July 7, 1966, at 1:30 p.m. (DST), here at the State Tax Commission office. You, no doubt realize that the values have to be certified and in the hands of the counties on July 11, 1966.°’ The Railroad’s stamp of receipt of said letter is obliterated thereon, other than the words ‘‘received 1966 land and tax department’’. Mr. Reedy handwrote on said notice ‘‘received 9:15 a.m., July 7, 1966 J. P. Reedy’’. Thereafter the Tax Commission received a telegram, marked Tax Commission’s Exhibit 14, sent by Western Union 1:17 p CDT, to Henter Phillips, Chairman, Mo. State Tax Commission, Jefferson City, Missouri; marked received by Western Union July 7, 1966, 1:54 p.m., which reads as follows: ‘“‘Tried unsuccessfully reach you by phone yester- day and this morning. Notice of hearing 1:30 this AZO afternoon received by me 9:15 am. this morning, making it impossible obtain witnesses and counsel to appear today. Respectfully request that you withhold certification of contested amount of assessment, namely $12.7 million, ana give us hearing as to that amount next week. No objection to certification of $20.7 million. J. P. Reedy, General Tax Agent, CB&Q RR Co.” The Commission finds that Exhibit L by the Taxpayer, is not a true copy of the original telegram sent by the Railroad and said original telegram being introduced and being the best evidence by the Commission and marked ‘*Tax Commission’s Exhibit 14’’, above fully quoted. Thereafter on July 7, 1966, the Railroad filed in Circuit Court of Cole County, Missouri, a Petition for Review of the assessment of $33,429,871, dated July 1, 1966. The Commission finds the attorneys and representatives of the Railroad did not appear before it on July 7, 1966, before filing the Petition for Review on July 7, 1966 in Circuit Court, Cole County, Jefferson City, Missouri; this hearing, as previously set out, being held pursuant to the order of the Circuit Court of Cole County, Missouri. The Commission finds that the taxpayer’s Exhibit N correctly states the mileage of main line, main and branch line trackage miles and branch lines in Missouri totaling 1,283.61 miles, but finds it was compiled to confuse the Commission as to the actual condition and age of the construction existing as of January 1, 1966. The Com- mission finds that Exhibit O, P, Q, R, S, T, U, V, W, X, Y, Z, AA and BB are not original records or verified transcripts of figures appearing on original records of the Railroad; that they are argumentative, inaccurate and not worthy of belief and not considered by the Commission as evidence, as are, also, Exhibits DD, Ii, KK, MM, NN, OO, PP, QQ, RR, SS. A27 Taxpayer’s Exhibit 0, marked for identification depicts the line from Francis Junction, just East of Mexico, Missouri, to Old Monroe, Missouri, as branch line. The Commission finds that said mileage from Old Monroe to Francis is part of the Railroad’s main line from Kansas City, Missouri to St. Louis, Missouri; and that Mr. Reedy’s testimony or Exhibit is not worthy of belief and is not credible. The Commission finds that at the time Witness Reedy testified with regarc to the aforementioned ex- hibits, he did not produce the records of the Railroad to substantiate the figures anc data contained in the exhibits and that the records were not produced pursuant to sub- poena therefore. (Tr. 343, 344, 345, and 346.) Exhibit II was produced and marked. Mr. Reedy testified it was a recapitulation of total Missouri assess- ments for years 1961 through 1965. This was taken from the Annual Report of the Proceedings and Decisions of the State T'ax Commission of Missouri and shows that the taxable wealth for 1961, of the State of Missouri, was $7,995,000,000; for 1962, $8,169,000,000, an increase of 2.17 percent. In 1963, total taxable wealth was $8,460,000,000, an increase of 3.56 percent over the total for 1962. In 1964, the taxable wealth was $8,743,000,000, an increase of 3.34 percent over the previous year. In 1965 the total taxable wealth in the State of Missouri was $9,061,000,000, or an increase of 3.64 percent over taxable wealth of previous year. The Witness did not offer figures for 1966 but Counsel produced them at the request of the Commis- sion and this was marked Exhibit JJ, which indicated an increase of one-half billion dollars taxation for 1966 in Missouri without the assessment of the Chicago, Burling- ton & Quincy Railroad Company, said assessment having been enjoined by the Circuit Court of Cole County, Missouri. Witness Reedy testified (Tr. 365) that there was a twenty percent increase from 1961 through 1966; that this EPG LEE ELI: A OR weer 2ST IEG ia 1mm MOLLE A IL OLE DE DLO IY OTR RRR ETE A28 in dollars and cents in 1963 and 1964 was $280,000,000 to $300,000,000; 1964 to 1965, $318,000,000; 1965 to 1966, an increase of $497,000,000; that the increase from 1965 to 1966 was $200,000,000 more, or an increase of 80 percent, rather than 25 percent previously testified to. (Tr. 367). The Commission finds the testimony of Mr. Reedy is in- accurate, deceptive and not worthy of belief, as are exhibits previously so found on which his testimony was based. Mr. Reedy testified as follows: (Tr. 372) ‘*Mr. Brannock: I want to ask some questions pre- liminary to a possible objection. Mr. Reedy, will you read over to yourself para- graph B in Exhibit KK? Witness Reepy: Yes, sir. Mr. Brannock: Do you say that that is a true state- ment of the procedure of the State Tax Commission of Missouri? Witness Reepy: To the best of my knowledge, yes. Mr. Brannock: Are you using this as a factual statement or is it true? Witness Reepy: Excuse me. I was reading B. In fact, I was relating it to the overall procedure. Mr. Brannock: I asked you to read paragraph B. Is that paragraph true? Witness Rezepy: No, I have indicated in the para- graph that there have been changes from Missouri Commission procedures. Mr. Brannock: I just asked you one thing: Is it true or untrue? Witness Reepy: It is not the procedure used by the Tax Commission.”’ A29 The Commission finds that the testimony and Exhibit KK are not worthy of belief. Witness Reedy stated (Tr. 380) that taxpayer’s Exhibit B-3, from which Mr. Travis previously had testified, was prepared from figures Mr. Reedy furnished Mr. Travis. However, Mr. Reedy did not produce the original records of the Railroad to substantiate the figures used in Exhibit B-3. The Commission finds the exhibit and testimony in regard thereto of both Broley Travis and Mr. Reedy are not worthy of belief. Taxpayer’s Exhibit MM was testified from by Mr. Reedy and said exhibit and testimony based thereon is found by the Commission to be of no value and not worthy of belief for the reason that records of the Railroad were not produced to substantiate said exhibit or testimony with regard thereto. The merger agreement was not produced; the testimony of Mr. Reedy concerning merger agreement and the value of the Railroad was hearsay, not the best evidence, and totally unsubstantiated. (Tr. 389, 390, 391, 392, and 393). Mr. Street stated (Tr. 394) that the merger, referred to in the previous exhibit and tesiimony, had been rejected by the ICC; after objection has been made to such testi- mony and the exhibit stating that the merger referred to had been rejected by the ICC. Mr. Reedy’s testimony in this regard is not worthy of belief for up to that time he did not divulge that the merger had not been effected and based his entire testimony and exhibit from a transaction that had never been con- summated. There vas a discrepancy in the number of leased cars under the heading ‘‘Equipment Leased from Others’? (Tr. 396) of thirty-seven cars which were not reported to the State Tax Commission of Missouri but were reported to panto killa ried te A30 the ICC on its Form A, the latter being 245 leased cars and the former being 208 leased cars. Witness Reedy also stated (Tr. 397, 398 and 399) that twenty-five cars leased from Fruit Growers Express Com- pany are not shown in the report to the State Tax Com- mission of Missouri; and twelve freight cars which ap- peared on ICC, Form A, that were not reported by the Rail- road to the State Tax Commission of Missouri, being leased from the General American Car Company. Mr. Reedy also stated (Tr. 399, 400, 401, 402, and 403) that the Railroad was leasing twelve Diesel locomotives ; that he had just the day before found a discrepancy in not reporting them to the State Tax Commission of Missouri and that their locomotive fleet contains twelve more units than he had reported for 1966 tax purposes in Missouri. The Burlington Refrigerator Express Company is a wholly owned subsidiary of the Chicago, Burlington & Quincy Railroad Company; the first paid the latter $2,197,000 in 1965 under contract of rental—such charges are determined between the parent and the subsidiary and are not set by the ICC. (Tr. 448, 449) Witness Reedy testified that it was deducted by Mr. Travis on Exhibit B-3. The value of non-operative property on taxpayer’s Exhibit B-3 is $135,763,000. The Commission finds that the ‘Petition for Rehear- ing’? was subscribed and sworn to by Mr. Reedy in Chicago, Cook County, Dlinois on Friday, July 1, 1966, and because there was no mail delivery on Saturday, July 2, Sunday, July 3, and Monday, July 4, 1966, a holiday, it was not received until July 5, 1966; and that the Rail- road was notified in writing on J uly 5, 1966, that hearing would be had on July 7, 1966, 1:30 p.m., at which time the Railroad nor any of its attorneys, agents, officers or em- ployees appeared before the Commission, nor did they appear at any time during that day; that on J uly 7, 1966, Chairman Phillips of the State Tax Commission of A31 Missouri did answer a phone call left for him by Mr. Reedy on July 7, 1966 at the Commission’s office, but Mr. Reedy was not available to speak to him. Mr. Reedy stated (Tr. 454) that he was in Chicago and kad the operator place the call to the Chairman on July 7, 1966. Referring to Exhibit O for the year 1957 and the year 1966, the assessment per mile for the ten states listed therein was not given. Mr. Reedy had no record of the mileage to testify from. (Tr. 456). Mileage used in the ICC Report, Exhibit 11, Page 401, Schedule 412, Column H, is the total of all miles of all types of tracks, of all types of mileage. (Tr. 456). A lower Assessment valuation can be offset by a high tax rate and vice versa, Mr. Reedy agreed. The Com- mission finds that the valuation of taxable property is not solely determinative of taxation but must be considered with, and the tax rate applied thereto, to ascertain the actual taxation, and the number of dollars paid in taxes. The levy against per mile of track for the year 1965, using Schsdule P, shows the total taxes paid. (Tr. 461). The resulting computation computes the tax per mile of road operated in ten states through which the Railroad operates. The tax cost per mile in the State of Missouri is $1,135.66. (Tr. 462). Colorado $1,022.04 Tllinois 1,833.51 Iowa 1,414.40 Kansas 361.67 Montana 799.40 Nebraska 852.97 South Dakota 414.33 Wisconsin 1,964.89 Wyoming 1,128.03 The main line in the State of Kansas is 12.85 miles, the branch !ine in the State of Kansas is 187.02; trackage A32 miles operated in Kansas, total 18.12, or a grand total of 218 miles operated in Kansas of which 12.85 are main line, On cross examination (Tr. 468) with regard to Exhibit Q, entitled ‘1965 Freight Revenue Per Mile of Line operated in Missouri’’, the revenue per mile of the Rall road is shown to be $21,177; and that of the Santa Ie Railrorad Company is shown to be 882,582. The Witness stated (Tr. 468, 469) that he agrees with the crons examination of question; that the industrial district ef the Railroad in North Kansas City generates or originates more freight than at any point on the Santa Fo Railroad in Missouri and that wouki be true beeause the Santa fe has practically all main line miles across the State of Missouri, a ‘‘bridge state’’, The Santa Fo has no yarde in Missouri; the only large city they pass through ta Kansas City and their yards for servicing Kanaan Olty are in Wyandotte County, Kansas, Me Santa Ko panier through Kansas City, Missouri on the Kansas Oity Ter: minal Railroad tracks, The Southwest Torminal of the Burlington Railroad, of all the line they own in Mixnonrl, ia in North Kansas City, (lay Cwanty, Missouri, The Witness agreed that the Railroad had moro froight Into Missouri than the Santa Ba vet the Railroad's Exhibit Q indicates revenue of $92,589 yer mile for the Santa Fe Railroad and $21,177 for the Chicago, Burlington & Quiney Railroad. The Witness did not pratwee rooords or facta to anb- stantiate Exhibit Q, and the (\wmission finds it tx not worthy of belief, nor the testimony given therefrom worthy of belief. On cross examination, the aeeeement of the Railroad per main line of mite ia shown tw be 800,000; the Miaronri- Kansas and Texas 81K. the Missouri Pacifle— $20,000; Norfolk & Weatern (leased from WabashS — $20,553; St. Louie & Southwestern #23595; Santa Ke— $26,250. ASS Witness Roody stated (Dr. 478), that the road bed condi- tion of the “RKaty’? is rot comparatle with the Chicago, Hurtington & Quirer Railroad. ‘ho Raithead constrected T8235 miles of main line botwoon IMS avd {QW on its Kansas City-Chicago short line within the State of Missowri, The best recollection of the Witness was that it cost 419,000,000. He had no record at the Railvoad with him, on the exact cost. The Commission Mniis from Witness Reedy’s best recollection, that the cast of the eighty miles of rehabilitated and new line in Misewart eorstreeted in 1948-1950, was approxi- Tratoly SEOQOQ QUA, wr £200,000 per mile. ao Raitsoad votarned wire ae to the State Tax Com- misisan of Micsowei at 283 per mile. Witness Reedy tostifleat he wit wot Reow how mach the Railroad he oxponded on tes communication system in the last year. When qiectionad on cross examination if he knew of any place ta Missouri where tax had been paid on the com- niunications eestem, Witness stated this was included in the ‘Pax Couumission’s valvation per mile for roadbed and LUPO UE NOE Witnoae Reedy testified (Tr. 487) that 97% of Chicago, Burlington & Quiney Railroad is owned equally between the Creat Northern ard Northern Pacific Railroad Com- panioe: that of the total outstanding shares, 1,708,387, in LES, anty YOY were traded in, The Commission finds thia does Wok corstitate a market to be used in computing value of the Railwoad: that 97% ownership of a corpore- tion constitutes efective control of said corporation, its dividends its Expenditane of money for salaries and that it woukt alect the selling price of any available shares that wight be offered for sale: that only 48,000 shares are available, those Reine the mamber not owned by the Great Northern aad Northern Pacifie; that only one employee, ar divecton, ie & Majority shareholder owning 110 shares of the Company. ~ ia | BPE A OE fA —— ee 2 —aaa———cscr—O~O~O—eeOoreee ASM On cross examimati@n, eforring to taxpayer’s Exhibit P, Item 3, the Witwess @id not give consideration to appreciation of the teHeawed value of land over acquisi- tion price; some of Whigh Was acquired over one hundred years ago. Witness Reedy farther stated (Tr. 493) that much of the land they eipeiated over, they have operating deeds only, that is, when thoy ceased operating the Rail- road the land revents t® pieperty owners; that there is some question, Compsell xdvived, as to whether or not the Railroad has tithe t@ any of its right-of-way in the State of Missouri; that the Railiead has no revisionary right to this land and that it aitaally has no value other than the easement value tq epeiate the Railroads; that land in St. Louis City (‘P. 494) paichased back before the turn of the century alone the River had a tremendous value; since that day the wale has depreciated quite con- siderably. The Commission fiads this testimony of Mr. Reedy not worthy of belief. On cross examination, the Witness stated that the lands in the Murray Yau@s ta Kansas City are not owned in fee title. The Commission finds this statement is not worthy of belief. Witness Reedy testified the Railroad retains possibly 145 acres of land acqaiied im 1947, as non operative property as distingwinked fiom operating property; that on the report reqwied 4 the Commission in 1966, it is shown of acquisition price only as $213,970; and that it was shown on the 1968 repext t the Commission as its value. Witness Reedy testified What 199.83 acres have been typed into the report to the Commission. The Witness stated that 16.62 acres of right-of-way land were reported to the State Tax Commission of Missouri in 1966 as a part of the 16,343.35 acres thal were Yeported as right-of-way in Missouri; that the vale ax shown on the report is $52.86 per acre; that the nor-eperating property in Clay County A35 had been sold at $14,006 to $15,000 per acre and that he, for the Railroad, put a value on the 16 operating acres of this same addition of $52.00 an acre. On cross examination, Witness Reedy stated (Tr. 506) the assessment on land held by the Railroad for industrial property is roughly $375.00 an acre, on land that sells for $15,000 per acre; that ‘‘it is a specific type of property and it would have a tendency to distort the results of a study.’’ (Ratio study.) On cross examination, Witness Reedy stated that Murray Yards is the West operation of the Railroad in North Kansas City; that the Railroad gave title to ground in North Kansas City not in the Paseo district and reserved easement rights for train operations. Witness Reedy stated (Tr. 513), ‘‘The steel companies say the price of steel is less today than it was 50 or 100 years ago.’? The Commission finds that this is not worthy of belief. It takes judicial notice of the large increase in steel and all prices in the last 50 or 100 years. The Witness did not answer a question as to whether appreciation of repairs they have made te the cars is shown in any of their exhibits. (Tr. 515). On cross examination, Witness Reedy testified (Tr. 518-519) that there were 835 cars built in 1965 in Railroad shops and that 651 cars were purchased, or a total of 1,486 put in service in 1965. This, added to the 482 cars purchased from the Chicago Freight Car Company, totals 1,918. He testified (Tr. 519-520) ‘*Many of these cars will be pur- chased or built, but they will not be getting into our accounts during the year 1965;’’ that he showed in his report to the State of Missouri 1,785 cars. The Commis- sion finds that 138 new cars placed in service in 1965 were not reported to the State Tax Commission in the Railroad’s report to the Commission, Witness Reedy was wmnable to substantiate Exhibit Z, headed ‘‘Age of Commercial Freight Cars’’, which gave A36 number of units as 44,909, while on taxpayer’s Exhibit NN the total units owned by the Railroad, year ending 12-31-65 was 43,157, which coincides with the number of units reported to the ICC as of the same date. Mr. Reedy then testified the difference might be in cabooses and on referring to Exhibit NN, 417 cabooses were shown as freight train cars. Mr. Reedy was unable to explain the difference in the figures and the difference in the exhibits and said he would have to go to the records of the Railroad which he had not brought pursuant to subpoena duces tecum. He further testified on Exhibits 1-A and 1-B, reporting a total of 40,369 freight train cars (Tr. 523) and was unable to reconcile that figure or explain the difference between it and the other two exhibits other than that the 40,369 shown on the State Tax Commission Form 1-A and 1-B does not include 2,741 refrigerator cars, 30 insulated box cars, or a total of 2,788 cars. He admitted there was a dis- crepancy of 2,788 cars in his exhibits. (Tr. 524). In attempting to explain the discrepancy in the number of cars, Mr. Reedy stated ‘‘Exhibit Z was prepared not based on the number of cars of 12-31-65.’’ ‘‘We were not particularly interested at the time of the preparation of this as to the accuracy of number of units.’? The Com- mission finds that the exhibits prepared for testimony before the Commission and the testimony of the Witnesses Broley Travis and James Reedy therefrom, are not worthy of belief. Mr. Reedy testified, (Tr. 526-527) referring to the ICC Report on Page 405, that this is units owned, including investment account and leased cars; in Column B, is the total of units in service at the beginning of the year, 1966 and in Column C, the new units purchased or built; and Column BK, is rebuilt units acquired and rebuilt units re- written into property accounts 432; that in adding Column C and E the total 1,783 cars and Account F, are units that are purchased or leased from others. A37 Mr. Reedy further testified (Tr. 529), that the Railroad’s report to the State Tax Commission ‘‘is not correct by the 12 cars’’. Mr. Reedy was asked (Tr. 530) if there was any way that the figures given to the Commission could be recon- ciled with the report to the ICC. He made no answer. He was asked also if the Exhibits NN and Z could be reconciled with the ICC Report. He made no answer. On further cross examination, (Tr. 530 and 531) he answered he could reconcile Commission Form 1-A and 1-B with the ICC Report, but he then immediately stated, ‘Well, I can have the work done and the reconciliation brought to you at a later date. ...”’ With reference to the ICC Report, Page 404 (first testified to at Tr. 526), Column G, entitled ‘‘Units Retired from Service’’, the Witness was unable to explain the 931 cars listed in that category; and he did not have the information as to how or why he used such number. Mr. Reedy testified (Tr. 533), in his form filed for 1965, to the Commission, he confirms that said return showed 835 units as cars built in 1959; in return filed in 1966, the number of units constructed in 1959 were shown to be 931 units. He was asked to explain the difference of 96 cars. He stated, ‘‘this difference would have to be checked with our records in Chicago to find out why this came about. I cannot answer that.’’? (Tr. 534). Mr. Reedy stated (Tr. 535) there would be some ‘‘carry- overs’? of equipment that had been received but not accounted for. Witness Reedy testified (Tr. 536) that in the 1965 report, 1,485 cars were shown for 1964 construction; that in the 1966 report he showed 1,529 cars of 1964 construc- tion. The number of cars taken out of service by their 1966 ICC Report, is 2,144. (Tr. 537). Pe rape rEey OP eet ALD Ri A38 Mr. Reedy was cross examined concerning Taxpayer’s Exhibit T, Depreciated Investment in Transportation, of $714,821, and stated those expenses are iunen out of current expenses. He was also referred to the ICC Report on Page 306, and was asked the amount the Railroad spent in the year 1965 for the repair of Diesel locomotives, to which he replied $11,419,096. They operate 618 Diesel locomotives all of which is charged directly to expense and nothing to improvements of the operating equipment. Witness Reedy was asked (Tr. 538) what was expended by the Railroad on freight train cars, referring to repairs, and his answer was $12,418,716; and none of it had been added to capital improvement accounts, nor does any go into the Railroad’s investment and transportation account. The same is true of passenger train car expenditures of $5,063,889. Mr. Reedy was referred to Commission’s Exhibit 12, the ** Annual Report of 1965’’, Page 3, and stated that the gross capital expenditures showed thereon for new equipment was $39,633,981. Mr. Street, Counsel for the Railroad, called this answer to the attention of the Witness who then said that ‘‘road in general’’, in ten years spent some $90,742,175; that these were expenditures in the road accounts of the Railroad, 1 through 47, those being ICC Account numbers. He was asked if this was added to the Railroad’s capital improvement account as shown by the Railroad’s investment and transportation property as of 12-31-65, and he gave no answer. He was then asked if it included expense items or accounts, to which he stated, $4,975,000 would have been amounts added to the book capital accounts of the Railroad in 1965; and that the $90,000,000 would have been added to the Railroad’s road accounts in the ten year period. On cross examination he further stated that in ten years the Railroad spent $308,874,388, which would go into the transportation account; that $308,000,000 had been added A39 over a ten-year period and the depreciated capital account of the Railroad is shown on their books as $714,000,000. Witness Reedy testified (Tr. 546) they had bee report- ing to the Commission that the Railroad had 99.45 miles in Clay County and a re-check showed 96.75 miles; there was also the same discrepancy in Jackson County; that the total mileage for the state does come out with thé mileage that the Railroad reported as the total side track in the state. Mr. Reedy was referred back to Exhibit T, Column V; he quoted statements of previous Commissions; other members of the Commission’s staff, newspapers and legis- lators. The Commission finds that this is not the proper method in which to arrive at an equalized figure of 30%. Mr. Reedy testified (Tr. 549) that the ratio studies he had seen indicated that 30 percent is a general level of the equalization on a statewide basis; and that he had seen no ratio studies with regard to the assessment of equipment in the State of Missouri; that he did not know the assessing practice of the three larger subdivisions in Missouri with regard to equipment; that equipment of the Railroad is depreciated to 25 percent of original cost over a fifteen year period and then 47 percent is taken on that figure, leaving, roughly, an assessment of 1114 percent, and off that amount was taken an economic adjustment factor. On cross examination, Mr. Reedy stated (Tr. 556) it was a general conclusion that personal property is not assessed at more than real estate; that this was arrived at by dis- cussion of this matter with others. Mr. Reedy testified (Tr. 559) he could not give the - basis for the $700 value he turned in for a 1965 Ford with closed cab, 64.8 horsepower, 8-cylinder, 4-ton truck; nor how a $10,000 or $12,000 truck could be assessed, in less than a year, for $700. He stated that he turned in for $200 as a minimum assessment, a 10-ton trailer with steel — PEI LONE E WSEAS EV IROPERG PY OOM LEIA E BEE OO IES ENO LEE LITE IDEAS te POSER See A40 siding, 23 feet 8 inches long, 1959 model; that he did not take the value off of any records, or books or depreciated cost, or original cost of equipment. Witness Reedy testified (Tr. 564) in his filing with the Burlington Truck Line of North Kansas City, he did not use any cost, original cost, depreciated cost, book value or any other manner in attempting to set the value turned in for assessment; that the filing was the same as in the other counties he had looked at. The Commission finds that Mr. Reedy put a valuation of $9,000 on ten new trucks purchased in the year 1965, for a value, January 1, 1966, without going to any guide book, ‘thout comparing with the records of the Burlington Truck Lines to find what the depreciated value would be, without attempting to find the original cost; that it was a judgment decision on his part as to the taxable value and would be comparable with the taxable property of other property in the jurisdiction. The Commission finds that Mr. Reedy’s return of taxable property herein referred to, under oath, is not worthy of belief. The Commission finds that it issued an automobile assessment book for use by the assessors of the State of Missouri for the valuation of automobiles and automotive equipment as of January 1, 1966, Commission’s Exhibit 13; that Mr. Reedy said he knew of said book (Tr. 567) and that he did not pay any attention, or follow this valuation book in making his returns of such equipment. The Commission’s inquiry as to returns of all types of property, including automotive equipment, was also made to test the veracity of the Witness and the exhibits from which he testified; that the Commission finds that the testi- mony, exhibits and returns made by James P. Reedy, Tax Agent for the Railroad, are not worthy of belief and are not credible. Mr. Reedy produced maps (Tr. 569) showing the Rail- road’s ownership of land in the State of Missouri and A41 thereon is marked ‘‘Indicates fee simple property’’. Such ownership being shown in red on the maps so produced by the Railroad. Mr. Reedy identified Commission Exhibit 14 (Tr. 5%.) as being the telegram dispatched out of Chicago by him via Western Union Telegraph, at 1:17 p.m., central day- light time, and received at 1:54 p.m. Mr. Reedy testified with regard to taxpayer’s Exhibit U, headed ‘‘Chicago, Burlington and Quincy Railroad Com- pany—1966 Missouri Assessment based on iowa Formula’’; that it showed that the assessment of the State of Missouri, if the Iowa practice had been followed, would be $21,106,894; that the equalizing factor in Iowa is 27 per- cent. Mr. Reedy was cross examined, (Tr. 573) with regard to ‘* Adjusted Net Railway Operating Income’’ and explained that the Railroad reports the net railway operating income as certified to the ICC and certain adjustments are made to the reported net railway operating income to reflect items that are carried as operating income in the ICC report, ‘‘or that are not truly operating income items. They are more closely related to non-operating income.’’ The Witness stated that as an example, the lease rental income received by the Railroad from Burlington Refrigerator Express does not involve itself in the opera- tion of the Railroad; that refunds of taxes from Illinois for 1961-1965, used in the average of net railway operating income which increased the net income by that amount should not have been included in ICC Account 532. On cross examination regarding taxpayer’s Exhibit T (Tr. 573) and taxpayer’s Exhibit V, and the difference of average net operating income between Exhibit T and Ex- hibit V, which resulted in a net railway operating income difference of $1,775,000, the Commission finds that the Witness attempted to mislead the Commission by using LP LALLO IESE AMS CELINE - SP, IEA NELO LE yk TER ION OE REPRE 1G ELM OLE OE Bhi ee BP A42 taxpayer’s Exhibit T and Exhibit V and that they were not worthy of belief; that the amount of dollars difference, (Tr. 574) between the value as shown for the system on taxpayer’s Exhibit T and Exhibit V is $49,452,000; that using the i.verage for Missouri at 15.02 in both exhibits produced a difference allocated to the State of Missouri by each formv’:. The Witness stated that the stock and debt value alone differential is 7.4 million dollars; that the difference of Item No. 3, the ‘‘Net Investment in Plant’’, and the one for Missouri using the Iowa Formula, is $8,000,000 (Tr. 576); that there has been no apprecia- tion shown in the Railroad’s reports from the original purchase of the land. (Tr. 579). : On cross examination (Tr. 583), Mr. Reedy had been asked to determine the tax dollars that would have been paid in the State of Iowa, using the formula as developed for the State of Missouri, by their procedure, and in answering he referred to taxpayer’s Exhibit V, stating that if the Iowa tax rate were applied against the value determined under the Iowa formula, for the State of Missouri, as equalized at 30 percent, the taxes would be $1,615,000; that the $21,106,000 assessment, when the Missouri average rate of $4.02 is applied, produces $848,500 of taxes; a difference of approximately $775,000, ($766,500). On further cross examination, Mr. Reedy was asked to compute the assessment of the State of Missouri to bring it to the same amount as arrived at by the State of Iowa, on the same assessment, and stated, ‘‘ Well, it would have to be close to double.’? (Tr. 584.) The Commission finds that the yield of given tax dollars can be many combinations of assessments and levies,—a high assessment, a low levy—a high levy and a low assessment—will yield the same amount of tax dollars. Witness Reedy stated that in Iowa the Railroad is equalized at $7.65 rate and in Missouri at $4.02 rate. A43 On cross examination (Tr. 590) Witness Reedy was referred to taxpayer’s Exhibit U and stated that based on the Colorado Formula, the Missouri assessment would be $18,288,556. Applying the Colorado tax rate of $5.63 to that taxable value produces a tax of $1,029,645. Apply- ing the Missouri rate of $4.02 to that taxabie value as equalized, produces a tax of $735,200. Applying the Colorado Formula to taxpayer’s Exhibit U, Mr. Reedy was asked to explain where he obtained the figure of $405,871,000, as shown on Line 4. (Tr. 592). He stated it was a weighted arithmetic figure (Tr. 593), when asked to explain the figure of $60,961,855, represented to be the Missouri market value allocated at 15.02 percent; that it was a ‘“‘weighted’’ system value. (Tr. 594). Referring to Taxpayer’s Exhibit V, under the Iowa formula, the Witness was asked what the Missouri market value would have been and he stated $70,356,316. He was referred to taxpayer’s Exhibit W and asked what the full value, equalized at 30 percent under the formula, would be allocated to Missouri and he stated it would be $58,907,715. (Tr. 595). He was referred to taxpayer’s Exhibit T and asked about, what he called, ‘‘Average Above 3 Factors’’ allocated to Missouri, would amount to and he stated $69,072,000. The Commission finds there was a great dis- crepancy in the exhibits and the deduction made therefrom, by Witness Reedy. On cross examination, Mr. Reedy was referred to tax- payer’s Exhibit W, the 1966 Missouri assessment based on the Nebraska formula, and he stated he had no reason for not following, in ‘‘A’’, the net operating income and that this was a reversal; (Tr. 597); that the stock and debt value was $403,144,000, (Tr. 598), compared with taxpay- er’s Exhibit T, which shows a system market value of $343 million. Mr. Reedy’s attention was called to taxpayer’s Exhibit V which reflects a stock and debt value of $293,- Aaa 154,000 and he toatithat Meat Yeo @ierence between it and Exhibit W, for the same items, was 8110 million (Tr. 598). The Witnoas was refered ty Yom B, of Exhibit W, and asked to explain how it Wax advod at. Ho stated it was an average over & four Yoav poydod, 1962 through 1966, of operating ineame, then eapihalived at 7 percent to produce a aystem indicated waarked Vale wider the capitalized in- come approach; and that hic prodneed §100,000,000 lens than was shown on ethos Edits TV, UL (Tr. 600) The Witness stated that welt Yhe Nebraska formula, ap- plication of the Nebradka yale of 86.57 to the equalized full value of the propery ef 817,672,000, produces a tax of $1,161,000; that wadliaadeon wt the Missouri rate thereto, produces a tax of QT QW Aly. Tin being referred ta kaynaver’s Exhibit X, Mr. Reedy stated that @TLASQLOLY yeenoeents The amount shown on the Railroad's Para \ wept as depreciated investment in read and equipmert o Yansportation property. Mr. Reedy atatedt he tit wel Dave Gepreciation schedule (Tr. HO9); that the steam Rearorie Investment is $346,382, undepresiated, ax cheney vn Page 221; and as shown on Form tA and LR Bhd wah the State Tax Commission Report, the amount i ROHS. The Witness was unable to reconcile the Dixceepaeios in the ficures contained in the two reperta (CE) Aaa), Witnewe Reedy wax telthind to taxpayer’s Exhibit X and atated that properdr salos in the industrial district, (North KRanaas (Vix. (ia Conny, Missouri), has been seii- ing at @14,000 an aces Yhat ho did not know the amount of profit upen cach eaoc: Phat right-of-way in North Kanane City be wabredd ah 8)2:00 an rere; that in the Murray and Harlem Vande thee ayo 204.47 rors; (Tr. 610); that the main time rari ef eae Phrongh the Murray Yard is included in the DAAD weros dn the Murray and Harlem Varia, The Withee eta (Py. 612) that the Railroad has 107.87 acres ia Sh. Lic OWoy: that the Railroad owns other AS real prapertiy than this acreage; that the records ef the other aereage wowkd be in [Kansas] Chicago; (Tr. 613) ; that the wrap given the Commission of the St. Louis City Praparties ie wm Rcewrate map. The Wimess stated he caukt Hat give ane examples of depreciation of land in the City @f St. Luowiss that he had left it in Chicago; that such recarets Were swbpoonaed bat were not at the Hearing. (‘Ke BLD. Wiitthoss Reedy was asked if there had been any attompt te aotormine if there had been a gain when he repartet te the Commission an? he stated he had not teken that inte comsiktoration. Witmess Reidy stated that parchases at Palmyra (Mis- sound), daring 19S) and 1966, amounted to 165 acres, an AVERRRE OF MASAO por acre; that there was a purchase in North Kaweas Oltr by the Railroad of .34 of an acre for WLYT.Odhe tat QUIS weres were sold between Cameron and Kearnex, (Missowri}, at $56.38 per acre, being abardoned right ofa, We was unable to state whether the prop- erty had & teversionary clanse In deed of acquisition; that ever EP praperty Loverts, people come along and buy up a «tot Bra tke Railroad In order to get a perfectly clear tithes that there are some abandoned miles from Green City to Mika (Missoni), at S20.88 per acre. He was asked if there Rad Meon any abandonment in Jackson, Clay, Bu- ohana oe St. Sworis City and stated there was some North af Liberix, ie Chor Qoanty, on the Cameron to Kearney lime, averrd telt. The Commission finds such was rural brane time amd side track, The Witness stated (Ty. 619), that the majority of the Hailvoad's 482.56 mites of side track in the State of Mis- waned, fe Raeatad ia major metropolitan areas in which the Railroad bas wand Peotities—Clay and Buchanan Counties, Si, Lewis Gite and West Quincy, Marion County all in Miswarnd, eomsisting of S388 miles in Buchanan County; YOAES writes Oe CRay County; 1447 miles in Jackson County; 41.08 waiters iy St. Lowis City; 8.28 miles in St. Louis County. Pore s 4 i i : Ala iA AUE AP hae we OP ih tank ab My atl i Sind OO NN ASB lad se OR ts) pit Yee PS las As The Witness stated the side tiadk looated in the foregoing five counties had the same wallae as the side track in the outstate area of Macon, Biookfield and Cameron; but that he did not believe What he amount of income generated therefrom had any relevancy. (Tr. 620-624). The Commission fies Uhat My. Reedy’s statement that side track in the fixe cqwaties had the same value as out- state Missouri, is not worthy of belief. Mr. Reedy was refed t@ Page 220, of 1965 Annual Report of the Railroad, Commission Exhibit 12, and was asked where the two-way adios, place in 51 locomotives, were turned in for tax panpores; and he stated that he could not specifically state whether they had been turned in for taxes and that his amxwer would also apply to all com- munications within the system. (Ty. 624-625). He further stated that they were mowhere itemized that he knew of, in the report to the Commission. He stated the Railroad purchased 12 locomotives ta 1965 for $1,579,878. (Tr. 627). He stated that 51 radios were placed in older locomotives; that when asked for comparixon of the cost, turned in on locomotives to the State Tax Commission, that he ‘did not”’ make any change im the figaies. (Ty. 628-629). He was unable to state where ““Dixpatcher-Controlled Wayside Radios were installed at nine locations between. Quincy, Illinois and Kansas City, Missouri’, Annual Report, Tax Commission Exhibit 12, after referring to Page 22, of the Chicago, Burlington & Quaiacy Railroad Company’s 1965 Annual Report, ox that they had been reported and taxes assessed thereon im Missowri in 1966, Mr. Reedy was next refered to Exhibit PP (Tr. 632). 800 box cars had been sed to the Chicago Freight Car Company at $400 each, totaling $320,000, during the year at a flat price of $400 eagh inexpective of the year of con- struction, from 1940-1947 tacluxive. These care were taken out of the reporting accounts to TOC and the Commission. The Witness further testified (Tr. 634) that a Diesel ac- SS eho oad Ad? quired in 1947 carrying total $163,734 investment, was sold for $20,500; that $163,734 represented the total investment in that piece of equipment from date of acquisition to date of disposition, all betterments and all additions, such as radio and the like, would be shown in the $163,734 figure. At (Tr. 637-640), Mr. Reedy was asked about Exhibit UU with regard to leased cars and stated that the Railroad was charged the same lease rate for a car constructed in 1927 as for a car constructed in 1953; and that all such oars were were usable and in service. The Witness again stated that twenty-five care were leased from Fruit Growers Express Company which were not turned in to the State of Missouri for tax purposes, and later stated they were not reported in a rider to the report to the Commission, (Tr. 641). For the purpose of ascertaining the veracity of the Wit- ness and the accuracy of reports filed in the State of Mis- souri, Mr. Reedy was asked (Tr. 644) to produce a copy of the returns and he did produce St. Louis City, Clay County, Hannibal (Marion County), St. Joseph, (Buchanan County) ; but on questioning was unable to show trucks, ete, had been reported and assessed in Missouri, althuagh used or dispatched from fourteen or fifteen points in Missouri. The Witness stated (Tr. 648) that he filed in North Kansas City, Clay County, Missouri, a personal tax return listing $400 for desks, chairs, typewriters, business machines, ete., and that the $400 figure was an arbitrary figure. The Wit- ness stated (Tr. 650) he had no knowledge about how much shop equipment was in Clay County, Missouri, gasoline, nor the number of typewriters, or offices, or time clocks; that he had not made a personal inspection before making a judgment figure of $400 on property in Clay County, Mis- souri. (Tr. 651-652), Mr. Reedy was asked (Tr. 653) for the record of the Rail- road’s equipment cost and depreciated value as turned in for assessment purposes in Clay County and Buchanan County and St. Louis City, Missouri and all other counties where returns had been made. SED tA ot. A i EN RE cir a ER ine AE Benesch bniiibtigighs pt ha SPO AL Oy mada IGE AP AMEE PI Sa RY te ISH ALLA AA EEG Be cbc asibiia its stele, RD 8 SR ck, RRR PTAA NS AERA EP A A48 The Witness stated (Tr. 656) that lubricating oil and other supplies in North Kansas City at $16,660 are stocks on hand in North Kansas City at the Murray Yards for use in the operations there. He was unable to give the Com- mission any specific information as to amount of equipment or property. (Tr. 657-658). The Witness referred to the Railroad’s report to the Commission for 1966, (Tr. 659) reporting the Railroad had a total of 16,343.35 acres of right-of-way. He was asked if there was any reversionary clause in any deed or title to land owned by the Railroad in Murray Yards, on such land having been reported in Missouri at $52.00 an acre, and stated he had not inspected the deeds but that he had, never- theless, set the value of the land at $52.00 per acre; that he had no knowledge of any abandoned right-of-way in the Murray Yards (North Kansas City, Clay County, Mis- souri). He did state that adjacent to their Harlem area, Murray Yards, the Railroad made some sales several years ago on approximately twenty acres, at $5,000 and $6,000 an acre; that they presently own no industrial property ad- jacent to Murray Yards—it all having been sold by the Railroad. The Witness was questioned (Tr. 663) with regard to property in St. Louis and stated he had no knowledge of the present value of the property in St. Louis. Mr. Reedy stated (Tr. 666) that for original cost in the Form required by the Commission, in its report, he had not filed original cost less depreciation, because ‘‘there has never been any specific instructions to that effect.’? (Tr. 667). He further stated he had been reporting 30 percent of the depreciated value of structures and that is the figure that he had de- termined as the value; that the same procedure was fol- lowed for Accounts 16 through 35 (ICC Report) ; that Ac- count 35, ‘‘Miscellaneous’’, consists of miscellaneous build- ings along the right-of-way; that this would be all buildings except those listed in 16, 17, 18, 19, 20 and 31. Rowe A A49 The Commission finds the return figure of $273,000 to not be worthy of belief. Witness Reedy was asked concerning twelve locomotives previously testified to, and not reported to the Commission for taxation, and stated they should have been reported as leased equipment and should be taxed. (Tr. 669-671). Witness was questioned regarding trailers and stated they were shown on the ICC Report, Page 414, as ‘‘com- pany vehicles’’; and also was asked concerning 1,087 ‘‘trail- ers and semitrailers’’, which he stated were piggyback trailers and carried under the heading of miscellaneous equipment in their return to the State of Missouri; that it had been returned to the State of Missouri for taxation on Form 1-C, Miscellaneous Equipment, in the total of $10,870,000, and a total of 1,812 units. The Witness stated that the Railroad had not paid any taxes on any piggyback equipment in Missouri; that the 1,087 trailers and semi- trailers were included in the total value of all equipment shown in Form 1-C, revenue and non-revenue, in the amount of $10,870,379, which represents all equipment as carried in Account 58 (ICC Report). The Witness stated containers, (the character of which is explained at Tr. 677) are a part of the miscellaneous equip- ment (Tr. 678) and that the State of Missouri has not been collecting tax on any containers, the same as on trail- ers, nor had any tax been paid in Missouri on bogies (the character of which is also explained at Tr. 677). Mr. L. Glenn Key was allowed to testify out of turn (Tr. 680) before Mr. Reedy’s cross examination had been concluded, and he was called as a Commission witness. He is General Land Agent for the Railroad, also for the Ft. Worth and Denver Railway Company, and Colorado and Southern Railway Company. On referring to the maps of Railroad land, Commission Exhibit 26A, 26B, 27, 28, 29, 30, 31, 32, 33, 34; Track No. 30 is Murray Yards, Commission Exhibit 28; as is Parcel No. 27, or tract No. 27, Commis- CURR re 4 er asad ich Phe ete Face tae sei or, A50 sion Exhibit 28, being a land ownership map of the Railroad. The Witness stated that the Railroad ownership was out- lined in one long dashed line and two dots, not necessarily as shown in red; and on further examination, stated that the Railroad claimed ownership to two parts shown in red as well as the parts within the two dotted lines. Witness Key stated (Tr. 686) that the maps indicated, in the judg- ment of the men who entered the records in the years from 1883 to 1966, the type deed as indicated in their judgment after reading the deed; that the warranty deed recorded in Book 692, Page 105, general warranty deeds, Recorder of Deeds’ Office, Clay County, was a Holiday Inn site sold to Industrial Land & Airport property, Inc.; that the war- ranty deed shows August 16, 1960, $42,763.50, consisting of 5.031 acres; that in the South and East part of Murray Yards, near the turn-off going into the airport (Municipal Airport, Clay County, Missouri). The Witness testified (Tr. 698) that the Railroad sold on October 19, 1960, to H. N. and A. W. Zimmer III, part of the northwest quarter of Section 24, Township 5. ‘‘That shows we gave the warranty to 10 acres, the price $80,000”’ ; that on September 20, 1961, the Railroad sold 5.50 acres in Clay County for $46,750; that as a general statement of the three transactions checked for 1961, they averaged roughly $8,000 per acre; that Henry Wurst was sold 10 acres by the Railroad, for $100,000, by warranty deed that is indicated and that is in the Paseo District, (Clay County, Missouri) ; and in the same Paseo District, 1.16 acres for $11,600 to T. W. Mast, et al; en September 5, 1962, the Rail- road sold to the Belger Warehouse Company (Tr. 699-670), ‘‘five acres by warranty, $50,000’. The Witness agreed that the sales in 1962 were at the rate of $10,000 per acre and included putting streets, curbs, water and improve- ments to the property but included no buildings; that the ground sold in 1961—1962 had the curbs and streets in- stalled when sold. A51 Witness Key stated (Tr. 701) that the street at the Holiday Inn site, previously testified to was already in and that it was not put in by the Railroad at the time of the sale. With regard to 1963, the witness testified the Railroad sold in 1963, to Sears Roebuck & Company, out of the Paseo District, 39.117 acres for $327,127.95. The Witness testified that on August 7, 1963, the Railroad conveyed to City Investors, Inc. in the Paseo District, three acres for $36,000; that sales in 1963 were around $12,000 per acre; that in 1964 they were approximately $12,000 per acre; in 1965, approximately $14,000; in 1966, the average was ap- proximately $15,000 per acre. The Witness testified (Tr. 704) that there had been ap- preciation of value of land of the Railroad in North Kansas City, but that he had no record of what the Railroad had paid for the land; that efforts were being made by the Flour Mills of America to sell ten acres adjacent to the Murray Yard for $600,000; that on part of the land is a mill and an old milling house. He stated that the probable value (Tr. 708) of a 600 acre wheat field, known as Norman Beaman property, to be worth about 20¢ a foot, but that it could not be bought—it was not for sale; that the City wants considerably more than 20¢ a foot; that he thought it could be bought at about 50¢ a foot; that 50¢ a foot would be around twenty to twenty-five thousand dollars an acre. The Witness testified that the Railroad sold 233,616 square feet, at $175,212. (Tr. 212). ‘The Witness was referred to parcel marked No. 84 (Com- mission Exhibit 33) and stated it should be shown in red, and parcel No. 84 and No. 83 were sold from Adelaide south to approximately Prairie to Shell Oil Company. The Witness testified that in 1964 they sold two acres to Cum- mins Diesel Sales Corporation, by quit-claim and special warranty deed for $34,848; that this property is north of the Burlington Railroad roundhouse; that the Railroad : i iy t ; i Hy » : SSCP ORE ee | Die Dic itt Mn ie Ct ihn i teas LPT OR gt a ‘ Ri aisbe : A52 owns the land east thereof; it owns parcel No. 19; that said parcel is next to land sold for $17,000 an acre (Tr. 717). Witness Key testified that the Railroad’s 6.87 acre tract in St. Louis City, previously testified to, was transferred to Burlington Truck Lines cost on book—$8,256. (Tr. 718). Witness Key testified (Tr. 720) that on October 7, 1960, the Railread gave the City of St. Louis a quit-claim deed to approximately 15.975 acres, for $43,530; that this was in the dump area of the land previously testified to. The Witness stated he had the cost of this land in Chicago, but did not have it with him; that for $3,750 they bought roughly 95,000 square feet of land—‘‘actually, these were clearance of title;’’ that 361,990 square feet, just under 9 acres, was quit-claimed to the City of St. Louis in 1961, for $129,716.23. Mr. Reedy’s cross examination was continued at (Tr. 724). He stated (Tr. 726) that there are 1,480 units of revenue equipment included in Account 58, made up of trailers, vans, containers, flatbed trailers, chassis, pole trailers, bogies, in which the investment is $8,602,220, orig- inal cost. (Tr. 727). The Commission finds there has been no tax paid on this property in the State of Missouri. Mr. Reedy was asked where the communication was re- ported in the State of Missouri for taxation and he stated it was reported at Question 16, Page 2, of Commission Form, which asks for miles of telephone and telegraph lines in Missouri, and the value per mile; and that this information had been filled in by the Railroad. He was then questioned as to where he received $283 value per mile as shown on the report. He stated he did not have any record of where he arrived at the $283 per mile. (Tr. 729). A53 Mr. Reedy’s attention was called to Page 220, (ICC Report), where original cost of communications system was given as $29,560,000; and to Railroad’s 1965 Annual Report, Page 22, Dispatcher-controlled wayside radios in- stalled at nine locations between Quincy, Illinois and Kansas City. Witness stated this meant this went under the heading of ‘‘Communications’’—and that it goes into telephone and telegraph. He was asked if he added any- thing to the value of this for these improvements and stated that the value per mile was adjusted for between the 1965 report and the 1966 report for communications system. He was referred to the 1965 report which shows $283 per mile; the 1966 report indicated $283 per mile. (Tr. 730-731). Witness Reedy said the $283 figure did not come off of any book; that for the figure to be the same amount of dollars and cents each year, would be impossible. He stated (Tr. 732) he had never previously been asked to give information of this nature before the Commission, except last year, he was asked what the cost per mile was to build a railroad. ~ At (Tr. 734), Mr. Reedy was referred to Clay County Assessment on small tools, shop machinery and equipment. He stated that roadway small tools, Account 38, has an investment of $197,000 at the start of the year. He stated he could not furnish the details of that amount; (Tr. 735) ; that he had no knowledge of the amount in this account in Clay County, North Kansas City, Missouri, at the Mur- ray Yards. He was then asked concerning an Account 44, Shop Machinery, and stated this would be car building, Diesel repair facility and coach shop; and that no shop of this type was operated in Missouri. (Tr. 736). The Witness was asked concerning the 584 cars that went into service in the year 1964 and stated he did not have a breakdown of the cost of these cars; that he just had a breakdown of the cars that went into service in 1965, ‘ ITS EE 4 TL EPL OE 3 ih i. ate BE AP PRCA EE Prien es NE EER WES be LETTE GENE SOIOCLE 8, A LEAOL LDR, TID I pe Ae FD OLLI PLAGE SIAN A54 which was $25,776,816, on freight train cars. A compa- rable figure on the ICC Report is $30, 684,315, (Tr. 736). Mr. Reedy said two items should be deducted from the $30,684,315 figure—six gallery cars, cab-controlled gallery cars used in suburban service in Illinois and 28 gallery cars used exclusively in suburban Illinois and the 12 loco- motives. (Tr. 737). Mr. Reedy did not have the figures of foregoing equipment broken down. Witness Reedy was next referred to warehouse and ele- vator in North Kansas City and/or Clay County, Missouri, which refers, on Page 230 B, to $700,000 investment. $1,400,000 is shown as the value of this elevator and Mr. Reedy was asked to explain the difference between these returns. He stated that the cost of rebuilding the elevator after the explosion and fire in the 1920’s and various minor charges, have been capitalized over the years that have accrued, were not included. In the Report to the Commission, he stated that a valua- tion was made by the Clay County Board of Equalization in 1963. He was asked why he did not report on Form 13-C the owner’s original cost of land and buildings and he stated that ‘‘I have not included all of the items in the cost of structure.’’ (Tr. 738). The Commission finds that the Railroad did not follow the form in reporting the value of the grain elevator as prescribed by the State Tax Commission of Missouri. Mr. Reédy was then questioned by Commissioner Davis and referred to Exhibit J (Tr. 740-751), which is the Rail- road’s petition to the Commission for this year stating that he signed it under oath and stating in part, ‘The Commission intentionally, or under such circumstances that it would not have resulted from an error in judgment, and under conditions resulting in constructive fraud as to this taxpayer for said year 1966, has failed to take into consideration all factors which relate to the value of A55 Protestant’s said properties, and has given too much weight and consideration, to the exclusion of other rele- vant and important factors, to some factors relating to value.’? The Commission finds he did not have proper cause to make such a statement and that he did not ex- plain what he meant by such a statement, alleging con- structive fraud or that he was unable to state where con- structive fraud existed. Carl A. Norfleet was called by the Commission as a wit- ness (‘I'r. 757) stating he was Supervisor of Taxes of the State Tax Commission of Missouri for the past two years and for the previous six years had been supervisor of Excise Taxes and previous to that Agent and Supervisor of Franchise Taxes; that he had computed public utilities distributable property taxes and in so doing, made com- putation and value of distributable property of railroads ; that the market value of such property is not known and possibly never will be known as such a value could be definitely determined only through an actual sale between a willing and able buyer and a willing seller, not under compulsicn to buy or sell, and sales of real property of the type and size of the roads operating in Missouri are extremely rare and practically non-existent, and, there- fore, the Commission value is an estimate and any other value placed upon the property by anyone using any method they may devise is also an estimate; that no taxable value can be determined that is entirely factual and any ap- praisal for tax purposes is not an exact science; that the responsibility of the Commission in regard to the assess- ing of a factual value of such property lies mainly in two areas: One, that the method of assessment as employed should not be discriminatory as compared to assessments of like property. Two, that the valuation determined by the Commission must be a reasonable one; and that this is the policy of the Commission followed by the Witness in making the tax assessment of the distributable property of all railroads in Missouri. This procedure is set out at ABE (Te, TIS TRAD wad Ghe Commission finds that they correctly stated the preeeare Benmined by the Commission in the naxqaament wf wd Ratrord property; that the final assess- ment ix wate Ye tke Clmmission after Mr. Norfleet has applied Uke Comriesion’s Yrothad to the property of the Railroad Mr. Naveed eehorend to Commission Exhibits 15 and 16, stating the Wateton on Heidi 16, was taken from reports of the prevtoac eae WiFhORt Adjustment. The valuations om RxXiiitt BS were Wade HpoN those records but show a redaction Ba wate, Pho Witross stated (Tr, 761-762) that BXRit BD ik te wae Weed Pn Fhe determination of the valun- tion af SQUAT, & Behe For the Railroad’s distributable property Ree BAAR Peo eAhject of this hearing. Mr. Nor- eet stated Chat aa wore Valo Was taken from the ree- ards showte Ge wateation 27 860 per acre that had been weeeed Ta RRR aed WDD): Phat Phis was prosent in the records but Be GL wet Rew erecth how such value was detor- waiteeads URAt BE Was WORT WITh YORAM to Value of buildings wrt ether Reed Prapenge Which were reported by the Rail- read te Rave & Wateo of RIVWANVHB,: that fi had been reported as arigtaal ea Ye FRis Riere Boze adjustments were made avd wees aeaoad Qo the addition of the values which hart Beem teed Ae Phe Reload and restored by the Com- mission, Da Preaek Hho POP, Pesulting in the figuro of SIBAMIA WAR was HroNdad upward by the Commission, wetag the Perrerea Rare of 226.566, which resulted in & taxade wake ef SQHOET for the buildings and other fixed spi a Bae Wet oh way in Missouri. He stated be Rat we WANT Hehe? Soet ax reported in the build- ings are ether Med Property on the right-of-way, is not earreekty Shows PAT PW straying this year’s report and reperts ef Past Weare, the amount brought forward is shown aa the Race ef same of the Railroad's reports under Urrighaed Cast, a Pe WRG vt, is a total of the amounts reparted Ry the eawneies oh Horm 2 and under the heading there aan that Rowe ot watea, on the various county shoots A57 it ix woted that certain pieces of property have been re- ctucedt Boma Yeat to pear. The original cost of a turntable ik TMED was Wow to be $15,000. Tn 1966, as $8,180. The Depat at Likerin, Missouri was reported in 1962 to have & value of 3893, dr 1966 it was incladed in the original Cort AMAL wt BLES: Chat Daildings and other fixed prop- erty Oh Hghtofway on a mileage percentage was com- prtect te Be Rees than Il percent of the apportioned value of buiktinge amd other fixed property to Missouri by allova- tion Baetlkend, At (Ds. THO), We. Norflect stated a reduction in main tine wale a 1866 Prom $22,665 per mile to $20,000 per waite; that Uke tedheetion Was made on the main line valua- tio at the teqrest of Mr. James P. Reedy. Mu. Neowteet was asked to explain Exhibits 17, 18, 19, art 20 ad Pow Re weed them in his calculations, stating WxXhidtt IT ws a Breakdown In valuation of each type of track of all vallraads i Missouri and offered for the pur- pose af chewing wo Giserimination against the Railroad on the Basis of Wee walkes; Exhibit 18 is an extract from the CORMMIRMION Hecords Showing cxact value used on each type of Kine Ra the past five years. Te was not used in this year's cabbwhation, exeapt for the 1966 figures, and it shows tat the wrain Ye valve has been reduced beginning in I9GD with a wale of 29.863 por mile. (Tr. 766), that in LOOK, A Was RAO per mile; that it shows a slight raike DR second Wade Bre, and a reduction in branch line ir TES aud WS: wad Phat it shows the value of side track AX LOMRATATAR COMStAMt throughout the years. Exhibit 19 ix am extiact Dom the Commission records of ‘Le valua- tion par acre Of Wiehtofway used in making the 1966 as- KORROMES WR Lhe Haltoads shown. Tt is used purely for infararatiion te whow the valve used iin the original caleula- tion af the Raitroad was consistent with the value of other raihroads, ‘Me Bartington Railroad value is $60 per acre; the mata Dae of fret Glass railroads are about the same. Ax The Witness, in explanation of Exhibit 20, stated it was the average value of the Gixtibatable property per mile in Missouri and shows Bwaber of Miles main and branch lines of each railroad operated ia Missouri; that it shows the Missouri distribatable property value as determined by the Commission and it breaks down on an average per mile. The Exhibit inchades all distributable property which includes rolling stock, Daildings, fixed property, on the right-of-way. The parpere of this Exhibit was stated to be that no discrimination im determining assessed value was exercised on the Bartington Railroad. Mr. Norfleeg stated that the average distributable prop- erty per mile as showa da Exhibit 20, is $31,238; that the average of the Bariiagton Railiwad is $26,085 and the valuation of the other yoads ave as shown from a low of the Missouri-Kansas-Texas of $17,718, to a high for the Santa Fe, of $51,311, and the Norfolk & Western, of $55,052. Mr. Norfleet stated that on Page 543, of the 1966 Transportation Manual published by Moody’s In- vestors Service, Ine, it shows that in 1952, the Burlington Railroad issued bonds ia the amount of $25,000,000. Under the heading showing the purpose of this issue is this nota- tion, that $12,460,100 be waxed t retire some outstanding obligations at that time, and that the remainder be used according to the wording of the purpose for acquisition and construction of new Hine Wetween Missouri City June- tion and Needles Junction, Missouri, leaving in excess of — $12,500,000 available for the construction of this new main line track, of T4 miles; and that baxed on this information, the minimum ¢ost of this Tine at that time would have been $169,918 pex mile, When asked concerning availiable knowledge of any other construction of new railyoads iy Missouri, the Witness stated the Annual Report of the St. Louis & San Francisco Railroad, as of Deceraber 31, 1965, etates they were build- ing 32.7 miles of new fine ta the recently owned mineral 8 Su pee ae WA URE ON fennel ~~ 9A AA ON) NU NOR an A59 development in Crawford and Iron Counties, Missouri; and that this track would cost $6,500,000, or an average construction cost per mile of $198,776, which would be classitied as branch line as it is merely an extension of an existing branch line of this railroad into that area. Mr, Norfleet was asked as to computation in valuing the rolling stock of the Railroad and stated that the Railroad reported the number of units of rolling stock, the type, age and the original cost of these units; and that the Com- mission allowed depreciation of rolling stock of the Rail- road and all railroads at the rate of 5 percent per year until a base of 25 percent of original cost is reached, which is not reduced further as long as such items remain in service, except that this depreciated cost is then equalized at 47 percent, which means 47 percent of 25 percent on the original cost after fifteen years, or an ultimate valua- tion of 11.75 of original cost on such property. The further procedure was that the depreciated original cost of the Railroad was $205,440,024, and to this was added the value of leased rolling stock in use by the Railroad totaling $209,911, or a total of $205,649,935, which was then equalized at 47 percent, causing an equalized value for the purpose of taxation of $96,665,469 on rolling stock. The Railroad has 8545.12 miles of track everywhere; in Missouri, 1,283.61 miles; the Missouri miles being 15.021 of all the Railroad’s miles. This 15,021 was applied to $96,665,469 rolling stock valuation, thus making the Mis- souri allocated portion of the rolling stock $14,518,618. To this total was added $8387 representing Missouri’s por- tion of the value of 37 leased cars valued by the Commis- sion at $1,500 each, which were shown in the ICC Report of the Railroad but were not shown in their report to the State "ax Commission of Missouri, making the total value of rolling stock of the Railroad for 1966, $14,526,955. The value of roadbed previously testified to, is $19,350,233. To this is added the fixed property on the IEE ett Oe ROR Re Se ce te eet en ee A60 Railroad right-of-way, $906,067, rolling stock $14,526,955; from this amount an economic obsolescence deduction was made by the Commission of $1,353,384, resulting in a total taxable value for 1966 on distributable property of the Railroad within the State of Missouri for the purposes of taxation of $33,429,871. Mr. Norfleet stated that the economic obsolescence ad- justment used in 1966 was calculated by considering the Railroad’s total investment in transportation property, $1,023,057,867, comparing this with its net railway operat- ing income, all for 1965, from the report submitted in 1966. The 1966 report of the Railroad to the State Tax Com- mission is accompanied by the Form A, or ICC report for the previous year ending December 31, 1965. (Tr. 775.) Mr. Norfleet testified that with its net railway operating income in the amount of $20,423,802 and then subtracting the resulting percentage of 1.99 from a desired potential income yield of 10 percent, this developed an economic obsolescence percentage of 8.01 per cent and resulted in the deduction or economic obsolescence of $2,913,281. The assessment of the Railroad for 1966 was first set by the Commission at $34,817,172, which was reduced by the foregoing calculations to $33,429,871; even though the rolling stock of the Railroad had increased considerably in the year 1966 over the year 1965. The same pattern and formula was followed in the development of computa- tions of all of the railroads in the State of Missouri. (Tr. 776). Mr. Norfleet was asked what he had done in regard to developing valuations since July 8, 1966, when the matter was sent to the Commission on remand for further hearing by the Circuit Court of Cole County, Missouri, and he stated he had been checking the value of the acreage of the right-of-way of the Railroad, and that he had found A61 from information in the Recorder’s Office in Clay County, Missouri, the following transactions: 1. Exhibit 36, (Tr. 777-782, inclusive) sale of 39.177 acres to Sears Roe- buck and Company, February 11, 1963; consideration $327,127.95. Item No. 2: Sale date January 5, 1962, from Burlington Railroad to National Bellas Hess, 13 acres; consideration $110,500. Item No. 3: Sale date September 26, 1962, to Printing Park Corporation, 10 acres; consideration $100,000. Item No. 4: Sale date, May 29, 1962, consideration $950,000. The Commission finds that this sate included some improvements and is not for land alone. Item No. 5: Sale date July 9, 1965, to the City Inves- tors, Inc., 3.94 acres ; consideration $55,500. Item No. 6: Sale date, August 7, 1963, to City Inves- tors, Inc., 3 acres ; consideration $36,000. Item No. 7: Sale date August 10, 1966, to John W. and Larry B. Belger, 3.96 acres; consideration $59,160. Item No. 8: Sale date June 8, 1966, to Stephenson Yost Steel Company, 4 acres, plus fraction; consideration $60,000. Item No. 9: Sale date January 4, 1966, to Weyerhauser, Inc., 4 acres, plus fraction ; consideration $60,380. Item No. 10: Sale date December 30, 1965, 5 acres; con- sideration $70,000. Item No. 11: Sale date March 11, 1954, from B. Fleming Company to Equitable Life Insurance Company, 8 acres ; consideration $60,000. Item 12: Sale date August 1, 1957, Clorox Company, 214 acres ; consideration $26,000. Item No. 13: Sale date June 12, 1959, to H. J. Cole Com- pany, 1.83 acres ; consideration $60,000. CRNA ARB ee ALO tilly 3 AG aR Pee. SBibesibe A ra pay Limca ihe hy So ¥ Vex eh pe th AM Sle AIT ah Rl a oe ne: ail Se ee ee A62 The Commission finds that all of these properties border on or are adjacent to the right-of-way and are served by the Chicago, Burlington & Quincy Railroad. Witness stated he had knowledge of comparable railroad property in Missouri, that being Terminal Railroad Association in St. Louis and the Kansas City Terminal Railroad Com- pany in Kansas City, Missouri. He was asked whether he had knowledge of any comparable property to the Mur- ray Yards of the Burlington Railroad property and he stated that the St. Louis Terminal Railroad Association and the Kansas City Terminal Railway Company were not comparable; that while they had large assemblages of switch tracks and various railroad tracks, there was a difference in that the Murray Yards is operated in direct conjunction with a large industrial area to which this Rail- road (Burlington) has an exclusive or a monopolistic entry and right to do business through the control of the access to the industrial area surrounding it. The Witness stated (Tr. 784) that he had been in, and examined, and was familiar with the Murray Yard, St. Louis Terminel and the Kansas City Terminal yards and to his knowledge they were the three largest in the State of Missouri; that they have main lines as well as side tracks and second main lines and in his opinion, the North Kansas City Yards of the Railroad, is the most valuable not only because of the value of the land itself, but also by comparison of sales; and it also has another large value in that where this yard lies in itself almost creates a mo- nopoly of doing business within that large industrial district. Witness Norfleet testified the Burlington bridge at the North Kansas City yards and the ASB Bridge (Armour, Swift, Burlington) are the only accesses between Kansas City, Missouri and North Kansas City, Clay County, Mis- souri, for rail purposes. The Wabash has a main line through this area but uses the Burlington bridge and has f renttesows A63 no access to the industrial district; merely passes through the area. The Burlington also has its main line running through the district in addition to its second main switch, branch and side lines, previously testified to, in this district. At (Tr. 786) Mr. Norfleet was referred to Exhibits 27, 28, and 29, which are maps of the Murray Yards furnished by the Railroad, and stated the valuation of the right-of- way of the Kansas City Terminal Railway consisted of 258 acres on which the Commission placed a value of $3,080 per acre; that the right-of-way of Terminal Asso- ciation of St. Louis consists of 480.58 acres, valued at $3,080 per acre; that the valuation on the Murray Yards property [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385604_0441%3A2. Public record. Not legal advice.