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Hudson & Manhattan Railroad Co. v. Board of Public Utility Commissioners

Decided: November 30, 1951.

HUDSON & MANHATTAN RAILROAD COMPANY, A CORPORATION, PETITIONER-APPELLANT,
v.
BOARD OF PUBLIC UTILITY COMMISSIONERS OF THE STATE OF NEW JERSEY ET AL., DEFENDANTS-RESPONDENTS



Jacobs, Eastwood and Bigelow. The opinion of the court was delivered by Eastwood, J.A.D. Bigelow, J.A.D. (dissenting).

Eastwood

The Hudson & Manhattan Railroad Company (hereinafter referred to as "the Railroad") appeals from the final decision of the Board of Public Utility Commissioners, Department of Public Utilities, State of New Jersey (hereinafter referred to as "the Board"), denying the Railroad's application for an increase of its intrastate fare from five cents to ten cents. The City of Jersey City (hereinafter referred to as "the City"), protested the fare increase and participated in the hearings before the Board.

The Railroad operates an interurban rapid transit electric railroad transporting passengers between points in the States of New Jersey and New York and intrastate within those states. The Railroad asserts that since 1934 it has operated its railroad at a substantial loss; that its deficit from railroad operations for 1949 was $1,986,579.06; and that its estimated deficit for 1950 is $1,423,978.75. On November 18, 1949, the Railroad filed with the Board its petition for the aforementioned fare increase -- its first application for such an increase during its 40 years of ownership. On March 19,

1950, the Board scheduled a hearing for April 26, 1950, which, after ten sessions, was concluded on August 2, 1950. The Board handed down its decision on February 15, 1951. The Interstate Commerce Commission has approved an increase of the Railroad's interstate fare from ten cents to fifteen cents, and the Public Service Commission of New York has increased the intrastate fare from five cents to ten cents.

In its decision, determination and order, the Board stated, inter alia:

"While the record contains exhibits purporting to show the investment in the property as a whole, devoted to interstate and intrastate service, the exhibits are compiled from the books of account of the Company. No evidence in support of the book entries was introduced. We are asked to accept the entries in the books of account of the Company at face value. This we cannot do under the above quoted Decision. (Public Service Coordinated Transport v. State , 5 N.J. 196 (1950)). (Parenthesis ours.)

Neither evidence of the cost to reproduce the property at the time of the inquiry nor other evidence on the basis of which a 'property valuation' might be established was introduced."

The Railroad contends now, as it did consistently before the Board, that:

"The Public Service decision is definitely not applicable to the Hudson and Manhattan Railroad, which has been a deficit carrier for more than ten years. It is limited to cases where a utility asserts a need for the revenue because it wants a fair return, not to supply revenue to meet costs.

The Public Service decision was upon facts and contentions related to the reasonableness of the rate or amount of return whether equated to stock or property value (supra , 5 N.J. 223). The Court holds that adequate proof and finding of rate base are essential to a valid conclusion on the reasonableness of the return prior to fixing fares. In the present case, the segregated revenues and expenses applicable to the intrastate New Jersey service showed a long continued absolute loss on the forty-year old original five-cent fare. It follows that no test of rate of return is involved and hence no use exists for a current segregated rate base.

The special deficit theory that should be applied to the Appellant is simply that a rate base need not be made out if the record by competent and adequate proof establishes the revenues, operating expenses, rentals, fixed charges such as interest costs, the reasonableness of ...


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