Capitalization of net earnings.-In the Eastern part of the United States the usual rate of capitalization for investments of this class is 5 per cent; in the Western States, 6 per cent. It should be higher in Santo Domingo, where the prevailing rate of interest on short-time loans is about twice as great as in the United States. Taking it at only 7 per cent, which is certainly not too high, the capitalization becomes $1,467 0.07 $20,957.14, which represents the value in gold of the bridge and franchise. December 20, 1895, calculated from net earnings on the assumed data. From this it would appear that the franchise is not of value. The investment, instead of realizing 7 per cent or more, will realize only 2 per cent.

It would appear that the city, in exercising its power to fix rates, has established a schedule that is too low. It has the power to raise the rates, and if this were done it would probably result in an increase of revenues. Unless an increase in

net revenue can be realized, the investment is unprofitable and the valuation is not increased by considering the franchise as an element.

That this is an unsatisfactory way of calculating the value of the bridge will be apparent on a slight examination of the data on which it is based. The principal uncertainty is in the estimate of gross earnings; it is an attempt to predict the growth of business, and the result, under any known conditions or in any country, the United States or Great Britain for example, would be extremely questionable. If the Republic of San Domingo should again be the scene of frequent revolutions, as was the case before the Government came into the hands of its present strong executive, the earnings might become much less than at present and the property itself would be in great danger. On the other hand, if the revenue anticipated by the owner should be realized, the capitalization would be greater than stated above by $14,071, making a total of $35,028. This amount is less than half of the actual cost of the bridge, and it follows that, even if the owner's estimate of earnings were correct, the bridge would be an unprofitable enterprise without a revision of the schedule of tolls. If the receipts from tolls could be increased 56 per cent above the amount assumed for this valuation, the net revenue would be equal to 7 per cent on the investment and it would be fairly profitable. The great change in estimated value resulting from a comparatively moderate change in earnings is very noticeable and strongly discredits this method of estimating value in cases like the present.

The reserved right of the city to regulate the tolls or to "control" the revenue, as it is expressed in the concession, is extremely important in connection with the valuation. Its purpose is to prevent the imposition of a schedule of tolls which would return excessive profits to the owner of the bridge. If the schedule should prove to be too high from this point of view the rates would undoubtedly be reduced. On the other hand, if the schedule should prove too low, the owner would demand a new schedule imposing higher rates; whatever the change, it would be, if equitable, for the purpose of securing to the owner a fair return on the investment and no more. If, then, the "control" of the revenues means an adjustment of rates to return a fair profit on the investment, it is useless circumlocution to base a valuation on earnings instead of the investment to which the earnings will be adjusted. The "control" of the revenues as expressed in the concession can have no other equitable meaning.

I hold, therefore, that the valuation of the bridge is not increased above its actual cost by the concession and franchise; that the method of valuation from net revenue is inapplicable in this case, and I base the following award on the actual cost of the bridge, deducting those expenditures which were clearly unwise and also deducting for the natural depreciation of the structure up to December 20, 1895. An allowance for interest on invested capital during construction and an allowance for expenses and personal services of the owner during the same period are included.

AWARD FOR THE OZAMA RIVER BRIDGE AND FRANCHISE.

I, the undersigned, engineer appointed under and in pursuance of an agreement heretofore made between the Government of the United States and the Dominican

Government to survey the Ozama River bridge at Santo Domingo City and to assess and award the value and amount to be paid by the Dominican Government for the said bridge and the franchise and concession therefor in pursuance of the terms of said agreement, do now make this my final award, as follows:

I award that the Dominican Government shall pay to the Government of the United States the sum of $74,411.17 in gold, with interest at 6 per cent from December 20, 1895, in full satisfaction of the claim of Henry W. Thurston for the said bridge and the franchise and concession there for.

This award is made without prejudice to any right the said Henry W. Thurston may have to payment for the passage across the bridge prior to December 20, 1895, of persons belonging to the police, military, or postal service of the city or the Republic of Santo Domingo, consideration thereof being expressly excluded from this arbitration by the terms of said agreement.

CHICAGO, ILL., May 20, 1898.

ALFRED NOBLE.

Mr. Powell to Mr. Day.

No. 68.1

LEGATION OF THE UNITED STATES,
Port au Prince, Haiti, July 9, 1898.

SIR: I have but little time to prepare this dispatch, as the steamer sails from here in less than an hour. The Santo Domingo mail has just reached me. I inclose copy of General Heureaux's letter in reference to the Ozama River bridge incident. I know from personal observation that there is at this time very little money, and that it is impossible for them to pay the whole sum in cash.

I also send inclosed draft for the expenses of Mr. Noble for $1,489.02, sent by the President, draft No. 10137 on Muller, Schall & Co.

I have, etc.,

W. F. POWELL.

[Inclosure 1 in No. 68.]

General Heureaux to Mr. Powell,

SANTO DOMINGO, June 21, 1898.

SIR: I have the honor to acknowledge the receipt of your note No. 33, June S last, informing me of the award made in the settlement of the case of the Ozama River Bridge. In it you advise me that the decision of Mr. Alfred Noble, the engineer appointed by your Government to examine the structure, awards to Mr. Thurston the sum of $74,411,17 with interest at 6 per cent from December 20, 1895. For professional services, your Government allows Mr. Noble $1,489.02 in conformity with inclosed vouchers. For this latter sum, you ask that I transmit a draft on any reputable firm of New York, and you also request that I close the matter of the other payment as soon as possible, suggesting that each day's delay only adds to the amount and postpones the transaction which will give me ownership of the bridge. In compliance with your request, I inclose a draft for $1,489.02 in your favor, at three days, against the house of of New York. This I hasten to do as promptly as the means of communication between Port au Prince and this capital will permit.

As to the desirability of completing the transaction as soon as possible by the payment of the total of the award, I am entirely in accord with you. On the other hand, it is not necessary for me to point out to you, who have so intelligently and thoroughly studied this country and its

FR 98-19

resources, the great difficulty which will be experienced here in securing so large a sum of money. According to the estimate accepted by Mr. Noble, the gross annual revenue of the bridge does not exceed $5,000. So the earnings of the bridge can not be of any considerable assistance. I need not remind you that the revenues of this Goverment are mortgaged for the payment of our foreign debt and that the Santo Domingo Improvement Company, of New York, which directs the business, pays to this Government the sum of $60,00 monthly. With this sum of $60,000 monthly we must pay all the expenses of the Government. It must, therefore, require no argument on my part to demonstrate to you our utter inability to pay the sum of $74,000, with interest, in cash. You are so familiar with our condition that I trust you will make clear to your Government that some arrangement for partial payments will not only be an act of consideration toward a friendly Government of so very limited resources, but also one which is made necessary by our limitations.

I therefore beg you to submit to your Government this plan of partial payments:

Cash

January 1, 1899

July 1, 1899

January 1, 1900, balance with interest from December 20, 1895.

$22, 000 22,000

22,000

It will be with great sacrifice that I will be able to fulfill these terms of payment. I submit the proposition to you with confidence that, with your intimate knowledge of our limitations and your cordial attitude toward my Government, you will recommend it to the honorable Secretary for his acceptance.

Accept, sir, etc.,

ULYSSES HEUREAUX.

No. 45.]

Mr. Day to Mr. Powell.

DEPARTMENT OF STATE,
Washington, July 19, 1898.

SIR: I have the pleasure to acknowledge the receipt of your No. 68, of the 9th ultimo, in regard to the terms proposed by His Excellency the President of Santo Domingo for the settlement of the Ozama River Bridge claim, in view of the decision of Mr. Alfred Noble awarding Mr. Thurston the sum of $74,411.17, with interest at 6 per cent from December 20, 1895. The terms proposed by President Heureaux are as follows:

Cash...

January 1, 1899
July 1, 1899..

January 1, 1900, balance with interest at 6 per cent from December 20, 1895.

$22,000

22,000

22,000

I am charged by the President to express his gratification at the prospect of an early settlement of the long pending claim, and to say that the mode of payment is entirely satisfactory to the Government of the United States, which has no wish to exact harsh or onerous conditions from that of the Dominican Republic.

I accordingly telegraphed you to-day as follows:

Sixty-eight, July 9, received. Proposed settlement Ozama Bridge claim satisfactory. Collect and transmit $22,000, first cash payment.

The draft No. 10137, dated July 4, 1898, on Messrs. Muller, Schall & Co., of New York, for $1,489.02, in payment of Mr. Noble's expense account, has been indorsed to his order and forwarded to him. Congratulating you upon the happy termination of this incident,

All

SIR: I respectfully inclose four drafts, representing $44,000.02, being the first and second payments on the Ozama River Bridge claim. the drafts represent the first of exchange, second sent by next mail, and are drawn in favor of American Government.

I have, etc.,

W. F. PowELL.

FRANCE.

RECIPROCAL COMMERCIAL AGREEMENT BETWEEN THE UNITED STATES AND FRANCE.