The Sun.
London, England, 1853-09-05 00:00:00

THE RAILWAYS OF THE UNITED

STATES.

The augmentation of American wealth and the
development of American resources are due to so
great an extent to the railroads that have already
been built, and such vast amounts have been in-
vested in them by Europeans, that I have con-
sidered the subject worthy of full investigation for
my correspondence in the Times. I have, on
former occasions, furnished you with some general
statistics on this subject • but I propose in this
letter to begin a more thorough and detailed ac-
count of the progress of our railways, in order that
your readers may forth their own conclusions in
regard to a matter which interests them so deeply
—viz., how safe and valuable are the railroad
bonds and securities of the United States for per-
manent investment.
1. In all instances the railroads of the United
States have received their charters from the Go-
vernments of the several States through which
their routes extend. lam not aware, with a few
exceptions, of an instance in which the application
of a company for a charter for a railway has been
refused, provided the responsibility of the appli-
cants, or the amount of capital stock subscribed,
has afforded a satisfactory guarantee for the execu-
tion of their designs. The powers and privileges
conferred by these State charters are very similar
to those conferred by the British Parliament.
Railroad property in the United States occupies
the same relations to State Governments as the
property of individuals. The companies are inde-
pendent in their action, and responsible to the
State authorities as private citizens.
2. I shall dwell more particularly upon the
western railroads, because their history, condition,
and prospects more materially concern European
readers, their bonds being those now most fre-
quently in the market. A very large number of
the western railroads have obtained their charters
under what are termed general railroad laws, in
distinction from special statutes enacted for the in-
corporation of companies named within the acts.
Within the last few years the tendency in this
country has been to general rather than to special
legislation. The great States (New York leading
the way) have many of them enacted general laws
authorising the construction and providing for the
management of railways, as well as other corpora-
tions and great institutions. General railroad laws
now exist in New York, Illinois, Ohio, Indiana,
and Wisconsin, in all of which States special char-
ters conferring special powers are prohibited. The
same principle of legislation will doubtless be
adopted in the other States. There are many ad-
vantages to the public in general laws, particularly
as they concern railways ; for monopolies are
thereby rendered impossible, and the principle of
laissez faire is adopted and carried out with the
least possible interference with private rights.
Under their operation, associations of men have
the same right to construct railroads as to build
factories or ships, and it is found by experience
that each community is fully competent to regulate
its own affairs.
3. The stock and bonds of railroads are regarded
as personal property, and, as such, within specific
limitations, subject to taxation. No tax ever can
be laid upon the bed of a road, its iron, cars, (1,,c. ;
but, where valuable real estate is owned for depots,
taxes may be levied. But shares and bonds can
only be taxed to flab holder thereof; and, of course,
cannot be taxed when held abroad. In this re-
spect, European holders of American shares and
stocks have an advantage over ourselves.
4. Companies organised under general laws can-
not be dissolved without special authority from
the Legislature of a State ; and, if the time comes
that any American railroad company asks for a dis-
solution, then, and then only, will the property of
the company be distributed pro rata among the
stockholders. Ido not know of a single onerous
condition or obligation laid upon an American
railroad company by any State, while I am not
aware that any railroad corporation has been
formed in England of which the same can be said.
5. No railroad can exist in the United States
that has any right to declare dividends until it has
discharged all its obligations due at the time ; and
all its bonds and debts of every description take
precedence, and can be prosecuted and collected
before the original stockholders can either receive
a dividend or profit from it in any shape whatever.
If there be a failure to pay its bonds or mortgages,
the bondholders or mortgagees can, by a short and
simple legal process, become vested with entire
control over the property, and manage it on their
own account. In other words, the right to apply
the well-known principles of law to the relations
of mortgagees and mortgagers obtain in all our
railroads, and they can be enforced by any court
of equity within the judicial district. The pay-
ment of the railroad bonds is generally secured by
deed of trust to some known and responsible citi-
zen of New York as trustee, with full power given
in the deed to the trustee to take possession of the
road, its income, franchises, personal effects, &c.,
in case of default, and to sell the same for cash to
the highest bidder,. at 60 days' notice, without the
intervention of a Court of Chancery.-
6. Nearly all the bonds issued by American rail-
ways have the same general features. They are
either secured by mortgage upon the property of
the roads themselves or they are common bonds for
the payment of money. But they are subdivided
into two classes—those which are convertible into
stock at the option of the owner, to the amount
on their face, whenever the holder sees fit ; or they
have no such condition attached. Convertible
bonds have an advantage over the latter, inasmuch
as they can be converted into stock so soon as that
stock rises above par. This condition has been
found peculiarly advantageous to many of the
holders of the bonds of the wesfern roads, since the
stocks of most of these roads have gone above par
as soon as they were completed.
7. Nearly all the western railroads were pro-
jected and built for the special benefit of the people
themselves in those districts through which they
pass. Their sole object was to be brought nearer
to a market for their produce, and many muncipal
bodies subscribed for stocks with no expectation
that they would ever become valuable in any other
way. Capital was scarce in the west, as it is in
most new countries. There was a serious want of
outlets to New York and navigable streams. Hence
these railroads were undertaken with the expecta-
tion of general advantages to the community. But
cities and counties could not create debts, or ex-
pend the money in their treasuries for such pur-
poses, without special authorization from the State
Legislatures. The object of this was to give cha-
racter and legality to their acts, that they might
have binding force, and also to equalise the burden
of those debts over the owners of property in those
sections. The charters, therefore, of almost all the
western railroads authorised these cities and coun

ties through which they passed to subscribe by a
uniform mode to the stock of those roads. But in-
variably one safe condition was attached to this
permission—that such action should also be autho-
rised by a vote of the majority of the citizens them-
selves.y This voluntary principle has worked ad-
mirably ; because no city or county has had the
right to subscribe for stock in roads until a ma-
theritzgo.e
f the voters thereof so decided ; and thus
and
of sanction of the will of the taxpayers
one law was imparted to their action. In no
has thus inc
Can I ascertain that any city or county
per cent,
owed a debt of more than from 2 to 5
The amotmtuthe ble property of its citizens.
slibscri
rangedtaxables wo from 50 00
2 yea by cities and counties has
the dols to 400,000 dols., where
dols. to 16,000, iie as.
high as from 4,000,000
000 :11
(I
8. These municipal°l4.
debts thus created have been
secured by all the guaranteestit,hat the State Legis-
latures could throw around
y and The
ceoitllieeestaniidi
counties have been required toere;
(as any and all other
case of necessity, taxes
sufficient to
cipal taxes are) from their own citi
muni-
should sinking
pay the interest, and provide a balanceeilssh
fund to pay off the debt, when it
become due. In no instance has any western finally
or county hitherto neglected to do this ern' ally
likely that any ever will. , nor is it
9. The bonds thus issued to railroad companies
by cities and counties are guaranteed by the roads,
and then sold in the market. They have all the
legal force of a lien on all the property of those
cities or counties, real and personal, and, if the
proper authorities do not provide for the payment
of the interest and principal, a mandamus, or an
ordinary suit at law can be issued, by which all the
real and personal property of the citizens of those
cities and counties can be attached and sold. Many
years since the city of Bridgeport, in Connecticut,
gave her bonds to a railway company for $lOO,OOO.
For so ne reason the payment of these bonds wai
delayed. I holder brought a suit against the city
in the State Court, and the Supreme Court decided
on appeal that the individual property, real and
personal, of each citizen, was liable for the debt of
the city, and could be sold on execution of the
decree.

10. The operation of these laws and of this sys-
tem of subscription to roads has been uniformly, I
believe, beneficent. I cannot learn that there is a
completed road in Ohio, for instance, that has paid
less than from 10 to 14 per cent.; and, as in a
great majority of instances, the cities and counties
that gave their bonds have been enabled, either
by converting them at their will into stock or other-
wise, to sell them, and often at a large premium,
thus realising large profits for thus lending their
s4oocredit. The city of Cleveland, in Ohio, subscribed
,000 to two or three roads, and she is now
selling that stock at a premium of from $24 to $27
advance. Her taxable property since 1849 has

You thus see that, although the value of a ton of
wheat in the market be $49 50c., and a ton of corn
$24 75c., the expense of getting a ton of the former
to a market 330 miles off by the common highway
eats up all the value of it, and a ton of corn in 170
miles ; or, in other words, the man who should get
his wheat for nothing, and be obliged to carry it 330
miles over the common highway, would have no
money left in his pocket, not make anything if lie
got his corn for nothing and had to transport it 170
miles ; yet he could take wheat, for which he paid
$44 55c. per ton, and transport it by railway 330
miles, without losing money, and when he got his
corn, which cost him $24 75c. per ton, to a market
by railway 170 miles distant, he would still, after
expenses, have $22 20c. per ton left in his pocket,
while the man who transported either of these ar-
ticles by earth roads would have nothing.
12. This table is valuable, because it shows how
permanent and secure must be the reliances of
western railroads for their income. The vast bulk
of our western population is agricultural, and will
long cc ntinue to be so, and by far the largest pro-
portion of the receipts of their railways will be from
the transportation of freight. There is, besides,
hardly a country in the world where the same
amount of labour produces an equal amount of
freight. These, and other reasons which will sug-
gest themselves from the facts given, go to show
how solid the basis would seem to be for the pro-.
sperity of the western roads generally, while the
premium for which their roads and stocks are sell-
ing, and the dividends they divide, illustrate the
matter by incontestable
facts.

13. The year 1852 has been the most prospe-
rous year for our railroads in operation and in
progress we have ever yet seen. Their increased
earnings are said, upon good authority, to average
an increase of 15 per cent. upon their mileage, and
10 per cent. upon their cost. This vast increase is
attributed partly to abundant crops and partly to
a general increase of activity in every department
of business ; but in this country more than in any
other the extension of the railroad system seems
to exert a beneficial effect upon each indi-
vidual railroad for itself. There is scarcely such a
thing now heard of as travelling or freight trans-
portation, except on railroads or by water. Our
people are perceiving that undue importance has
been hitherto attached to our canals, and it is now
found to be quite difficult, if indeed it will not
ultimately prove impossible, to get the people of
the State of New York to appropriate 10,000,000
doll. more for the final enlargement or completion
of the canals already built in this commonwealth
alone. Transportation or travel by canals is too
slow—it does not suit the electric speed with which
we are advancing. We may therefore expect in
the future that little more will be done for canals,
while a network of railroads seems destined inevit-
ably to cover this continent.
14. I give you below a tabular statement, show-
ing the number of miles of railroad in operation
and in progress on the Ist of January, 1853, with
*he specifications for each State :
Number of Number of
Miles in Miles in
Operation. Progress.
Maine 395 111
New Hampshire 5OO 42
Vermont 439
Massachusetts
Rhode Island 5O
Connecticut 630
New York 2,150
New Jersey 254
Pennsylvania 1,211
Delaware
Maryland
Virginia 622
North Carolina
South Carolina
Georgia

States.

Florida
Alabama

Louisiana

Texas
Tennessee
Kentucky

Ohio ...
Indiana

Michigan ..

.inois

Missouri ...
`Wisconsin.

1,418
755

Total 13,315

198
1,004
85
914

610
248
296
203

6661
875
200

509 i

Total.

506
542
439
1,206
82

. 828
. 3,151
. 339
• 2,125
▪ 27

- 521
~ 1,231

.- 497
• 865
• 1,070
-. 23
._ 9024
_. 970

-. 263
-. 32
6944
753-
-. 3,154
-. 1,734

659'
1,736
979

1,662
515
417

... 427
_. 1,958
... 115
... 473

12,029

25,343

I have carefully compared this table with an
authentic one published one year before, and it
shows an increase of 2,500 miles of roads built and
in operation, and 1,150 miles of roads in progress
during the short period of twelve months. I may
also add that, with hardly an exception, there has
teen a corresponding, if not a greater, increase in
the revenues of the American railways during the
same period.

If we go back to January 1, 1848, we find that
there were only 5,565 miles of road in operation at
the time, while the table I have given above
shows on January 1, 1853, 13,315. I subjoin
another table, showing the area and the number of
square miles to each mile of railroad in the several
States :—.

Areas. Square Miles
Railroad.ll Miles
s of toeachMileof
Maine ........Railroad.
New nampsi;ii.; 30,280 ... 506 ... 59.6
New .. 9,000 ... 542 ... 16.6
tt
Massachuse..s 10,212 .•• 439 ... 23.2
71:8, 00 . ... 1,206 ... 6.4
Rhode Island
NConnecticut 4,764 ..
82 ::: 12.6
ew York 486).032000 ::•3,%
...
New Jersey 14.6
....
21
...
22714881:r:5
5
Pennsylvania 46,000 ... 2,125 •• •
Delaware 2,120
.. 7 •••
Maryland
9,356
Virgink 61,352 ... 1,235 •••
North CarA 49.6ina
•
:54.
Florida South Carolina
::
27.490.
90,5
Georgia
59,268 ••• 23 ... 2567
7
Alabama 50,722 ... ON ... 56.2
Mississippi
Louisiana
Texas
237,321 ... 32 ... 7,416
Tennessee
45,608 ... 691. ... 65.6
Kentucky 37,680 ... 723 ... 50
Ohio 39,694 ... 753 .• • 12.7
Michigan
Indiana
Illinois
53,924 ... 4730 •.•
138
67,380 ... 515 .•• 11.4
Missouri
Winconsin 5353,480959 .....:
. 11975384: ... 2189..35

State,.

Total 25,' 343
I add still another, showing the population Of the