The union Democrat., 1871-02-18


We have receiveia pamphlet headed ''The
Subsidy Question and the Democratic party, =
from which we publish the following. to show
how these railroad projects are worked up
This Los Angeles and San Pedro operation is
a small affair, but the same rule pursued By
its pro2rietors viii apply to ell large or small
enterprises among the railroad subsidies.
In November, 1867. thirteen citizens of Los
Angeles associated themselves to build an
eighteen mile railroad from Los Angeles to
the Bay Of San Pedro. under the the title Of
the LOS Angeles and San Pedro Railroad
Company The capital stock was fixed at
$500. 900, each of the original thirteen sub
scribing $500 10 gold coin. II does not
seem that any of those stockholders paid in
single cent. though some of them advanced a
little money for printing, advertising, lobby
ing at Sacramento. etc.
Why should they have paid in a cent !?
Their object was to own railrod, not to pay
for one, and to own d railroad nowadays it
is not at all necessary TO pay for one; all that
is necessary to do is to get the people to pay
for building it for ycu. So these gentlemen,
instead of putting in their own money, went
to Sacramento, where the Legislature was in
session, and got through bill authorizing
the city of Los Angeles to subscribe ST., 900
to their stock, and the county of Los Ange-
les TO subscribe Sl50.000 Both city and
county voted to subscribe, for il was proved
to the people very clearly BY the advocates oe
the road, not only that it would cause great
increase of taxable property, and all that sort
of thing, bnt that they would not be called
upon to pay the interest on the bonds, as the
road could not fail TO pay, and the dividends
accruing on the stock of the city and county
were paid into fund to meet the interest on
the bonds.
So our railroad builders, the Directors of the
Los Angeles and San Pedro Railroad Compa-
nv went to work. Not one cent had been
paid in, but their first act was to divide
among themselves Sl4, 500, as recompense for
the money they claimed to have spent in
starting their little ball a rolling. There be-
ing no money in the treasury, they could not
pay themselves in cash, so they credited them
selves with this amount on the books and left
it to bear interest. The next thing to do was
to let contract for building the read. And
now Phineas Banning appears on the scene,
though it is probable that he had been be-
hind the scenes from the beginning. The
law under which the city and county SUBJ
scription had been made, called for a railroad
from Los Angeles to San Pedro, but, without
regarding the law. the Directors decided to
build the road to Wilmington, instead of San
Pedro, as at the former place Mr.. Banning
owned land, wharf, hotel, and some other
traps. The bids came in. the lowest, from a
Mr. Ives. being for S342, 900; the highest,
from Phineas Banning, being for S467 900.
Of course Mr.. Banning got tie contract. for
it is an invariable rule with railroads to he
built by the peoples money that the highest
bidder gets the contract. Having let this
contract. the next step of the Directors was to
buy piece of land and lot of lighters and
other things that Mr.. Banning had lying
around his town of Wilmington, for the sum
of SIC, 900. Then these Directors mortgaged
the whole road. all its property and franchis-
es. and issued mortgage bonds to the amount
of $500, 900 to help pay Mr.. Banning. And
the building of the road commenced, and the
city and county were called upon to issue
their bonds, and did issue them, though none
of the other stockholders paid in a cent; and
before the road had been completed Mr. Ban
ming had all the county bonds and all the first
mortgage bonds, and his partner had the
stock, and things went along beautifully
Whenever section of the road was complet-
ed and ready for acceptance, the engineer was
discharged, so that there was no one to say
whether it was well or i'll built; and Mr. Ban
ming, who had learned as he went along, and
that be had not been as enterrrising at the
start as be ought to have been, and had not
made his bid high enough, put in large claims
for extras, which were invariably allowed.
and did various other things which showed
him to be a great railroad fnancier, but
which are too numerous here to mention.
And now the people of Los Angeles have
got little one-horse local road. which their
money and nobody's else has built. for riding
on which they must pay as much as they
used to paw the stages. And they have a
debt of 1926. 900, the interest of which they
have to pay every year, and the principal of
which it is certain they must ultimately pay.
How to relieve themselves they don't know,
unless they can repudiate the whole thing.
They can't sell their stock, for tho road is
heavily mortgaged. and they fear they can't
assess the other stockholders, who have never
paid anything, without assessing themselves.
This is but fair sample of the manner in
which railroad building. under the subsidy
system, is now conducted in the United States,
and instances Just rs bad could be multiplied
from evey State in the Union where the sub
sidy system has prevailed. To dignity such
proceedings with the title of 'enterprise'-t
style the system that begets them the Sen
couragement of internal improvements. is
as bad misuse of words as to call the opera
tons of ''road agents" honest industry. 1t
is not railroad building which we are encour-
aging, but public robbery 1t is not the in-
vestment of capital in remunerative pursu Is
which we are stimulating. but the swindling