, 1873-03-26
neithcr help tfom in tllo railroad fight, nor hin.
dor tl1om III tho tnrtfr fight.
HOW MODERN RAILROADS ARE BUILT

Peoria d Rock 1elana, and tho Rockford, Rock
island Il at. Louis. Tho recital ia timoIy, ou 1t
EXPOSES tho faElnoy Of tho claim mado by tho
rat1rond companies that thcy must oarn or 10
por cont OH their oapital ntock oyor and nbovo
tho o1ponses Of running their roalu anl paying
tho intorost on thoir bonds. Wlnt is true Of tho
two railroads named, is, in groator or less do
greo, true Of alt tile railroads In tho country.
Tho capital stock Of railroads is fictitious to tho
o1tont in which tho aggregate atook and honda
o1ocod tho actual cost Of tho roads, and tho
claim TINT this fictitious capital should earn div
idcnds accounts, in largo part, for tho unrcaHon-
ablo charges to which tho railroads adhere in
violation Of tho Inv.
Tho Peoria i Rock Island Railway Company
WAS incorporated in 1867 to build road botwoeu
tito two points namod, - distance Of 01 milos.
The declared purpose Of building tho road WEB to
furnish cheaper transportation; aud, upon this
representation, subscriptions wero obtained from
individuals and from town and county govern
monts amounting to, 9700,o00. Tho Directors,
ovor two-thirds Of whom arc said to havo Ind
no pocuniary interest in tho road, thon issucd
e1,500,0o0 gold bonds, boaring per cont inter-
cst, and mado contract with certain Eaatorn
| capitalists to turn ovor tho ontiro amount Of
bonds mud 81, ,250, 600 Of stock for tho constrnc-
tion Of tho road, furnishing tho locomotivea and
rolling-stock, building the shops, dopots, cto.
Tho atock was to bo transferred to
tho CONSTRUCTION Company aa tho work
progressed, so TINT, by tho timo Of
tho completion Of tho road, 81 ,25000O Of tho
Stock or hye-oghths Of the ontiro capita1 stock,
would DO In the hands Of tho construction ring,
who would thoroupon control tho corporation,
| paaa upon thoir own work, and, as a rnntter OF
| course, accept 1t aB u discharge Of their part Of
the contract In tho moantino, tho Construo-
| tion. Company had placed tho bonds On the mar
kot, Advertised thcm In q manner unwarrantod
by tho facts in tho case, md sold them ut ratos
varying from 30 to 90 cents. They were not per-
mittod to dispose Of tho bonds at lcHs than 10
cents, aud, assuming TINT this waa tito average
price which they received, tho result would DO
| $1,050,000 in money The cost Of tho road ia
sct down US s1,o0o,ooo ct tho highost.
Tho ring profits, therefore, wero $4,000
in money and 81, ,25o,00 In stock. Or, assuming
that tho stock waa worth par, on which railroads
claim that they muat earn high interest, tho
Construction Company, which also becamo tho
owner Of tho road, made profit Of s25o000 in
stock and 81,050,0o0 in money. Now, after
operating tho road about eightoon months, tho
Company which bus made those enormous profits
proposes to iasue anothor million of mortgage
bonds for tho purpose Of paying off tho floating
indebtedness Which has accrued, and for further
stocking and oqupping tho road. If this o3tra
Issue shall be made, tho nominal capital Of tho
road will DO represented by e2,G50,0 900
Of bonds and s2,oooooo Of stock, Or
"a, 600. This would bo moro than throc
times u much as tho road cost. including tho
additional material which it ia proposed to add.
Assuming TINT tho earnings Of tho road should
pay the per cent lutorcst on tho bonds, with
out declaring dividends, and TINT 1t will require
60 per cont Of tho groHs receipts to operate tha
road, 1t would DO necessary to earn s798, 600 q
year, considerably more than $4,000 per mile,
and ns much us tho largo trunR~linoa oarn. To
do this 1t would DO necessary to increase it's
present rates threo Or four times as much as
they aro now. II tho road should also under.
take to earu q dividend on its capital stock
over md above the payment Of It's interest, ths
ratoa would have to be further Increased in pro.
portion.
It will be Hoon, from the manner In which ths
Peoria t. Rock Island Railroad rus constructed,
that tho patrona Of tho road arc expected to pay
m interest not only on the cost OF building and
operating railroad, but also on tho onormou!
proftsmade by tho Construction Company and th'
, managers. It is mattor Of notorioty that mos
railroads arc constructed On Hi1nilar p1an, ant
with similar wastefulness. The Rockford, Rocl
Island L. st. Louis Road..furnlsles another illus
tration Of tho same thing on q larger acalo. Tht
Compuny authorized an issue Of 80, 900, 900 stock
: sold as much Of it as thoy could to tho counties
cities, mud towns On tho limo OF tho road, ant
, kept enough to insure them tho control, Thoy
then nude contract with nominal
: | another company, consisting mainly Of tho sam
mon, aftor tho manner of tho Crodit Mobilier
for tho building Of the foad at an oktravagan
!, price. The next step was to issue 80, 600, 900 o
per cent gold bonds, which woro aold moatly Ii
:. Germany for about 75 conts. Having abHorho
~ all tho proceeds from the sale Of tho bonds, an
all the local subscriptions, tho road was not "
:. completed, aud there was no money with whio
= to pay the accruod interest on the bonds. Th
. bond-ho1ders found they had boen swindlod bu
concluded that tloy would be swinllol sti
>. worso II thoy foreolosed thoir mor
gago md took tho road to opcrat
> 1t. Thoy, therefore, concluded to surrende
;, ono-half their bonds, but took preferred atoc
in their place, 80 tint tho nominal capital W.
not decreased. But 1t is only by charging til
: highest rntos for transportation that tho Con
pany can now pay tho iutcrost On tho romalnin