New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1874-06-27
HOW RAILROADS ARE BCILE
THE PROCESS OF BONDING.

THE PROCESS OF BONDING.
I'm the course of an argument before a COM
mittee Of Connecticut Legislature against petition
OF the New-York and Eastern Railway Company foI
authority TO bridge the Housatonic River Mr.. WIN. ID
Bis aop Explained the by which nonpayns rail-
roads are built upon the proc OF worthless bonds
Aside bearing upon the case before the Lrs'
nature the statement Is OF general interest. HAVING
called attention the provision Of the General Railroad
law which permits railroad comp1ncs 10 issue H0nds
and undertakes to regulate the unt he proceeded to
show that the law furnished guarantee whatever OF
security and placed restriction upon the ISSUE
Although the law provides that no railroad company
shall issue bonds to greater than onc-thlrd
the actual Of the road, the provision Is eyaied Ia
the following manner
Suppose Given road is to be built whose actual cash
cost viii be seOoe. Certain schgmers de are - build
tnt road as speculation ana obtain the money for
lis construction rutifey bonds, ana tnel MAKE what
The w MAKE contract for The construction OF that
road for 100000 payable s21O@O IN STOCK ana
ponds snail build road Now the question comes,
How can make certificates 10 the Controller OF the
we can get the bonds sufficient 10 build the roar
The plan this W. will suppose during the hrst month
the 100000 OF actual cash w0iA Is per
formed. The contractor is thea entitled 10 receive
500 900 in stock and 100000 N bonds S2oo0,O OF stock
is issued and when issued TO the contractors Is eharscx
upon the books OF the company n sOoJJ OF iulpaso
stock Tle contractor then l. credited also WITH sly0o.
due MIN IN bonds account Of the contract. Ihey
then make certificate tlt according TO the books or
cost OF $4,000 and on the strength thar they issue
100000 OF bonds, certified by the Controller OF PdJic
Accounts.
This practice. lie said, could be carried Oh as long
aud as oftc4i shrewd contractors aud spectators
choose To do IT, He suggests the remedy as follows:
In the first place. railroad anyw bere in the
State Of Connecticut that can be built at tAs time that
suoud he permitted To Issue the FIRST solitary bond and
put ii upon the market unti they have grated their
road, bdgcd their road furnished their igf VI way
and prepared the roadway for tne rails. When rail-
road company has its roadway that condition. II mas
then q basis which 10 Issue bonds Dut not much
III the road doesn't prove 10 be paying road, N IL doesnf
nav MS running expenses, the grading ana the brdang
and the Ight OF way form 40 security whatever Tor
sim dollar the bonds because II the road stands In
complete the right OF reyerts 10 the landhoders
and an put On It. Hence say that in
Connecticut railroad be constructed with
the certainty OF its being paying road Tor several
years, "a bond should be Issued until the road -
graded the bridges built ready for the superstrGc
ture. Then they shoad be permitted TO issue bonds
sufficient pay for 50 per cent Of The rails and the ties
and the superstructurc and when they have all their
&C. paid for, then would be safe 10 permit bonds
enough be issued 10 enable them 10 purchase their
equipment. But the minute yen 20 beyond that unless
YOU at the start Wat the road VIII pay some
thing ond It's actual running expenses y0u are giving
to the bondhoiers who invest their money security
upon which reliance can be placed
The suggestions those OF practical man, and seem
to be reasonable and sensible There Is doubt that
great deal OF pscalty has been practieed for few
years past in putting of worthless railroad bonds upon
credulous community, aud asy suggestion of remedy
for this evil de serves 10 be considered.