The New York herald., 1877-12-27
The Pacific Railroads and tho Cow
ernment.

! against the government for transportation
amounting, in the case of the Union Pacitc,
| to So, 899. 652, and for the Central Pacific TO
81, 1851 The bonds Of tho companies
second mortgage bonds--have about twenty
years to run, and, by decision OF the United
States Supreme Court made in 1875, the
companies cannot be required tc pay inter-
| est on their bonds until these mature BY
law, however, one-half the transportation
accounts and 'at least five per cent OF the
net earnings" Of the roads are to beannually
applied to the payment OF their indebt-
edness. The one-half the transportation
dues has been withheld by the government
and applied to decrease the companies In
debtedness, and is deducted in the totals
given above. The five per cent on net earn
ings the companies have not paid, and the
government is suing them for this, which
amounts. with interest added, to nearly
three millions for the Union Pacific and to
about two millions and half for the Cen
tral Pacific.
The simple question between the govern
nlent and the two companies is how these
were Improbable the stockholders would
possibly give themselves but little concern
about their government debt 1t is secured
only by n second mortgage, and m unproi-
table road would be suffered to fall under
foreclosure. But the roads are, on the con-
trary, very profitable-far more profitable
than the great majority of railroads in this
or any other country. They paid eight per
cent dividends ON their stock in the last
severe year, and had u surplus OF over three
millions. The owners, therefore, find the
property too good to let it slip out OF their
hands. AS they pay no interest to the gov
ernment their Indebtedness will amount at
the maturity of the bonds, in 1897, to be-
tween eighty and ninety millions for each.
They sec that to pay such sums
would bo inconvenient; to prepare
to pay them, as they undoubtedly
ought and could, would involve self
denial on the part OF the stockholders,
which they do not like, and they have Tor
some years been trying to drive hard bar
gain with the government In 1875 the
Union Pacific Company proposed to pay the
government five hundred thousand dollars
year for ten years, seven hundred and fifty
thousand dollars year for the next ten
years, and million year thereafter, until
the whole debt should be cancelled. The
Central Pacific made similar offer. But in
these payments the charges for transporta-
ton were included. Since then they have
united in an offer to give buck to the gov
ernment all the lands they have remaining
unsold the least valuable, Of course-and
thus cancel the whole debt. On the part OF
the government a bill passed the House of
Representatives in the Forty-fourth Con-
gress, which provided that the Union Pa
cific Company should pay to the govern
ment semi-annually 1894, 731, exclusive Of
the proceeds from transportation and the
five per cent on net earnings. 1t was cal
culated that this payment would cover the
whole principal and interest accrued ut the
time the bonds fall due. The government
directors of the Union Pacific in their
last report suggest that semi-ann nual pay
ment of half a million dollars, put at inter-
est ana compounded in the manner of q
sinking fund, would, together with half the
transportation charges and five per cent Of
the net earnings, produce about the amount
due, principal and interest, from the
company in 1897. Similar propositions
have been made for the Central Pacific.
Against these proposals the companies
make persistent opposition, and the public,
which does not comprehend complicated
rows OF statistics, ought to commit to
memory the following brief statement Of
facts -
/. These two companies will by their re-
fusal to pay the interest owe the govern
ment in 1897 about one hundred and sixty
millions of dollars-a considerable fraction
OF the national debt.
.. They are extremely prosperous, earn
ing in these hard times eight per cent on
their stock, and having large surplus fund
besides.
3. They refuse to pay the interest due on
their government bonds, though they are
abundantly able to do SO, and compel the
taxpayers to pay the interest year after year.
4. They reject and oppose every equita-
Dlc hiIuA SSihcHo piopoScu W tHc SoNcIH-
ment, whereby without oppression and
with but n moderate diminution of their
large dividends they could establish a
sinking fund in the hands Of the govern
ment which would redeem their indebted
ness at maturity. The two roads paid in
dividends on stock last year $685. 900. If
they would consent to pay the government
| liauidate all their Indebtedness when due
and would still be able to declare five and
a half per cent dividend on their stock,
which is more than seven-eighths of the
railroads in the country now pay.
Clearly the refusal Of the Union and
Central Pacific railroads to make an equita-
bic arrangement to cover their government
| ;p1 sbfplppcg ig not a 90 of ~