Evening star. [volume] (Washington, D.C.) 1854-1972, 1878-11-11
SUBSIDIZED RAILROADS..
Annual Report of the <iOvernm e n
Auditor.

The auditor OF railroad accounts, Mr.. Theophi-
lus French, has submitted his first annual
report to the Secretary OF the Interior. The
fact that the Office is newly created one gives
the additional attraction OF novelty TO this eX-
haustive report. The Pacific railroads are
debtors to the government to the extent OF
nearly hundred million dollars. and both gov
ernment and peOp'e are interested in their con
ditiOn and prosperity. Mr.. French gives first.
review OF the recommendations and con SD
eratlonS which were Immediately effective III
the establishment Of the bureau. and shows
from the course OF legislation and events that
the whole system Of reports state and national.
Is in a measure necessary outgrOwth of the
railroad development OF the country and OF the
liability TO abuse OF the vast power invested in
the control of such extensive interests. The
tendency has been TO inquire into railroad mat
terS IN general, and as a consequence into the
Indebtedness of subsidized railroads. The COM
pan1eS whose roads are in whole or in part west.
north or. or south OF the Missouri river. and to
which the tnited States has granted any loan
or credit or subsidy in bonds or lands are those
which by the words of the act must report TO
the auditor. The only point. in Mr. French'S
opinion, upon which any doubt can arise in
the act. IS whether grant Of land to state
solely to aid in the construction Of railroad
nalned and specified in the act making the
grant, is q subsidy in lands under the act II is
regarded that the objection that such grant is
not grant TO the railroad company Is in the
nature CT quibble or evasion. In treating OF
tie
OPERATIONS OF THE OFFICE
ii IS said that at this comparatively early day in
the existence of the bureau ii is next to impos-
Si0ie TO give a complete statement in reference
10 all the companies. Considerable part OF the
four months since the organization Of the bu-
leau haS-been taken up in correspondence be
tween IL and the companies. many OF them
having referred the requests or the Office 20 their
law officers for consideration and report. Much
pafleHce and ior0eaTance has been exercised in
the hope that the companies affected would
understand n %
bureau and comply with the law without resort
being had TO the penalties prescribed therein.
IN REFERENCE TO THE UNION PACIFIC,
MI. French says that the company has COM
menced TO render the reports called for. bat
under reservation by advice OF their law Off
Ger. which cannot be accepted by the bureau.
books ana records TO inspection, which has been
partially done. and some OF the information
given has been verified. Mr.. French SUCCESS
that as the company is fully able TO comply
with the requirements of the law establishing a
sinking fund and having nothing to conceal
uhdef us present management. 1t would do
ItSei n much n more Justice by acquieSeIns in the
law than by litigation at every step. The regent
advance in rates OF freight by the Union Pacific
between New York and san Francisco is con-
sldered. The reason assigned by the company
1Cr the action IS that many shippers send their
valuable goods 10 san Francisco by railroad and
their coarse goods by ships around Cape H0rn,
and thar IT has been found necessary to increase
the charges in order TO get shippers to make
contracts covering all classes OF goods at reaS-
enable rates. The auditor holds that this is q
matter with which the government has nothing
10 GO. unless il appears the net earnings of the
road are thereby increased beyond ten per cent.
upon the cost.
THE RELATIONS OF THE BUREAU WITH THE CEN
TRIAL PACIFIC
are unsatisfactory. The company has not COM
pied with the law. and certificates as to such
neglect have been sent 70 the Secretary OF tie
interior for proceedings to be instituted accord
ln%ly. A report, however, under the old re-
realed laws was rendered by the company to
he Interior department. a great discrepancy
between the sWGrn statement OF the president
OF the company and OBe made up from the fig
uIeS given III the printed report TO stockholders
was the subject OF correspondence between the
department and the company. The question is
raised whether this company has the right to
lease hundreds of miles OF another road in
Which their own stockholders are the principal
owners and TO pay out millions of dollars for
the privilege OF operating the same at loss, to
the detriment and insecurity OF the rights of
government. The auditor thinks that the float
.ng oebt OF the company is increasing over
what IL ought to be by its legitimate business.
During the year ending June 80, 1871, the net in
crease or its floating debt was $3.50, i69 81, i'm
spite OF which the directors saw tit to pay out
over 81 W0.O00 In dividends and its annual in
tereSt charge increased over S30O,oO0 Regret
is expressed that the company should appear TO
mistake the spirit OF legislation concerning it as
one OF hostility. 1t is shown by extracts from
the report OF the board OF transportation OF Cal
ifornia that it is no new thing for the company
TO resist efforts to bring it within reasonable
control.
The condition OF the smaller roads is then
considered. After summary of the conditions
imposed upon land grant railways, number of
strong arguments are advanced fayOring the
repeal OF such conditions.
NINE IMPORTANT RECOMMENDATIONS
follow IN regard to legislation necessary to pro-
mote the prosperity of these railroads, and to
remedy defects in existing laws First, that
section OF the Pacific railroad act, approved
July 1st, 1862 be amended by the addition of
the following words:-"Pr Provided all of the
alternate sections adjoining the sections grant
ed to the railroad companies have been sold,
pre-empted, or otherwise disposed Of In ex-
PLANTATION and support of this recommendation
ii is stated that the companies claim that any
reduction by them OF the price OF their remain
ing lands would not increase their sales or the
settlement OF the country; that the. general
depression dep for some years past has kept the
tide OF emigration back; that just so much
OF these lands can be disposed of annually
a,i1i ana no more, SO long as the Indians are
the settlers; and that the companies could have
disposed OF their lands to their interest cred
llofs ana stockholders at nominal prices, but
have considered it right ard proper to retain
them as a general asset. Second. It is recon-
mended that the several departments of the
government having stores OF supplies for ship
ment 10 the Paclhc states or territories be df-
rected TO forward the same over the Pacific
railroads 80 as one continuous line with
out discrimination OF any kind whatever. The
companies complain OF the Withholding and d.
vert1ng OF freights by the government, for
whichthe government has to pay money out of
the Treasury and take the risk of long ocean
voyages. Third. That the U. s. courts be re-
queSted or directed, whenever receiver is re-
qu1red for any Of the railroad companies to
which the United States has granted any snb-
sdy in bonds or lands, to appoint no oficer, d.
rector stockholder or creditor to such re-
ceiyership; and in case the company is in
debted to the United States, that such re-
ce1versh1p continue until the Indebtedness
is paid or permanently provided for. Fourth.
That the Central branch, Union Pacific
company, be authorized and assisted
to continue its road to a junction with
the Union Pacific railroad at or near the one
hundredth meridian, in order to complete the
racine railroad system as originally contem-
plated. The imprObability of the repayment by
this company OF its present Indebtedness to the
government which, the company claim grows
out of the legislation which located them In the
woods. and the hardship thereby endured are
mentioned as just grounds for rectifcatiOn of
the matter. Fifth, that neither money nor pub
lie lands be granted to any corporation to aid
In the construction OF railroad hereafter; that
IN every case where the line of railroad for
which grants have been made is in process of
construction, the time Of completion be extend
ed; ana that all grants Of land be declared for
fe1ted where the line of the road has not been
located. surveyed and some portion of it con-
Stlucted and used. The sixth Recommendation
provides method OF relief for railroads which
nave acquired ''Swamp landSn as ssrailrOad
laEds' under the land grant act. 1t is recon-
menQed, SeVenthly, that the government dtrec-