Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1886-06-18
TIE EXTENSION BILL.

THE EXTENSION BILL.
The bill extending the time of payment
Of Government claims against Pacific
railroads was reported favorably to the
House from the Committee on Pacific
Railroads unanimously, and was under de-
bate last week. 1t aggregates the sums to
fall due, interest paid and to be paid, de-
ducts payments made in cash and service,
the amounts in the sinking funds, and
simple interest thereon at 3 per cent. per
annum, and on the remainder computes
interest from the average date of maturity
of the subsidy bonds to October, 1921, at
3 per cent. per annum, adds the interest
to the remainder, and divides the gross
sum obtained into 40 equal parts payable
semi-annually, one part each six months
beginning April, 1887. The failure for six
months to pay any instaliment due, forfeits
the benefits Of the bill to the delinquent,
and makes the whole sum due at once. If
any company fails 10 accept the terms of
the Act, there is to be collected from it 30
per cent. of its annual net earnings, and
its share in the sinking fund is to be in
vested in first mortgage bonds Of the COM
Panies, or in United States bonds. Mr.
Cultivate, who reported the bill, defended
it on the ground that the Investment of
the sinking fund providing for the ex-
tinguishment of the debt had proven a
failure The Government could not afford
to allow increase Of the debt to go on, and
assume the necessity of taking up the first
mortgage. It was the part Of wisdom to
provide a feasible plan for the payment
of the debt in regular installmants.
Whatever embarrassment any of
these debtors encountered, he attrib-
uted more to the fault of the Gov
eminent because of its regulations as to
what payments should be made than to
any Encouragement or errors on the part
of the debtors. It was a question simply
whether the Government should provide
50 as 10 receive payment, or push the COM
panies to the wall, and be compelled to
take the roads in self-defense at the ma
turity Of the debt, and to do this it would
Of course have to take up the first mort
gage bonds. The Government itself pro-
vided that the interest should not become
due on the debt until the principal fell
due, and that provision had been sustained
by the Supreme Court But the net earn
ings Of the roads had diminished by rea-
son @. new competing lines being con
structed, some of which lines had been
aided too by grants of land from the Gov
eminent. Mr.. Thurman, he pointed out,
had estimated, in urging his bill in 1878,
that the accretion on the sinking fund
would meet the interest the companies
would have to pay to the Government
But the sinking fund was to be invested in
five per cent. bonds of the United States.
whereas tie ruling rates of interest having
fallen 10 three per cent, the United States
Treasurer has actually paid cut on account
of these funds for premiums more than the
funds have brought for the benefit Of the
companies. The result has been that large
sums of TIE lund have remained unin-
vested, and on the 30th of June, 1885,
uvsr two and quarter millions of dollars
was in that condition, paid in by the Union
Pacific and Central Pacific Companies.
The bill under discussion was then outlined
by the speaker, in which he showed that
the plan IS unlike any other yet proposed
in Congress. 1t fixes the average state of
maturity thirty-fve years hence, ascer-
tains the worth of the Indebtedness, and
the total amount the Government shall
have advanced, to create a new principal.
The credits are deducted that are proper,
including the sinking fund and a calcula-
ton of per cent. interest thereon. The
interest on the remainder of the debt is
computed at 81 per cent to October, 1921
the average date of 40 equal payments.
The committee, he said, after examining
fully into the earnings of the roads, and
the state Of the debt, had concluded that
it would he unwise to require, and impossi-
bic for the companies to begin row and
pay every six months, until in TWENTY-FIVE
payments the debt should be extineuisbed
To have safety and regularity longer
time was needed. The committee, he said.
did rot claim that the Government would
receive the whole of the 81 per cent. in
terest. But theaggregation made to ascer-
tain the principal includes the whole of
the 6 per cent. paid cut BY the Govern
ment for the benefit Of the companies from
this time until the maturity Of the princi-
pal. and on the sum of that added to the
principal, interest at 81 per cent. Is com
puted. The 81 per cent. was fixed on SO
as TO collect from each company such q
fixed installment every six months as
would pay interest at per cent. on the
present value of their debt, and make such
reductions Of the principal of that present
value as would entirely. pay it off IN the
time given them"
Il was necessary to adopt 81 per cent?
he added, to attain this end. To illustrate