Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1889-05-18

Presuming that the United States will receive a
judgment on the basis of its claim in the pend
ing per cent suit, and estimating upon like
basis per cent. Of net earnings from commence
ment of suit to June SO. 1877. the Government
will receive from that source to said date about
81. 0000; and will have paid to said date by
onehalf TRANSFORMATION about s., 273, 105 so: or
total of IS so, Sos So leaving total remainder
of 500, 7Ss SOC 20. Estimating the annual aver
age arising from half transportation aud per
cent on the basis claimed by the Government
in the pending suit r the remainder of the
term, at 81 900, Co., we have a total from
these sources of 100000 coo; leaving a balance
due the Government at the maturity of the
bonds of SAG, 73S, 500 20.
"How can the payment of this large amount
be provided for? 1t will not be due under the
law as construed by the Supreme Court until
the maturity of the bonds, when there will also
be due the tirst-mortgage bonds. amounting to
81, 2S2 900, or a total of S77 01e,s 500 20.
This is a sum beyond possibility of payment
in money without refunding at date of matur-
ity. And the additional practical fact exists
that the first mortgage bonds have precedence
of the Government lien. The holders OF the
first-mortgage bonds are amply secured. The
this danger be avoided? The Government Di
rectors think il can be. The establishment of a
sinking fund is practical scheme. and opens
way out of this difficulty.
"a sinking fund, established on the basis of
semi annual payments of 100000 EACH COM
mencing on the first day of January, 1878. CON-
pounded at the rate of 6 per cent. per annum
turiiy of the bonds. would give a total result, 10
be applied TO the payment of the Government
claim, of $40, 1926 Sc, and leave still due the
Government $500 ;9 81. This balance could
be discharged either by the plan suggested in
the report last ear or by the simple operation
of the half transportation and per cent. OF the
net earnings. as now provided by law.
1.-The adoption of such a plan of adjustment
as is here outlined by the Government and the
company, with the approval of Congress, would
render the pay ment ofthe principal and inter-
est of the bonds advanced by the Government
absolutely certain. 1t would be useless to exact
more than the company can perform; and 1t is
not unjust to require so much as il can comply
with without embarrassing its affairs and de-
priving the owners Of the property OF fair re-
turn in the form of dividends on the capital in
vested. 1t is believed that the company can
accept and perform the plan here presented"
Mr. MITCHELL desire now to attract attention
to the report OF the Directors in 1885, page 21S of
the same document. l ask the Secretary to
read the marked portions.
The Secretary read as follows:
1.-The relation between the company and the
Government growing out of the b)nded indebt-
edness of the consolidated roads to the Govern
ment have never been harmonious or salts
factory. Differences of opinion have arisen
concerning the amounts due the COMPANY for
Government service, mail carriage, army trans
portation, etc., the terms of payment, construc-
ton of charter provisions and laws OF Congress
and other matters of detail, so that there has
seemed to be constant clashing of interests be-
tween the two.
1.-THE so-called Thurman Act, which was in
tended to be conclusive settlement of the
questions at issue between the Government and
the company, had failed to effect its purpose,
and mutual under landing as to its meaning
and scope has not yet been reached. That por.
ton of the Act which provided for the invest
ment of q liked proportion of the earnings of
the road in certain United States bonds as a
sinking fund for the gradual extinction of. the
debt has been rendered imperative and null
by the action of the Government in taking up
n ha ela 1ad ~, fla. ko, y.
there are none now to be purchased in market
Hence IL happens that the company has paid
into the United States Treasury large sums of
money which lie idle and uninyested to the
eminent. The value of the company's securi-
ties is impaired by this condition of things. 1t
seems plain, that. for the sake Of the Govern
ment as well as of the company, there should
be some additional legislation on this subject at
as early day as possible"
Mr.. Mltchell-Mr. President, desire to have
rectors Of the Union Pacific Railroad for the
year 1884. page 2ji of the same document, and
also small portion on page 2S5.
The Secretary read as follows:
There is equity in the claim, in the opinion
of the Government Directors, that in arriving at
net earnings there should be deducted such
sums as are properly and necessarily expended
in Improvements and betterments The high
degree of excellence, of speed, and assurances
OF safety demo nded in present railway manage
ment dictate the justice of this policy within
reasonable limits. IT is oaly by its operation
that the Union Pacific could stand to-day as it
does, in the.very front rank of first-class roads
In fact the Supreme Court has affirmed this
view; it adds: We think the true interest of
the Government is the same as that of the stock
holders. and will be subserved by encouraging
a liberal application of the earnings to the i'm
provement OF the works. 1t is better for the
ultimate security of the Government
the view of the Government Directors is
correct, however, the arguments and decisions
of Courts that whatever, without some defined
limit, may be expended in betterments is an ad-
dition pro tdnto TO the security of the Govern
ment is fallacious. he original excessive cost
of the road is an element that cannot be elimin-
ated by this process. In proportion as the
amounts devoted or diverted to this purpose are
permitted or increased the PAYMENTS to the
Government, which in the premises are the only
real security the Government has, are reduced
That the bounds of what is proper in this regard
may not be exceeded. the interposition OF some
tribunal other than that simp of the law
making power Is imperatively demanded, if the
past policy is to be continued.
"a commission or Government directory. in
its personnel professionally competent plenary
authority being delegated to it to command the
fac llltles for intelligent information and action
and with power to conclude negotiations sug-
gests itself as necessary requisite in the prem
lses. There is no person or department repre-
sentiDg the Government that has this peediu
authority now. The Office of Commissioner of
Railroads, as at present constituted, has not the
time, the clerical or professional force, nor the
pecunlary ability at its command to intelli-
gently deal with all the issues involved. Nor is
it provided with the legal authority necessary
The company rightfully protests that the in
yestment OF such sinking fund for the benefit
of the Government Tor cIedi.ors) as has been
accumulated is unjust to it. The fund Is not so
Invested as TO earn the full measure of its abil-
ity, if properly invested 1t tends, therefore, in
no practical degree to relieve the debt of
the staggering proportions it will have
assumed when the time arrives for its payment
If the present policy of percentage upon net
earnings, and the investment of the same in
sinking fund, is TO be pursued, experience hav-
ing dictated that some vital essential is lacking
to the successful working of the policy some
additional measurement must be ado9ted. The
successful working of the policy presupposes
two things-the Government securing the full
and entire amount of its proportion of the net
earnings, and investment OF that amount so as
to accumulate with reasonable rapidity.
" But If the Government is to be reimbursed
out OF net earnings, the Government Directors
venture the sugg stIon that in fact no depart
ment OF the Government will ever know. for it
Is practically Impossible to definitely arrive at
what those earnings really are or may be until
some competent Commission or Government
directory is empowered by law to supervise
continually and constantly the actual concerns
and operations of the company. Aside from
this being impracticabie, there is grave doubt
whether results would then be satisfactory
especially to the Government and public. This
for the reason. among others, that conditions
which this year might prompt aud enable the
company to comply with Ger ain demands next
year might render such concession a physical
and financial impossibility.
But the Government Directors are by no
means assured that this is the view to be taken
of this matter The principal concern OF the
Government, in its present financial condition,
Il matter which should be considered If any,
thing. of more importance than the immediate
recovery OF its debt is that the CONTROL man.
agement, and operation Of this road should be
in honest as well as competent hands. 1t should
of all railways in the country be operated in the
interest of the public.
The suggestion that seems, from careful
and as intelligent as possible survey of this
matter, the mot feasib c plan is one that set
Ties, OF would settle the most speedily and per-
manently. this whole question and obviate all
the dlfnculties which surround it. 1t is that in
stead OF the present requirement of the Gov
ernment OF a certain percentage of net earn
ings, a liked sum be agreed upon, which the
company would be compelled to pay at stated
intervals toward the interest and principal OF its
debt TO the Government. IL is true the supreme
Court has decided the company may not be
compelled 10 pay either the principal or inter-
est before the maturity of the bonds. But IL
does not 'eem possible that the company can
conceive it To be in its interest TO longer contest
this issue ii reasonable terms are imposed
upon 1t.
" In fixing such stated sum the law-meking
power can resolve upon just and intelligent
figure, with or without consultation with the
company, keeping i'll view the financial condi-
due regard to the interests of the communi. les
and OF commerce that will be affected. This
plan would necessarily etfe etthe immediate and
complete suppression of all present controyer-
sizes and pending litigation. as well as remove
any and all cause Tor the same The reasons
growing out OF these coutrovers es, would fall to
the. ground The compauy would know ex