Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1889-11-25
THE CENTRAL PACIFIC And THE GOV.
EMINENT

THE CENTRAL PACIFIC AID THE GOV
EMINENT.
The Central Pacific has been the most in
vestigated of corporations. ancient or mod
ern public Or private. For the past ten
years particularly, its property, books and
business have annually been examined and
reported on by the United States Commits
sioner of Railroads and his staff of engi-
neers and accountants. In 1877 also, the
President appointed special Commission,
who came to California with the evident
purpose of proving all charges or insinua-
tions which had at any time been made
against this road. Their report is pub
lished in nine large volumes. These and
other reports which have been made are so
bulky that few have interest enough in
the subject to wade through them and dig
out the substance of the matter. This
work has now been done, and is made
available for general use through pamph-
let issued by The company, giving a sum-
mary of the facts as to the relations be-
tween the company and the Government.
This pamphlet has been prepared at the re-
quest of Governor Stanford, by 6. L. Ian
sing, Secretary and Controller of the South
ern Pacific Company. 1t throws new light
on the subject, and shows that the company
ubo AOt OLlJ RlOblPbAg AOAAAliCN oil vi It's
obligations which were imposed by the
several Acts of Congress, but has continued
to keep good faith and perform all of its
duties notwithstanding arbitrary and illegal
acts of the Government.
The debt of the company to the United
States is secured by second mortgage on
the aided line. As matter of fact this is
no security, for the reason that the first
mortgage which was issued by the COM
pany on the authority of the Government
will require the entire assets of this line for
it's payment That this debt has not been
provided for, and that the Government has
no real security, are facts for which the COM
pany does not appear to be responsible,
either legally or morally. 1t was expected
when the bonds were issued that they
would be met through the annual pay
ment of five per cent. OF the net earnings
and one-half the charges for United States
transportation. These payments proved
much smaller than anticipated, owing to
the reductions in rates and the ending of
Indian wars; by each of which circum.
stance the Government made much more
than the whole amount of bonds When
it was found that these provisions TO meet
the debt were inadequate, the company of
fered to provide sinking fund in Its own
treasury and to pay into it annually an
amount sufficient to meet the bonds and
interest at their maturity pledging the en-
tire income of all its lines, aided and non
aided, for this purpose. This offer the
Government refused and took the matter
from the hands of the company bv the
adoption of the Thurman Act Under this
act the company pays into the United
States Treasury twenty-five per cent. of
the net earnings of the aided line, and is
specifically excused from making any
further payments on its debt to the United
States. After making the twenty five per
cent. payments, it is authorized by the Act
to use any excess in the payment of divi-
dends. This Act has completely failed in
It's purpose. Both parties, however, con-
tinue to be bound by its terms, while the
Government alone is responsible for its
adoption.
BY the management of the sinking fund
in the United States Treasury established
under this Act, the company has up to this
time lest over 100000. For transporta-
ton charges on non-aided lines the Gov
eminent owes the company in cash over
50, 5S4 600. For failure on the part of the
United States to keep its agreement in the
issue of patents on lands, the company has
been injured to the extent of over $500, 000
By substituting competing railways, the
United States has reduced the earnings of
the original Central Union line about $751;
100000
The United States bonds issued to the
company were payable in currency At
the time of their issue gold commanded a
high premium and to use the money in
California when gold only was in circula-
lion, they had TO be sold at a discount
amounting to $7,12000O Interest is
charged by the United States on the par
value of the bonds for thirty years at six
per cent so the total charge to the COM
pany for account of these bonds, for which
il has really received nothing, is $40 $780,
600. Interest is the important item of the
United States charge, as it is about twice
the amount of the principal. Its reduction
could have been provided for in the United
States bonds issued to the company for at
least half their term at three per cent. The
company is still charged six per cent. how
ever, on these bonds now, while United
States bonds are selling on the basis OF in
terest at two per cent. By this operation
the com pany is charged unnecessarily over
So 500 600 on interest account. In the
transportation of mails, troops and mill
tary supplies, the official statements show
that the Government has saved directly
up to the end of 1885, the enormous sum
OF S139, 347 al, besides the much larger
saving, which is not capable of calculation.
resulting from the ending of the Indian
wars
The facts shown by the pamphlet fully
Justify these conclusions: So far as the
specified terms of the agreement are con-
cerned, they have all been fully observed
BIZ the company, while they have been in
many cases violated by the Government.
As to the promised benefits to follow the
construction of the road, they have all been
more than realized by the Government;
but they have fallen very far from the pre-
dcted results in favor of the company AS
to the payment for bonds and interest, if
the account were between two private citi-
zens, the following facts would be allowed
as affecting the terms of settlement: The
debt was to be paid in services and per-
centage of the profits These falling, the
percentage of profits was increased and
the debtor excused from making payments
in excess of such increase. The value Of
the property mOrtgsged TO secure the debt
was dependent entirely upon the earnings
from It's use. The creditor Government
has destroyed the value of its security and
prevented sufficient annual payments on
the debt--frst, by the reductions in rates
ON the services performed for it by the
debtor; secondly, by the reductions in
earnings chiefly caused by aid given by the
creditor to competitors and, thirdly, by
the mismansgement of the whole matter
resulting from the enforcement OF the
! Thurman Act, adopted against the wishes
of the debtor.
Although these circumstances do not
comprise all the claims on the part OF the
company, they would certainly be sufficient