The morning call., 1890-06-10
PACIFIC ROADS.
The Majority Report Of the
House Committee.
Modification Of the Terms Of Settlement
Of Their Indebtedness.
They Should Give a Mortgage on All Their
Property, Including Branch and
Leased Lines,
Special Dispatches to THE MonSrNe CALL

days submit a minority report:
Any settlement made between the United
States and Pacific railway companies In the re-
port of Their Indebtedness 10 the United States
following, among other considerations: First
The settlement should DE OF such character as
not 10 destroy the utter value OF the stock OF the
respective cOruoratiOns.
PAYMENT BY THE PEOPLE.
Second-That to a large extent the payment TO
be made on account OF the Government indeot-
roads. Competition for transcOntinenlal
Traffic Is OF such Character as 10 reduce the
compensation for through service to low com
peitive rates, so that such amounts as may be
required 10 be paid on account OF their Indebted.
ness 10 this Government are necessarily very
largely drawn from local patrons OF the road.
TO SECURE THEIR INDEBTEDNESS.
Thrd-That In connection with the settlement
the Government should obtain for itself such
further and additional security as the
be aDle to give in addition TO
ADDED lines by wnGn alone their
fore been provided in the case of each company,
that TO secure The bonds to be given upon the
proposed adjustment OF the debt mortgage
should be made securing and embracing The en-.
tire property of the company, real, personal and
mixed, including all right, title and interest of the
company In and to any stock, bonds or securities
or lands OF anJ branch lines or auxiliary COM
panes in which said company has any
Interest, ana all railroads owned, acquired
or contracted by the company aud all their
franchises telegraph lines, roing-stock, iix-
lures aud property OF every kind and descrip-
assigns might thereafter acquire, and that de-
scription and inventory OF an the property COW
cred by such mortgage should be prepared under
lie direction of the Secretary of the Treasury.
THE CENTRAL PACIFIC.
In the case of the Central Pacific, that COM
pany and lis lessee, the Southern Pacific Com
pany, are required to file a modification OF It's
lease modified in such a manner as
To provide that during the term of the
mortgage Of for Se 5ne pDe benefit Of The
pany, 1t shall be leased 10 The Southern Pacific
Company az an annual rental or rentals,
%hen shall sneD not be less in hs yssr
Tie UniIed States by the properties during such
Act, and both company or companies are re-
qured to consent that The leasehod
estate Of the Southern ihern,. Pacific Com,
profits of the lease shall be subject TO the lien
or mortgage provided by the act, SO that lhe
Southern Pacific Company subject to and
made further security for the lien or mortgage
10 The United States.
REPORT OF THE COMMISSION.
The report OF the Pacific Railroad Commission.
and the report of the Select Committee of the
Senate and the Presidents Message transmitting
the report of The Pacific Railway Commission,
between the Union Pacific Railway and
Central Pacific properties. both inlrinsicaly
OF adopting different modes OF adjustment
for The TWO companies, 10 put 1t in
another form, the ability OF the Central Pacific
Railroad Company TO make or carry out an
adjustment upon the terms prescribed Tor the
Union Pacific road. The President OF the United
States In transmitting the report of the commits
sion pointed out the fact that the success of any
plan depends upon its acceptance by the COM
paDes and their ability to perform its conditions
after its acceptance.
CENTRAL PACIFIC COMPANY.
The commission had pointed out very clearly
the fact thai the ear nings Of the Central Pacific
Railroad Company were not such as 10 make
the act proposed by the Commissioners
If IL should accept The same, and suggested that
il II should be deemed advisable to effect per-
manent settlement with that company,
method by which that result might be OBJ
tained would be the reduction of Interest to
rate lower than Ter cert; and, further that
the bill submitted Herewith could be brought
within the limits OF the earning caraciiy of The
Central Pacific by reducing the rate of interest
which the bonds should bear, suggesting lhi5
merely as business method Of effecting The best
adjustment possible with these nsolven debtoIs.
NET EARNINGS OF THE ROADS.
From 1879 to 1888, both Inclusive, the net
earnings OF the Union Pacific Railway Company
have been S52, 9lS. .534 o.. The net earnings OF
the Central Pacific Railroad Company have been
less than half that amount, VIZ: S23, l29 81 %.
aud that whereas the net earnings OF the Union
PaclIc Railway Company during the last half of
been s19,755, ,331 81. those of the Central Pa
cihc Railroad Company during The same
period have been only S6,4S5,l46 OF, or less
than one-thlrd of the earnings Of the Union
Pacific The fundamental distinction between
The lines OF the TWO roads depends for the most
part upon their location in respect 10 the great
wealth and population of the East and upon the
character Of he surrounding country.
THE RESOURCES OF THE ROADS. WY
While the line of the Union Pacific Railway
Company runs for the most part through
a rich agricultural country, which has become
a1unfany ,s populated as ., by immigration from
Railroad Company from Ogden to the western
slope OF the Sierra Nevada Mountains is almost
wholly unsupported by any local or continuous
camps which were formerly tribut-
ary TO some extent thereto having been
pressed iu the report OF the Senate COMMITTEES
The country from Ogden to Reno, through
Will which rouios The road nd,,0 passes, is desc
purposes of cultivation and is almost uniDhabited
Five hundred and eiehty-nine miles oil this rail.
road Is nothing more than bridge. and il receives
through which it passes, as It would were that
region now covered as ln great part i once was
by the waters OF the great Salt Lake"
MODE OF ADJUSTMENT.
The mode of adjustment proposed In the bill
accompanying this report OF the Senate Commit
Tee IS; FirstmIn that one.hat Of The u.
the first period of ten years has been
capitalized, thus limiting TO that extent the
amount payable on behalf OF that cOmpany dur
Ing the neIlod preceding tbe maturity OF The first
mortgage bonds which precede the Govern
menl debt; second, In that the distribution
OF payments on account OF the principal ana IN
terest OF the Central Pacific debt has been as
simulated to the distribution OF such payments
as prescribed for the Union Pacific the only
differences being In the reduction OF the rate of
Interest from to 2 per cent and the extension
OF the period covered by The adjustment from
fifty to seventy-hve years.
CHANGES ARE NECESSARY.
We believe that both these changes are de-
manded by the differences In the situation and
earning capacity OF the properties and the
nfaa tn.
to secure an adjustment which each company
may fairly accept and may be fairly expected 10
carry out. lie first change Is the only difference
so far as the Union Paeihc Railway is concerned
between the bill reported herewith and the bill |
unanimously % reported by the Committee on Pa
the latter bill was drawn the earn
ings OF the Union Pacific Railroad
the payment required by its terms there would
have been left u balance equal to about per
cent upon the c0mpany's capital stock. which
was the rate OF dividend permitted by Lhe bill.
REDUCED EARNINGS.
Since that time its earnings have been
so far reduced by lower rates and In
creased EXPENSES, S h dne , mainly IN .s to co%peti
there would nave been left after meeting its
requirements less than per cent upon the com
pany's capital stock. This, in tile judgment Of
your committee is too small margin for safely,
and they have therefore made the modification
referred to, In order TO reduce the annual pay
ment required during the first ten years.
BONDS WILL NATURE.
In the course OF this period the first mortgage |
bonds and other debts bearing high rate OF
interest will mature, aud during this
time the charges upon the property |
are much larger than they Will be |
after these debts have been paid or refunded nj |
a lower rate OF interest Tie first ten years are
a period OF danger, aud when these
have passed the ability of the company |
Will bo very much greater, aud It's !
burden can be increased. The change in the |
bill is made 10 adapt the load to the com pany's
strength, and whatever Is taken off during the
ten years Is added later that the result 10 the
United States Is the same
SIMILAR CONSIDERATIONS.
The same considerations apply in the case Of
the Central Pacific Company. 1t will be observed