The Salt Lake herald. [volume] (Salt Lake City [Utah]) 1870-1909, 1891-09-25
THE UNION PACIFIC
The Report of the Government
Directors.
CONGRESSIONAL ACTION NEEDED
To Relieve the Road and Aid the Govern
mental Observation-Disclosures of the En-
tire System Recommended.

WASHINGTON, Sept, 24.-G gorge F.
Leighton, John T. Plummer, Jesse Spauld-
ing Rufus B. Bullock aud Joseph w.
Paddock, government directors Of the
Union Pacific Railway company, have filed
with the secretary of the interior their re-
port as follows:
For the year 1890, as compared with 1883,
the gross earnings of the railway increased
1862, 64S, whilst the net earnings decreased
81, oil $40 for the same period. The gross
earnings OF all the roads composing the
system increased So. 3T9. 64S, whilst the net
earnings decreased 81, 457 1862. The causes
of this diminution in net earnings are
mostly of general character common
to all railways in the west and
arose chiefly from the exceedingly low
rates prevailing over the greater part Of
the territory covered by the system. The
fact that an increase of about So, 5oo,0 900 in
the gross earnings was effected at an in
creased expense in the cost of operating
and maintaining of about $1,000, 000 the
conclusion is newt able that after making
full allowance for all local and eXcep-
tional requirements for increased expendi-
lures and that large portion of the busi-
ness OF the year was secured at rates
involving an absolute loss. The event OF
the year t. which we feel called upon to
direct the attention of the department has
been the financial embarrassment of the
company, brought about by conditions i'm
pairing the ability of the company to
carry its large floating debt. The gross
| floating debt Of the company Oh the 31st of
| December, 1889, was $40, 16l, 000, and al
though at times materially less during the
1 > l,y1l . 10 % -.
1890, S2l, 100000 OF this amount about
SIS, 900, 600 was the result of expenditures
and was advanced in the construction
OF branches, or the purchase of stock in
such lines for the purpose of control, aud
was fully represented by securities Of
equivalent or greater value in the treas
ury of the company. But under the condl-
tons of the money market in the autumn
of $780, brought about through the
embarrassment of financial houses in Lon
don, the market for investment securities
of all kinds, both in this country and in
| Europe, was seriously impaired and the
company was unable to dispose of them. A
floating debt of such magnitude, however
well represented or secured is always to
be deplored as subieoting the company to
embarrassment from great monetary dis
turbances.
a The policy of the Union Pacific company
in acquiring control of the tributary lines
has been frequently discussed. We have
no hesitation in saying such policy Is ab-
solutely necessary to the prosperity of the
system. 1t is doubted if the company could
have maintained its solvency excep,
through such policy, Every mile of road
constructed or purchased has brought ad
ditional tribute to the trunk line In the
year 1890 about 100 miles Of new road, OK.
elusive of sidings, had been added to the
system. In November there was under
construction in Utah about 100 miles upon
which nearly 81, 100000 had been expended
In Oregon and Washington about ST. SOC, 00C
had been expended on the Portland s.
Puget Sound railroad, including bridge
across the Columbia river. All this worl
was Immediately suspended on the frs
suggestion of financial danger, and has not
} yet been resumed. Every effort was
made TO retrench expenditures in
every department, and it was hopec
no extraordinary measures would become
nece> sary 10 protect its credit A crisis il
the financial affairs of the company was
however, reached in August, 1891. 1t be
came impractcable, If not impossible, Il
carry the large floating debt any longe,
through banks and trust companies, anc
became necessary to fund 1t at least for
period sufficient TO enable the company tt
market its securities, most of which were
already hypothetical in temporary loans
The report then details the methods
adopted by the company at O meeting helC
last month to prevent the present tinancia
; embarrassment The government direc
tors say they reluctantly concur in THU
course of action as adopted, as presenting
, apparently the only means of relievins
, the company, but regret the temporar,
, character OF the provision for relief, ant
the additional fact Juat it is necessary Il
hypothecate not only bonds but stocks hell
by the company.
' The report then continues: 1.-THE condi
, lions prevailing at this time emphasiz
the recommendations SO often N de b.
. congressional committees and by the gov
!, erument directors. No one can come int
close knowledge Of the Union Pacific rail
, way system without being Impressed wit
2 the necessity for relief from the exaction
l and limitations now imposed by law. 1t i
virtually essential this company shout
be freed from these to enable i
to maintain itself in fair competition wit
other systems not so hampered and re
] strained. The whole financial system i
one OF eXpedients rendered necessary b.
a the limitations of various statutes havin
in view the security of the government
lien. The complex and invalid method
arising from branch, guaranteed collatera
\ trust, and endorsed bonds has cost tn
t company vast amount of money, fairl
| stated in millions which might have bee
in q large degree saved if it had been per
mitted 10 assume Its own direct obligatio
= secured by direct mortgage upon its ow
: property"
n 1--WE perceive that the government Ia i
L any way benefited by these limitations o
e that the security of its own lien would b
c in the least impaired by their remova
t Their only effect seems to be to add to th
n burden of the company in ordinary hnanci,
a administration, and to that an extent {
( impair its ability to meet the demand upo
f it. A sound public policy should, In GU
G Judgment prompt the government as
e credit tor TO make such provision as to tn
u time and date of payment of the prin Clip
9 and rate of interest to be paid as may /
D within the ability Of the company to NEE
|. and just and equitable under all the CT
q cumstances. But having done this, II
Vt Union Pacific should be as free and vi
q trammeled as other lines to develop ar
l. extend its system, in fact should be free
II from every restriction except those whic
o the law imposes upon all railways sim
n larly engaged in inter state traffic. Und,
d all the conditions surrounding the prop
X erty at present are prospective condition
Is of future prospects so far as they may
y foreseen, that we do not believe the positic
d of the government as creditor will in an
d degree be improved by delays in such a,
IS justment whilst, on the other hand, th
e ability of tho company to discharge
IT obligations to the government aud tt
d public would be materially enhanced, an
J; ultimate payment more certainly insur,
3. by such legislation as will permit of Il
D, consolidation and unihcation of the syste
and the extension of the security
government, either directly or indirect
to the whole property. The nearly concu
4, rent maturity, in the near future, of Il
- under ying first mortgage bonds of the de
~ to the government and of the collater
10 notes recently issued aggregating ov
500, Oo0, goo, is a fact not to be overlook,