The Seattle post-intelligencer. [volume] (Seattle, Wash. Terr. [Wash.]) 1888-1914, 1891-09-25
THE union PACIFIC,
Annual Report of the Board of
Government Directors.
FINANCES IN BAD SHAPE.
Construction Stopped, and Expenses
Cut Down Wherever Possible.
Large Decrease of Net Earnings-Every
Mile OF Branch Built Has Been
PrOfitable-The Road Suffering in
Common With Others.

| WAsHINGToS Cry, Sept. A.-George F.
Leighton, John f. Plummer, Jesse Spauld-
ing, Rufus B. Bullock and Joseph w. Pad
dock, the government directors of the Un-
ION Pacific railway, have filed with the
secretary of the interior their annual re-
port, as follows: For the year $780, as
| compared with 1889, the gross earnings
increased $652, 2,443, while the net earn
ings decreased $1,01l, $50 for the same
| period. The gross earnings of all the
roads composing the system increased
S3,319,6iS, whilst the net earnings decreased
| $l,457,962 The cause of this diminution
in net earnings is mostly of general
character common to all railways
| In the West, and arose chiefly from the ex-
ceedingly low rates prevailing over the
| greater part of the territory covered by the
system. The fact that an increase of about
S3,5o0,000 in gross earnings was effected
at an increased expense in the cost of oper-
atlng and maintaining of about S., 900 900,
leads to the inevitable conclusion that,
after making full allowance for all local
and exceptional requirements for in
creased expenditures, large portion of
| the business of the year was secured at
rates involving absolute loss.
The event of the year to which we feel
| called upon to direct the attention of the
department, has been the financial en-
barrasment of the company brought about
by a condition impairing the ability of the
company to carry It's large floating debt.
| The gross floating debt of the
company on the 3ist of December,
1889, was 500 16t, 900, and although
at times materially less, during the year
it reached on the 3lst of December, 1890,
| $2f 10000. OF this amount about $l5,-
| 100000 was the result of the expenditures
| and advances for construction of branches,
OF the purchase of stock in such lines for
| the purpose of control, and was fully rep
resented by securities of an equivalent
or greater value in the treas
ury of the company, but under the
conditions. of the money market in the
autumn of 1890, which brought about pri-
marily the embarrassment of financial
houses in London, the market for invest
| ment securities of all kinds both in this
country and in Europe was impaired and
the company was unable to dispose of
| them. A floating debt of such
magnitude, however well repre-
sented or secured, is always to
| be deplored as subjecting a company to
embarrassment from great monetary dis
! turbances. The policy of the Union Pa
| cihc Company in acquiring control of
| tributary lines has Seen frequently dis
| cussed. We have no hesitation in saving
| that such policy is absolutely neces-
| sary to the prosperity of the system
| 1t is doubtful If the company could have
| maintained its solvency except through
| such a policy. Every mile of road con-
| structed or purchased has brought addi-
| tional tribute to the trunk lines In the
| year 1890 about 120 miles of road, exclusive
OF sidings, had been added to the system.
| In November there was under construction
| IN Utah about 120 miles of road upon
which nearly $4, ,000,000 had been expended.
In Oregon and Washington about
| 81 800, 900 has been expended on the Port
land e Puget Sound railway, including
! the bridge across the Columbia river All
| this work was Immediately suspended on
! the first suggestion of financial danger.
| and has not as yet been resumed. Every
! effort was made to retrench expendi-
| ture in every department, and it was
! hoped that no extrao rdinary measures
would become necessary to protect it. A
! crisis in the financial affairs of the COM
! pany was, however, reached in August.
| 1891. 1t became impracticable, if not
| impossible, to carry the large
| floating debt any longer through banks
and trust companies, and it became neces-
sary to fund it at least for a period suffi-
cient for the company to market its
securities most of which were already
hypothecated in temporary loans
The report then details the methods
adopted by the company at the meeting
| held last month to prevent the present
financial embarrassment. The GOV
ernment directors say they reluctantly
Concurred in this course of action
as adopted, as presenting apparently the
only means of relieving the company. but
regret the temporary character of the
provision for relief. and the additional
fact that it is necessary to hypothecate
not only the bonds, but the stocks held by
the company. The report then con-
| tinueS:
The conditions prevailing at this time
emphasize the recommendations so often
made by congressional committees and bv
! government directors. No one can come
into close knowledge of the Union
! Pacific railway system without be-
! ing impressed with the neccssity
for relief from the exactions and limita-
! tions now imposed by law. 1t is virtually
essential that this company should be
freed from these to enable it to maintain
| itself in fair competition with other
| systems not so hampered and
restrained The whole financial
/ system is one of expedients
rendered necessary by the limitations of
| the various statutes, having in view the
| security of the government lien. The
| complex and involved methods arising
| from the branch guaranteed collateral
| trust ami indorsed bonds has cost the
! company a vast amount of money, which
| can fairly be stated TO be in the millions,
! which might have been in a large
| degree saved if it had been permitted to
issue its own direct Obligations. secured
| by direct mortgage upon its own prom
erty. We cannot perceive that the
government is in any way bene-
fitted by these limitations or that the
security OF its own lien would be
in the least impaired by their removal
Their only effect seems to be to add TO the
burden of the company in its ordinary
financial administration, and 10 that ex-
tent TO impair its ability To meet the debt
uron II. y sound public policy should, in
our judgment, prompt the government as a
creditor 10 make provision As 10 the time
and date of the payment of the principal
and the rate OF interest 70 be paid such as
may he within the ability of the company
TO meet. and just and equitable under all
circumstances. But having done this, the
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