The Salt Lake herald. [volume] (Salt Lake City [Utah]) 1870-1909, 1896-04-26

very briefly the familiar history of the
legislation by which the government
granted subsidy bonds to the Pacific
roads and then outlines exhaustively the
provisions which congress has made from
time to time for the repayment of the
bonds. The report says on this point:
The acts of congress prescribing the
provision to be made by the companies
Tor the repayment of bonds and the in
terest thereon have all been fully COM
piled With by the companies.
1t was believed by congress, the re-
port says, that the provisions so pre-
scrlbed to be made would suffice to dis
charge the subsidy bonds and interest
thereon al maturity. As a matter of fact
they nave not suffiiced. The insufficiency
OIL the congressional provision has not
resulted from any failure or omission
OF any OF the companies to fully carry
out the provisions OF the various acts
OF congress- but has resulted from two
causes, nrSt, the great reduction in rates
OF transportation which has reduced far
beyond the original anticipation, the
amount OF compensation which the COM
panles were entitled to receive from the
United States for government transporta-
ton, and, second the reduced and until
a very recent date, the constantly dim
lnlSnlng rate of interest upon the gov
eminent bonds, in which the Thurman
sinking fund was originally required to
tention of half of the compensation for
services rendered for the government
would equal or exceed the current inter-
est upon the subsidy bonds, and that the
would suffice for the repayment of the
principal of the debt at maturity
1t was estimated that the aggregate
annual interest would be $3,S $50, and
the fact that the army and navy trans
portatlon and postal service to the Pa
ellie had cost the government annually
1887, ISL, one-half of this compensation
Tor services to the government would
nave very nearly paid the whole annual
interest account; but Notwithstanding the
vast increase in the government trans
portatfon to the Pacific coast, the rates
OF compensation at which the companies
were paid for the services, which they
rendered the government, were reduced
so low that the companies, instead of re-
ceivlng an amount double, or even equal
to the annual interest on the subsidy
bonds, found themselves left debtors an
nually to the government in the interest
account in large amounts.
The insuffcieney of the acts of 1862
and 1864 becoming obvious, the report
states, congress in 1878 passed the Thur
man act providing for the reservation
OF the. whole instead of half the COM
penSatlon for government transportation
and with amounts reserved in the bond
and interest account $50 called, and the
further amounts specified in the act to
be paid into the Thurman sinking fund,
should at least equal 20 per cent, of the
net earnings of the properties. The pro-
visions of the law have been fully carried
out and there has been no interruption
Notwithstanding the insolvency of one
of these companieS) in the continued COM
pliance by both the Union Pacific Rail-
way company, with the full requirements
which congress has heretofore estab-
lished: but the expectation of Senator
Thurman that the sinking fund could
he
five per cent. or anything like a five per
cent. basis utterly failed, as for very
considerable portion of the time govern
ment bonds have sold very much nearer
q 2 per cent. than a 5 per cent. basis.
These companies have repaid to the
United States sums, which in the aggre-
gate are almost equal to the entire
amount of the subsidy bonds loaned; and
in the case of the Union Pacific Railway
company, the repayments will exceed by
the sum of about 100000 the entire
amount of the subsidy bonds issued to
its constituent companies. The decline
in rates of transportation is obvious,
when it is considered that the army and
navy transportation and postal service
to the Pacific before the construction of
the roads cost the government annually
81, 1851, 7S1, while the cost of the like trans
portation on both the Union and Cen
trail Pacific in 1894 Ghe latest year for
which the accounts have been made up)
when the volume Of business transported
must have been many times as great as
that transported before the construction
81, 1853, 426. On the other hand. the Thur
man sinking fund, instead of earning
per cent. per annum on the amount in
vested therein, has yielded only COM
paratively insignificant returns.
From statements furnished by the sec
rotary of the treasury, Chairman Pow
ers shows that the total subsidy bonds
advanced were:
~
sas PACING railroad, S6S0S, coo; total, $685.
539, 512; Central Pacific railroad $20, SS5, 120;
Western Pacific railroad, Sl,97O,560; total,
$27, S55 $50. Total subsidy bonds advanced
to these companies, SCI, $685. 1872.
The repayments We're: Union Paclhc
S3S, 569, 1886; Central Pacific rail-
road sis, 1S5, ASS; total, $50, 577, 1874
The repayments on January l, 1897, fall
short of an amount equal to the princi-
pal of the subsidy bonds advanced by
about the sum of S4,639, 49,
The remaining debts to the govern
ment on January l, 1897, are: Union Pa
CHIC and Kansas Pacific, $53, 715,4O8; Cen
trail Pacific and Western Pacific. $57,6Sl,-
514 Three possible lines of policy seemed
open to the government, Mr.. Powers
states, viz: First, to enter into posses
sion of the properties which would IN
volve the immediate payment OF SOL, $780,
coo first mortgage bonds. Second, fore
closure and sale of the governments lien,
which would practically reach the same
result of the governments acquisition of
the roads. The roads, If sold for what
they would fetch, would yield little or
nothing for the government on its debt.
Third, to make an arrangement with
the companies which would secure to the
government the payment or f1xed
amounts at prescribed dates as large
as the reasonably anticipated earnings
would bear.
The committee, the report continues,
adopted the third plan and extended the
government lien TO embrace the whole
including. terminals, branch
lines and feeders and equipments. In THIS
connection it is said:
without these it would be 1mpractlc-
able to operate successfully lhe supsl-
died properties, which are connned 10
interior railroads without the terminals terminals
and outlets Indispensable to compete
and efficient property. On the other
hand, no settlements had been maze
which would leave the government at IT'S
present disadvantage and Whlcn does not
provide for the government security COM
pleted in the respects in which 1t mas
been heretofore so clearly deficient. The
lien of the government Will embrace ad-
ditional indispensable properties which IN
clude more than 20 per cent. OF the main
line mileage of the Union Pacific rail-
way. 22O miles of branches, its extensive
terminals at Omaha, Kansas city, Den
yer and Ogden, the bridge across the
river at Omaha the entire pody
ing land contracts. In the case of the
Central Pacific the lien is extended to IN
,lude the non-aided lines extending from
Niles to Oakland (on the bay of San
francisco together with the local lines,
terminal properties and real estate in
San Francisco, Oakland and Alameda,
steamers, ferry boats and equipment OF
ferries. which constitute the great ter
ninals of the Central Pacific in and near
San Francisco"
The bill requires the Southern Pa
cific lease of the Central to be modified
to guarantee the Indebtedness of the
Central.
The report estimates s4,OOe,OO0 to be
n fnir q vera ye of the annual earnings