The herald., 1896-04-26
Chairman Powers Report Pre-.
sented in the House
OF THREE LINES Of POLICY
The Committee Makes Recommendation
as TO Action
nles for the Payment of Prescribed
Amounts at Fixed Dates
Associated Press Special Wire.


cific roads today presented to the house
the report of the majority of the COM
m1ttee on the Pacific railroad Dill. 1t
makes very comprehensive and eX-
haustive document. The report sketches
very briefly the familiar history of legis-
latton by which the government granted
subsidy bonds to the Pacific roads, and
then outlines exhaustively the proVis-
ions 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 compan-
les for the repayment of bonds and the
interest thereon, have all been fully
complied with by the companies"
1t was believed by congress, the re-
port says, that the provisions so pre-
scribed to be made would suffice to
discharge the subsidy bonds and in
terest thereon at maturity. AS a matter
of fact, they have not sufficed. The in
sufticeny of 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 re-
suited from two causes, first, the great
reduction in rates of transportation,
which has reduced, far beyond the orig
inal anticipation, the amount of COM
pensation which the companies were
entitled to receive from the United
States for government transportation,
and, second, the reduced and, until a very
recent date, the constantly diminishing
rate Of interest upon the government
bonds in which the Thurman sinking
fund was originally required to be in
vested. 1t was expected that the re-
tention of half of the compensation for
services rendered for the government
would equal or exceed the current in
terest on the subsidy bonds, and that
the reserved 5 per cent of net earnings
would suffice for the repayment of the
principal of the debt at maturity. 1t was
estimated that the aggregate annual
interest would pe So, S92, ,0S0 and the fact
that the army and navy transportation
and postal services to the Pacific had
cost the government annually $7,307,7S 7S1.
One-half of this compensation for serV-
ices to the government would have
very nearly paid the whole an
nual interest account; but, notwith-
standing the vast increase in the gov
ernment transportation to the Pacific
coast, the rates of compensation at
which the companies We're paid for the
service which they rendered the govern
ment were reduced so low that the COM
panies, insetad of receiving an amount
double or even equal to the annual in
terest on the subsidy bonds, found
themselves left debtors annually to the
government in the interest account in
large amounts. The insufficiency of the
acts of 1862 and 1864 becoming obvious,
the report states, congress in 1878 pass
ed the Thurman act providing for the
reservation of the whole instead of half
the compensation for government trans
pOrtation, and with amounts reserved
in the bond and interest account ESQ
called) and the further amounts spec
ified in the act to be paid into the Thur
man sinking fund, should at least equal
% per cent of the net earnings of the
properties The provisions of the law
have been fully carried out, and there
has been no Interpretation (notwith-
standing the insolvency of one of these
companies) in the continued compliance
by both the Union Pacific Railway COM
pany and the Central Pacific Railway
company, with the full requirements
which congress has heretofore estab-
lished; but the expectation of Senator
Thurman that the sinking fund could be
invested in government bonds upon q
8 per cent or anything like a 5 per cent
basis utterly failed, as for a very con-
siderable portion of the time government
bonds have sold very much nearer
per cent than per cent basis.
These companies have repaid to the
Tilted 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 payments will eX-
coed the sum by about So 900, 900, the
entire amount of the subsidy bonds
issued to it's constituent companies
The decline in rates of transportation
is obvious when it is considered that
the army transportation and postal
service to the Pacific before the con-
struction of the roads cost the govern
ment annually $7,357,7S1, while the cost
of like transportation on both the
Union and Central Pacific in 1889, the
latest year for which the accounts have
been made up (when the volume of busi-
ness transported must have been many
times as great as that transported be-
fore the construction of the roads), cost
the government only $1753,426. On the
other hand, the Thurman sinking fund,
instead of earning per cent per annum
invested therein, has yielded only conf
paratively insignificant returns.
From statements furnished by the
secretary of the treasury, Chairman
Powers shows that the total subsidy
bonds advanced were:
Union Pacific railway, s27, 236, ,512; Kan
sas Pacific. $6,303, 900: total $33, ,539. .512.
Central Pacific railway ,$25,SS5, ,120;
Western Pacific railroad, $1,970,560; to-
tai, 27,S55, $50. Total subsidy bonds ad-
vanced these companies, SCI, 1896, 1872
The repayments were: Union Pacific
railroad, $36, 569, ,935; Central Pacific rail-
way, $18, 8,1S5, ,4ES; total, $S56,577,394
The repaymenrs on January l, 1897,
fall short OF an amount equal TO the pfln-
cpal of the subsidy bonds advanced by
about the sum of $4,639, 797.
The remaining debts to the govern
ment on January 1, 1897. are: Union
Pacific and Kansas Pacific, $53, .40S;
Central Pacific and Western Pacific,
$57 ,6S1 ,514.
Three possible lines of policy seem
open to the government, Mr.. Powers
states. viz:
First-To enter into possession of the
properties, which would involve the
immediate payment of $61, ,3S5,0OO first
mortgage bonds.
Second-Foreclosure and sale of the
governments lien, which would practi-
cally 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 it's debt.
Third-To make an arrangement with
the companies which would secure to
the government the payment of fixed
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
properties, including terminals, branch
lines and feeders and equipments. In
this connection it is said:
without these it would be imprac-
ticaple TO operate successfully the sub
fidized properties, which are confined
to interior railroads without the term
inals and outlets indispensable to a COM