The record-union., 1897-01-04
RAILROAD INDEBTEDNESS.
Little Doubt Of Favorable Congressional
Action.
Reasons Advanced Why Funding is
the Best Course for the Gov
ernment to Take.
(From the vacaville Reporter)


for final settlement With a consensus
of opinion in the East apparently we'll
disposed to a funding bill, there is but
little doubt that Congressional action
will be favorable to the railroads. One
finds from a perusal of the Eastern
papers a unanimity of sentiment, which
will, without doubt, be reflected in Con-
gress by the votes of Eastern Repre-
senbatives. AS a proposition of busi-
ness, taking into consideration the
amount of the debts of the Union and
Central roads, the fact that there is a
first mortgage, prior to the lien of the
Government, amounting to about $685.
OOo,oO0, 1T seems necessary to adjust
the Indebtedness of these roads ON the
basis of what the Government is able
to demand and what it can force the
lines to pay. Amy phase of the ques-
ton which may be investigated pre-
sents difficulties and unusual condi-
tions. There are many in California
who have desired that the roads be
secured by the Government by some
process, and that it run them on
basis of cheap rates for the benefit of
California. We have a strong desire
to see the experiment of Government
ownership tried, and believe the ex-
pertinent would be of value. The
East, however, would oppose it solidly,
and 1t is not likely to result from any
plan which has yet been suggested.
Whiie 1T seems very easy to some for
the Government to acquire the Union
ana central, as matter of fact it
is q question whether it can be done
without additional legislation. Ger
tainly. 1T would involve the payment
OF the prior first mortgage leins, and
IT would also involve the refunding or
payment in some form of the amount
OF bonds issued to the aided roads.
To secure possession of the Central it
would cost the Government over fifty
millions the Union would cost i'm the
same way over sixty eight millions, a
total for both roads of over one hum
dred and eighteen millions 1t must
be borne in mind also that to this cost
to the Government must be added the
amount of interest which has been
pald out I'M the past three decades. Of
course 1T would be lessened by pay
nefhts and the amounts In the sinking
fund. In the case of the Union the
aggregate of credits is S34 100000. In
the case of the Central it is $4,000
oOO, total of forty nine millions. De-
Quoting this total from the amount of
interest paid to date, there Is to be
added to the cost to the Government
of the Central $31 100000, and to the
cost of the Union $26,OO0OO0. In other
words, the Government, after wiping
cut the Junior securities, would own
the Central at cost of $S1, 900, 900,
and the Union at a cost of SS4, ,0OO. 900.
This would aggregate in round numbers
one hundred and seventy-five millions.
which the Government would have in
vested in a line without satisfactory
terminals, without rolling stock and
to equip which additional millions
would have to be spent Now all
this obligation of debt would rest ON
lines about 2,300 miles in length. Prob
ably the same lines could be duplicated
Tor SbO,OOO,OOO, or a cost of $25, 900 per
mile. Foreclosure and a sale of the
properties does not leave the Govern
nent in any better shape 1t is ap-
parent that the first mortgage bonds
would have to be paid off, and that the
best the Government could hope for
would be to secure the repayment of
the amount of the first mortgages and
a portion of the amount it would have
to pay out to take UP the bonds it
has indorsed.
In view of the fact that there can he
no substantial competition in bidding
for properties of the valuation of these
transcontinental lines, it Is not proba-
Die that the Government could hope
to secure more than a few millions
no fY.ct
basis its losses would be about fifty
million in round figures. On the basis
of refunding In some manner the best
interests of the Government lie very
clearly. The efforts that should be
made at present are to see that
when bill of the kind proposed
passes the Governments rights are
second to none and that it is in a posi-
ton to insist upon a full performance
of the conditions imposed. There is
no reason why there should be a
repetition of the disregard Of the
rights of the Government and the be-
trayal of private interests, which
have been associated with the sl1bsi-
diZed lines. The Union Pacific has been
the scene of many a case of railroad
loot and at present this magnificent
railroad property is practically wrecked
In the event that the funding bill
passes we shall expect to see the Gov
ernment lien on both roads extended
to all branches it does not cover and
make a first mortgage lien This will
probably be done by means of an as
sessment of the Junior securities, as
has been done in the case of the Atchi-
son, the Northern Pacific and other
railroad properties. What will be ac-
complished by refunding? The Govern
ment will not be called upon for pay
ment of the principal of the credit
loaned to the Union and Central,
amounting to sixty million, and but
little reduced by credits; lit will not be
obliged to protect itself by lifting the
first mortgages, prior liens to its own,
amounting in the case of both roads
to SOS, 900, 900, and it will secure re-
payment of every dollar, we believe.
of interest now due, compounded in
effect at the rate proposed. Taking
sMesSs ga EExA -