The record-union. [volume] (Sacramento, Calif.) 1891-1903, 1898-10-04
RAILROAD DEBTS.
rs THE REFUNDING OF THEM
AN ISSUE?
Intelligent Treatment OF the Cues
ton by Reno News
paper.
paper.
TFrom the Reno Gazette. I

by the amendatory Act of 1864. The
chief features of the aid extended by
the Government were: First, land
grant of relatively inconsiderable value
But a second, and more important fea-
ture related to the extension of credit
on the part Of the Government of the
| United States in the form of bonds
These bonds were sold, and their issue
and delivery were made by them terms
of the Act to constitute a first mort
gage upon the road and equipment. BY
| the Act of 1864 the first mortgage was
made subordinate to a lien represent
ed by the bonds issued by the railroad
companies themselves, and thus there
was interposed between the property
and the claim Of the Government a
first mortgage.
The roads received their grants upon
condition that they would pay the
bonds issued by the Government upon
maturity, and when legally called upon
so to do. The time is now fully ripe
for the redemption of this pledge. On
the 1st day of January, 1899, the last
of the Government loan bonds will ma
ture, and the amount which the Cen
trail Pacific will owe on that date is
approximately S60,000,000.
For the past ten years the question
of refunding this debt has been under
discussion. Refunding was a misno-
mer in this case. What the railroad
companies asked was an extension of
time for the payment Of the whole debt
and the policy Of giving this extension
has been the subject of acrimonious
controversy.
Two policies have been advocated.
The railroads and their friends have
advocated an extension Of the time TO
eighty years for the payment Of the
debt at a lower rate Of interest than
the original rate. The anti-railroad eIe-
ment has advocated foreclosure of the
Government lien Immediately upon ma
turity of the bonds
Bills for the extension of the time
for the payment of these debts have
been before Congress and have met
a uniform defeat. At last, all parties to
the controversy agreed upon a bill
which was incorporated into an Act,
making an appropriation to supply de-
ficiencies for the fiscal year ending
June 30, 1898. This Act was approved
July 18th Of the present year, and is
now the law. Several questions arise
among which may be noted:
Is this Act a funding bill? Does it
require further legislation? Has the
relation between the Central Pacific
Railroad Company and the Government
been adjusted? Is there any adjust
ment between the Government and the
road which involves a. question of policy
creating an issue in the current cam
patgns now in progress within the
States of California and Nevada?
An examination Of the provisions Of
the bill will answer these questions. The
bill provides that the Secretaries of
Treasury, Interior and the Attorney
General shall constitute a commission
with power to settle the indebtedness
Of the company, growing out of the
issue Of bonds in aid of the construc-
ton Of the line of the Central Pacific.
ETC.
The second provision is that any and
all settlements thus made shall be sub
mitted in writing to the President for
his approval or disapproval, and unless
approved by him shall not be binding
At this point, it should not fail to be
noted that the commission created by
the Act can simply propose terms os
/ negotiations with the owners of the
railroad, and that the President must
approve before the agreements are valid
| or possess any force, and that the COM
mission itself has no power to pass
their agreements over the Presidential
veto. In this way the President of the
United States is the final arbiter of all
questions arising out of this adjust
ment.
The next provision Of the bill deter
mines for the commission fully and
finally just how it shall act. 1t pro-
vides that the commission shall not
agree to accept a less sum than the full
amount due the United States and all
amounts necessary to reimburse the
United States for money paid for in
terest or otherwise"
Thus the law determines for the COM
mission that it shall not consider even
proposition to accept less than the
entire amount which the Central Pa
| cific owes or is to owe the Govern
ment.
The next provision declares that in
any settlement that may be made the
final payment shall not be postponed
to exceed ten years, and that the whole
amount, principal and interest, shall be
paid in equal semi-annual installments
within the period so limited, and that
the rate of interest on deferred pay
ments shall not be less than 3 per cent
| This is provision of law and is a
statute Of the United States.
| Thus far then, we have a commits
| sion subject to the order of the Presi-
dent, and it is made a provision of the
statute that the commission shall not
| accent less than fhe whole amount +ha
railroad owes the Government, nor
grant a longer term than ten years in
which to collect the full amount, nor
less rate than 3 per cent on. deferred
| payments, and that the payments shall
be made semi-annually. To understand
this properly, it must be remembered
that all of these provisions are statu-
tory; that they are the law of the land
at the present time, and that no one has
power to violate it.
The amount of the Indebtedness, as
already indicated, is S60,OO0000. The
| provisions of the statute then declared
that 100000 of the principal shall
| be paid in each year, or three millions
each six months, and that in addition
3 per cent. interest shall be paid (col-
lectible semi annually, on the deferred
| payments. In the first year the rail-
road company would be required to pay
S6,0O0,000 Of the principal and S1,71O,-
O00 interest, making a total first pay
ment Of S7,710,000. In the second year
the company would be called upon to
pay S6,000,000 principal and 1,620, 900
interest, total of S7,620000. Pursu-
/ ing the calculation the fact is disclosed
that the interest to accumulate will be