The evening times. [volume] (Grand Forks, N.D.) 1906-1914, 1912-07-01

the st. Paul. Minneapolis & Manitoba
was organized and for many years
thereafter the railroad world was
governed by a code o done away
With. 1t was the general practice to
build new roads with the proceeds Of
was considered the legitimate property
OF the promoters. who were accus-
toned to use part of 1t as q bonus to
the subscribers for bonds. When
profits We're large, stock dividends
were held perfectly proper; and the
general practice of railroads was to
divide all profits in sight and charge
to capitalization all expenditures that
could be SO covered. This code and
these policies were those not merely
of spectators or railroad managers,
but were publicly sanctioned both as a
part of the necessary conduct Of the
business and ethically. This differ
ence of standards has to be borne in
mind constantly whenever one deals
with railroad developments dating
much earlier than twenty-five years
ago..
During 1873. before the road was
organized, 112 miles of track were
built, and mor than that the year
following. A large amount of equip
ment was bought. To cover this out
lay a part of h proceeds of the sec
ond mortgage issue of S. 00, 900 was
used. There was originally a limit
Of bond issues to $4,000 per mile of
single track road which vas found to
on prairie. In 1880 the Dakota extern
sion mortgage vas authorized of
which %$5,676.000 Of six per cent bonds
were issued from time to time, and
this total of less than $22. 900. 900 COW
cred the whole bonded Indebtedness
OF the company down to 1888. But
1t by no means covered the actual ex-
p%enditures for which bonds might legi-
tinately be issued,
Used Profits for Extensions.
The period from 1879 to 1888,
when the railroad vas still an expert
ment in the minds of most eastern
capitalists. was no a time to enlarge
the volume Of securities or ask outside
capital to bid for them. All this could
have secured would have been some
sales at much below par and an i'm
paired credit. Yet money must be
had to keep going the extension which
was creating a new northwest; and,
through that, profitable and assured
future for the company. The COM
pany diverted to these uses the none
which might have been divided as
profits among the stockholders. At
one time 210 miles Of road were built
and $1.7o0,000 We're spent on equip
ment without a bond issue. The COM
pany became its own banker while
waiting for a favorable market to be
created. The stockholders Temperate
~ renounced their profits in order to
leave their money in the enterprise.
But 1t remained their money, and
their title to it was indisputable. It
was costing now very much more than
$4,000 a mile to build a substantial
track. In all. about $11. 900. 900 Of
pronts was put into new construction
and betterments. The stockholder Of
that day expected these profits to be
distributed. His right to them was
sanctioned by public opinion as we'll
as by custom and law. It was recos-
nized in 1883.
Credit is Preserved.
I'm that year the credit foundation
Of the company was broadened and it's
methods systematized by the authori-
cation Of $4,000, 900 consolidated
mortgage bonds. OF this amount,
~$19,426,000 was reserved to retire
prior bonds. 10.574,000 was to be is
sued Immediately and the remaining
the construction thereafter Of addi-
tional track at the rate OF not to ex.
coed $4,000 per mile. although the
cost per mile was often as high as
$4,000 and the cost of terminals add
ed greatly to this sum. OF the &c.
$4,000 bonds issued on execution Of
the mortgage. $40. 700, 900 were sold to
the stockholders at par. payable 10
per cent in cash and 80 per cent in
the property that had been construct
ed OF acquired with the stockholders
money. thus returning to them 49,
600. 900 of the forced loans taken
from them by seQuestration Of S11.-
100000 Of their profits during the
previous years. To the stockholders
the only difference was they received
a portion of the legitimate earnings Of
the company in the shape Of bonds in
stead Of cash. and were deprived Of
the personal use Of 1t during the time
that 1t had been used by the company.
The difference to the company was
100000 or more. az 1t sold to its
stockholders at par bonds which IL
placed on the market three years be-
fore could have been sold only at a
heavy discount; besides It was an in
dispensable aid to immediate growth
and Q conservation and huildinS IN AZ