<^=^ (T CORNELL UNIVERSITY LIBRARY Ui\\t Cornell University Library HE1061 .M65 State aid to railways in Missouri olin 3 1924 032 483 335 DATE DUE um~-^ :ar^— ^ CAVLORO PniNTCDlNU.S.A. Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/cletails/cu31924032483335 ECONOMIC STUDIES OF THE UNIVERSITY OF CHICAGO NUMBER IV. NOW READY No. I. THE SCIENCE OF FINANCE By GusTAV CoHN. Translated from the German by Dr. T. B. Veblen. 8vo. pp. 12 + 800 ; price SS-So No. II. HISTORY OF THE UNION PACIFIC RAILWAY By Henry Kirke White No. III. THE INDIAN SILVER CURRENCY By Karl Ellstaetter. Translated from the German by Professor J. Laurence Laughlin. IN PREPARATION No. V. HISTORY OF THE LATIN UNION By Henry Parker Willis STATE AID TO RAILWAYS IN MISSOURI BY JOHN W. MILLION, A.M., SOMETIME FELLOW IN POLITICAL ECONOMY IN THE UNIVERSITY OF CHICAGO ; PROFESSOR OF HISTORY AND POLITICAL ECONOMY IN HARDIN ladies' COLLEGE, MEXICO, MISSOURI CHICAGO /SVZ^. /^ CriPVRIGHTED BY THE UNIVERSITY OF CHICAGC i8q6 THE UKiVERSirV OF CHICAGO PRESS TO R. P. R. A TRIBUTE OF FRIENDSHIP PREFACE. The question of nationalizing the agencies of production, especially those which partake more or less of the nature of natural monopolies, is receiving and doubtless will continue to receive from legislators and students of Political Economy no little attention. In view of this fact increasing interest should be found in the investigation of past experiments in state activity in industrial matters ; for the results of such experiments can hardly fail of being helpful in the discussion of present problems. The study here presented is offered as a bit of information regarding the question of state activity in connection with rail- ways. The particular question on which it possibly presents some information is that of state aid and not of state control. The two questions are, however, closely related. By virtue of the fact that a state aids railways the possibility arises that it may some day control and operate them. This is true for the reason that in aiding railways the state must maintain certain checks on the aided companies ; and these checks, in the form of mortgages and the like, are likely sooner or later to make it necessary for the state to assume active control. In Missouri this possibility became virtually a reality in the case of all the roads aided but one (the Hannibal and St. Joseph); although the state did not choose to exercise its right of control for any considerable period except in the case of one road (the South West Branch) . The aim of the study is not, however, to discuss the question of the advisability of state aid or state control ; it is merely to present some information on state aid to railways that may be of value in the present discussion of somewhat similar questions. It is perhaps needless to call the attention of the reader to Vni PREFACE the fact that a large part of Chapter I. and all of Chapter VI. are the results, of mere compilation. The writer is indebted to Mr. Albert O. Allen, chief clerk in the office of the State Auditor at Jefferson City, Missouri, for valuable assistance in rendering state documents accessible, to other state of^cers for the use of libraries, rooms, and the like, and especially to Hon. F. A. Sampson of Sedalia, Missouri, for the loan of special reports, copies of minutes of proceedings of conventions, and other valuable material otherwise inaccessible, and for a careful reading of the manuscript. The writer would also acknowledge his indebtedness to Mr. R. W. Herrick, Instructor in Rhetoric in The University of Chicago for a careful reading of the manuscript and for many valuable criticisms. John W. Million. Hardin Ladies' College, Mexico, Mo., March 1896. CONTENTS. Chapter I. Early Period (1806-1850). § I. External and internal commercial situation of Missouri i § 2. Agitation for railways : (a) Convention in St. Louis in 1836 3 (i) Recommendation by the governor in 1836 6 (c) Great activity in 1837 7 § 3. Experiments of other states; general view 7 (i) Eastern states : {a) New York 8 (d) Pennsylvania 1 1 (c) Maryland 14 (2) Western states ; common causes for unsystematic and rash schemes 16 (fl) Ohio 17 (i) Illinois 20 (c) Indiana 23 (d) Michigan 25 (e) Other states 26 § 4. Final analysis of the state debts in 1841 28 § 5. The attitude of the states in debt 28 § 6. Possible significance of the disastrous conclusion of this period of state activity 29 § 7. The banking experiment of Missouri 30 § 8. The warehouse enterprise of Missouri 33 § 9. Further preliminary attempts at securing internal improvements in Missouri between 1839 and 1850 — Board of internal improve- ments established ; its work 34 § 10. Causes for general reluctance concerning internal improvements in the early forties 37 §11. Great decline of interest in internal improvements in Missouri (1844-1847) 37 §12. Revival of this interest in Missouri in 1848 and 1849 39 (a) Incorporation of the Hannibal and St. Joseph and Pacific railroads 40 (d) State still conservative 42 § 13. The policy of aiding railways in Missouri a part of a general movement ~ 42 §14. The uniqueness of the experiment in Missouri 43 ix X CONTENTS PAGE Chapter II. The Initiation of the Policy of Aiding Railway Construction (i85i). § I. General view 44 § 2. Reasons for granting aid : (i) To develop the territory of the state and the metropolis of St. Louis 4** (2) To attract the transcontinental traffic of the future through the state: (a) Influence of railway construction in the East 54 (i) Influence of possible western lines. Mr. Whitney's pro- posed route ; a " more southern route." 5^ (3) Insufficiency of Missouri capital and lack of private enterprise in railways 62 § 3. Manner of aiding 64 § 4. The first aiding act, February 22, 1851 65 Chapter III. The Execution of the Policy of State Aid (1851-1860). § I. More applicants for state aid 6? § 2. Charters of the companies aided and to be aided 68 (1) Question of publicity of accounts 69 (2) The railway — a quasi-public institution 7° (3) Banking privileges denied to the companies Ji (4) Time allowed the companies for the construction of the rail- ways 7 1 (5) Exemption from taxation till the payment of a dividend 72 § 3. Relation of the system as outlined to the future railway develop- ment of the Mississippi valley 72 § 4. Progress of the companies to the close of 1855 73 (1) Work of construction begun 73 (2) Congressional land grants 74 (3) Grants of land transferred to the Hannibal and St. Joseph and Pacific railways 75 (4) Genesis of the South West Branch 76 (5) Estimates on the cost of the Pacific and the South West Branch 77 (6) The Iron Mountain Branch of the Pacific 7S (7) Request of the North Missouri Railway Company for aid 78 (8) Law concerning the liability of stockholders too rigid for investors jq (9) Progress of construction on the Pacific So (10) Second general grant of aid (December 1852) So (11) Conditional settlement of the route of the Pacific and exten- sion beyond the borders of Missouri Si (12) Public opinion favorable to state aid 82 (13) First division of the Pacific completed 83 (14) Route of the South West Branch ; its finances 85 CONTENTS XI I'AGE (is) Route of the North Missouri SO (16) First division of the North Missouri completed; its cost 86 (17) Progress on the Hannibal and St. Joseph; its finances and land grant S7 (18) Route of the St. Louis and Iron Mountain; its finances 88 § 5. Railway development, an impetus to the iron industry of the state 90 § 6. Significance of the greatly increased cost of the railways so far as constructed gi (1) The Pacific 92 (2) The North Missouri 94 (3) General causes of the increased cost 94 (4) Need of a general Board of Public Works 96 § 7. Bad financiering 97 § 8. Grant of December 10, 1855 99 (i) Reasons for the grant 99 (2) The state incautious 100 (3) The act of December 10 analyzed 100 § 9. Progress and condition of the railways 102 § 10. Grant of March 3, 1S57 105 § II. Progress of construction in 1857 ; depressed condition of the money market 107 § 12. Act of November 17, 1857 108 (i) Issues of bonds suspended (2) Powers of the Board of Public Works extended (3) State interest fund to be augmented by a special tax and by other means § 13. Rapid progress of the companies in 1858-9 no § 14. Suspended issues of bonds fall due 113 § 15. Conclusion of the period — retrospect and prospect 113 Chapter IV. Progress and Drift of the aided Railway Enterprises during the War (1860-1866). § I. Defaulting railway companies unable to get further aid from the state 115 § 2. Disturbed condition of the country commercially and politically unfavorable to railways 1 1 5 § 3. Causes for the default of the companies : (i) Lack of traffic 116 (2) Unproductivity of land grants 118 (3) Proportion of private funds expended to state aid granted too small 119 § 4. Causes of the great cost of railways in Missouri : (i) Inexperience in railway construction 120 (2) Extravagance; or fraudulent use of funds 121 § 5. A bankrupt state treasury 124 CONTENTS 6. Progress in construction to tlie close of the war; (i) Obstacles to progress; (a) depredations by Confederates, ((5) lack of funds 126 (2) Sources of needed funds 127 (3) Pacific Railway completed I33 (4) F'urther aid asked by the North Missouri, an unequal competitor with the Hannibal and St. Joseph 133 (5) Miles of railway completed at the close of the war 139 7. State debt incurred for railways 139 Chapter V. The Conclusion of the Experiment of State Aid (1866-1868). § I. Railway companies continue in default 140 § 2. Preliminary attempts to dispose of the railways 141 (i) Purchase of the Platte Country Railroad by the state 141 (2) Disagreement between the state authorities and the companies formerly owning the road 142 (3) Sale under the compromise act of February 18, 1865 143 (4) Default of the purchasers a second time 143 § 3. Comprehensive act of February 19, 1866, disposing of (a) the Platte Country, (i) the South West Branch, {c) the St. Louis and Iron Mountain, and {d) the Cairo and Fulton railways 143 § 4. Sale of the Platte Country Railway postponed 144 § 5. Sale of the St. Louis and Iron Mountain and Cairo and Fulton rail- ways : (i) The railways bought in by the state 145 (2) Second attempt at disposal — bids of November 8, 1866 146 (3) Award of the commissioners 146 (4) Investigation demanded 146 (5) Report of the investigatini/ committee 147 (6) Question of higher bids 148 (7) Suit against the purchaser of the railways by the Attorney- General of the state 150 (8) Petition of Mr. Allen for withdrawal of the suit 151 (9) Report of the committees appointed to investigate Mr. Allen's case jq2 (10) Value and condition of the raihvavs [a) Testimony of Mr. Allen ico {d) Further facts concerning the value of the railways 154 (11) Confirmation of Mr. Allen's title, by act of March 17, 1868 155 § 6. Condition of the public morality of the state reflected in the dis- posal of the St. Louis and Iron Mountain and Cairo and Fulton railwa3^s j r a § 7. Disposal of the Missouri Valley Railway : (i) A liberal policy towards the railways now initiated [cy (2) Capacity of the former purchasers to pay for the railway I c8 CONTENTS (3) Reasons for a liberal policy toward this road 157 (4) Lien released and company aided by act of March 17, 1868 159 § 8. Sale of the North Missouri : (i) A second lien 160 (2) Value of the railway 160 (3) The case summed up 166 (4) Railway sold by act of March 17, 1S6S 167 § 9. Sale of the South West Branch : (i) Default of the purchaser, Gen. John C. Fremont - 169 (2) Sale of the railway by him to a new company 169 (3) Seizure of the railway by the state 170 (4) Operated by the state 170 (5) Schemes and bids for getting control of the railway {6) Gift of the railway and lands in fee simple by the state to a pri- vate company 171 §10. Sale of the Pacific Railway : (1) Preliminary attempts 173 (2) Value of the railway: {a} Investigation by a committee appointed by the state 175 (i) The business of the railway: (uthern States. § I. General statement 196 § 2. Georgia 197 § 3. Tennessee 203 § 4. Virginia 206 208 I CONTENTS PAGE § 6. North Carolina 210 § 7. Louisiana 212 § 8. Kentucky 214 § 9. Alabama 215 § 10. Arkansas 217 § II. Texas 219 § 12. Florida Chapter VII. Summary and Conclusion § I. Causes of failure in internal-improvement enterprises ' 222 §2, Probability of the completion of the unfinished roads in Missouri without the release of the state's liens 225 § 3. Redeeming features in the history of internal-improvement experi- ments . - 22S § 4. State activity versus private enterprise in railway matters 229 Appendix I. Tables Relating to Railroads in Missouri 231 Appendix II. Bill of Complaint and Decree against the Committee of the Board of Directors of the Pacific Railroad Company 244 STATE AID TO RAILWAYS IN MISSOURI CHAPTER I. EARLY PERIOD. 1806-1850. § I. That one or more of the highways of commerce between the eastern and western portions of the North Ameri- can continent should pass through the territory now known as the state of Missouri was clearly seen by the early settlers of this territory, and was also very early recognized by the general government. Between 1806 and 1840 commercial adventurers from Missouri, and especially from St. Louis, established a con- siderable trade by means of pack mules and wagons between Missouri and Mexico. But as the carrying on of this trade was fraught with many dangers,' both on account of Indians and Mexicans, and on account of many natural disadvantages, it developed but slowly for several years. By 1824, however, the trade "amounted to ;? 190,000 in gold and silver bullion and coin and precious furs,"'' a business too great to be carried on by pack mules ; wagons were therefore employed, and the trade was moreover extended from Santa Fe to Chihuahua and Sonora. Trafific now rapidly increased, and in 1828 " two hundred wagons loaded with goods of a value of half a million dollars at Mis- souri cost arrived at Santa Fe." In answer to one of the early memorials to Congress,^ from the inhabitants of the territory of Missouri, asking the protection and assistance of the general government for the Santa Fe trade, Congress had passed a law in 1825 authorizing the President of the United States to cause 'In 1806 a party of commercial adventurers from St. Louis were thrown into prison at Santa Fd, but were liberated the next year. In ,1812 and 1818 other parties met with similar experiences. Many fatal conflicts with the Indians are also reported. See "A Memorial to Congress," Laws of Missouri, 1838, p. 328, and Register oj Debates in Congress, 1824-5, vol. i. pp. 344-345. ' Register of Debates in Congress, 1824-5, vol. i. p. no. 3 Register of Debates in Congress, 1824-5, vol. i. p. 6. 2 STATE AID TO RAILWAYS IN MISSOURI a road to be " marked out from the western frontier of Missouri to the confines of Mexico."' The reasons, as given by Senator Benton, which secured the passage of this bill, were that the trade was large enough to demand protection, that it would be a permanent trade, that there were no other sufficient means of transportation, and that there were precedents for government action in such a case.° The government, however, did nothing towards carrying out the construction of this road. The slow progress which it was making on the Cumberland and other roads possibly afforded a reason for not prosecuting new enterprises with vigor. More- over, the incentive to action in this particular case was not so great after 1830 as before. Merchants from St. Louis, not being allowed the drawbacks given to merchants from other cities on goods exported in the original package, were unable to compete with traders from New Orleans, Philadelphia and New York, who, by this time, had found their way to Mexico via the Gulf. Largely on this account, therefore, but mainly on account of a lack of better means of transportation, the western trade of Missouri in 1838 amounted practically to nothing.3 At this time no considerable trade overland east from St. Louis existed ; although the outlets from the city in other directions by means of the Mississippi and Missouri rivers were almost all that could be desired. The internal trade of the state was suffering more or less from the lack of efficient transportation. Although the state possesses an unusually great number of large and small streams they are very unreliable for transportation purposes, because of ^ United States Statutes at Large^ 4, p. 100. ^The particular need of a precedent in this case lay in the fact that the second sec- tion of the bill necessitated the construction of a part of the road upon foreign (Mexi- can) territory. The particular precedent given was found in the Acts of 1806-7 (U. S. Statutes at Large, 2, pp. 397 and 444), authorizing the construction of a road from Athens, Georgia, to New Orleans, " two hundred miles of which [extended] through the Dominions of the King of Spain." .Register of Debates in Congress, 1824-s, vol. i. p. 348. '^Memorial to Congress on the Santa Fi Trade (1838)— Zawj of Missouri, 1 838-9, p. 328. EARLY PERIOD 3 the sandy nature of the soil which forms the river beds. As early as 1838 the state began sending memorials to Congress, asking for aid in rendering her rivers navigable/ § 2. To a people confronted with such difficulties nothing could have proved more acceptable than the railway, the com- mercial importance of which had but recently been successfully demonstrated to the world. And it should be noted in passing that the main cause for the decline of interest in such national enterprises as the Cumberland and Santa Fe roads was the pos- sibilities of the new means of communication, which was now beginning to attract universal attention. The fact that the railway was transplanting the common highway greatly intensified the desire in Missouri for commercial connection with the great west ; and although the people of the state had to wait many years for the coveted means of transpor- tation, they began at once a systematic agitation of the question. The first step was taken in 1836. On April 30th of that year a convention assembled in St. Louis. ° The attendance at this con- vention showed that even at this early period there was con- siderable interest in securing better means of transportation — fifty-nine delegates assembling from eleven counties.^ This convention could, however, do nothing more than recommend lines of road and suggest ways and means for securing them. ' Memorial to Congress on the Santa Fi Trade (1838) — Laws of Missouri, 1838-q, P 331- ° See a Pamphlet entitled Proceedings of a Convention of Delegates for the Promo- tion of Internal Improvements within the State of Missouri (St. Louis, 1836). 3 Delegates from the County of St. Louis 14 " " Lincoln 5 " " Washington 7 " " Cooper 3 Warren 3 St. Charles 4 " " Calloway 3 Montgomery 3 " " Boone 8 " ' Howard 6 Jefferson 3 4 STATE AID TO RAILWAYS IN MISSOURI Two lines were recommended, one extending from St. Louis to Fayette, in Howard county, to develop an agricultural section of the state, and one extending from St. Louis to Washington county, to develop a mineral section of the state. The first would leave St. Louis in a northwesterly direction, the second in a southwesterly direction, and both were to be extended as trade demanded. For ways and means the convention had no valuable prece- dents. The success of the Erie Canal, however, had resulted in giving a great impetus to the internal-improvement idea in many of the states ; and the ways and means adopted by the state of New York in this enterprise served in a greater or less degree as precedents for other states in like matters. The internal improvements of the province and later of the state of Penn- sylvania had been all but abandoned until the state was stimula- ted to renewed efforts by the success of the Erie Canal. Then at a very early date, in order to keep pace with the rival state, Pennsylvania had organized and started anew her system of internal improvements on a grand scale. Although the ways and means recommended by the St. Louis convention for Mis- souri were not in all respects similar to those adopted in the older states they were in many. The convention expressed the desire that Congress would grant the state half a million acres of land to be used in making internal improvements. It was also thought that the state could safely borrow the money needed for this enterprise, because when the lines were once put into successful operation it was believed that they would pay for themselves without burdening the state with taxes. The prospects of the road entering the iron region of the state were rendered more than ordinarily good for a new road by the demand for the products of the iron industry in the city of St. Louis as a growing metropolis in itself, and as a distribu- ting center. The annual demands for the products of iron in this city were placed by a committee of the convention at two mil- lion dollars." It was also stated that " Blooms are now trans- ■^ Value of cast iron per annum ^250,000 EARLY PERIOD s ported by land from the county of Washington to the Mississippi, a distance of fifty miles, and from the county of Crawford to the Mississippi, a distance of between two and three hundred miles, by land and water. From the Mississippi, the blooms are transported by steamboats to Cincinnati and Pittsburg, there manufactured into iron, and manufactures of iron generally, and reshipped to this state, and sold to our citizens, thus adding to the cost of the articles at least 33^ per cent., which would be saved by the erection of the contemplated railroad to the west and southwest, and the consequent establishment of the neces- sary manufactures amongst ourselves." ' The amount which the community would pay in transporta- tion charges, annually, upon the opening of this road, was estimated by a committee to be about ^420,000.^ For this transportation it was stated that the community was now paying $905,000 annually. The statement of the committee that the $420,000 would pay 5 per cent, on 8.4 million dollars, or twice as much as was necessary to construct the road, is simply an instance of the loose calculation of the times. Money could not be had in those days in Missouri for 5 per cent. Furthermore, the cal- Value of bar iron per annum Value of steel per annum Value of steam engines for mills and distilleries Value of nails Value of axes Value of steamboat engines Value of chains, shovels, wire and the like Brought forward, ^250,000 750,000 20,000 150,000 375,000 200,000 280,000 50,000 ^2, 075,000 ^ Proceedings of Convention of Dele gates, ^io.., pp. 13-20. = These amounts were made up as follows : 25,000 tons of iron at S3 per ton 5,000 tons of lead at S3 per ton 62,000 tons of lumber 50,000 tons of coal $ 75,000 cost now S375,ooo 15,000 cost now 30,000 250,000 cost now 375,000 cost now 125,000 Traffic to intermediate points 30,000 $370,000 50,000 905,000 $420,000 6 STATE AID TO RAILWAYS IN MISSOURI culation leaves wholly out of account transportation expenses which usually consume from 50 to 75 per cent, of the gross earn- ings of a road. Although nothing recommended by this convention was ever carried out, its importance lies in the fact that it gave new life to the desire for better transportation. In the fall of the same year in which the convention met in St. Louis, Governor Boggs in his message to the general assem- bly, favored a general system of railroad construction.' In his recommendation that the general assembly should memorialize Congress for alternate sections of land along these routes to be used in aiding the construction of the roads, he was influenced simply by the precedent already established by the general gov- ernment with reference to other states. At this time lands had already been granted to Indiana, Illinois, and Ohio for internal- improvement purposes.'' However, important grants of land for railroad purposes can hardly be said to have been made prior to 1850.3 In the recommendation of the governor, as a further means of assistance, that Congress be asked to remit the duty on all iron rails and machinery imported for the construction of railroads, the governor overlooked the fact that there was at this time no duty on iron rails imported to be used on railways, if so used within three years from the date of importation. "i As a still further means for securing funds, the governor recommended the establishment of a bank with as large a capital as was allowed by the constitution. The bank was established very shortly ; and a brief account of it will be given later.s In 1837 internal improvements in Missouri received a great ' Senate Journal, rS^d-y, p. 23. 'Laws of the United States relating to the Public Domain, House Ex. Doc, XLVI. Congress, 3d session, vol. xxv. p. 258. '^Ibid., p. 261. 4The law remitting the duty for this purpose was passed July 14, 1832, and remained in force till September i, \.'iis,2 — Congressional Debates, yo\. viii. part 3, Appendix, p. 48 ; also Taussig, Tariff History of the United States, pp. 56, 125 and 126. s See below, p. 31 f/ se,]. EARLY PERIOD impetus, but it was wholly of a speculative character. The general land, canal, and railroad speculation, built up during the prosperous times of the early thirties, and greatly increased as it was by President Jackson's arbitrary financial policy, showed itself in Missouri in its most violent aspect during the first two months of 1837 '"^ fhe particular form of chartering railroad companies. From January 23 to February 6, no less than sev- enteen roads were incorporated with an aggregate capital stock of S7, 875, 000.' As there is no evidence that work of any extent was ever begun upon these roads, and as there was a great decline in the number of roads incorporated during the years immediately following, the incorporation of these companies can be regarded only as a phenomenon of the speculative intoxica- tion of the times. § 3. The agitation for internal improvements m Missouri, compared with the activity in other states at this time, however, was really insignificant. A cursory review of the experiments in other states during this period will demonstrate the wisdom of inaction in Missouri and enable us to understand why the state, when beginning her railroad enterprises in 185 1, refused to adopt literally the ways and means tried by other states in 1836-7. It is a fact well known to all who are acquainted with the general economical development of the United States, that from the time of the acquisition of the Northwest territory, and especially from the time of the purchase of Louisiana plans were suggested both by private parties and public officials for giving this great territory commercial connection with the Atlantic sea- board. The first significant attempt for the accomplishment of this purpose was the projection of the Cumberland road in 1806 by the general government. But, aside from minor attempts, the first significant and successful undertaking was the construc- tion of the Erie Canal under the auspices and at the cost of the state of New York. This enterprise, completed in 1825, resulted at once in giving an impulse to other states and was a source of inspiration for several years. The development of the resources 'Laws of Missouri, 1836-^ ; for projected roads see map below, p. 55. 8 STATE AID TO RAILWAYS IN MISSOURI of the several states, accordingly, now became the controlling desire of each. The plan decided upon was not a borrowed one, but grew out of the situation. Canals and highways had of course often been built by states as such in both ancient and modern times ; indeed, our states might have appealed to such facts for precedents, if it had been thought necessary. But they had their own peculiar situation. They were without capital ; and the people, recognizing that their ability to construct lines of transportation was limited on that account, very properly decided to import capital into the state. But capital could be imported only by the use of the credit of the state ; and the state was the only power, corporate or otherwise, that could issue bonds of a denomination large enough to secure the required capital. Along with this appeal to the corporate power of the state to import capital, there appeared in many states a sincere belief in the efficiency of banking institutions to create capital. If the banks could have accomplished this, they would indeed have assisted in the general development of the resources of the state. This belief, indeed, led to the establishment of many banking institutions upon unsound principles. However, the main element in the bad financiering of the times, which led finally to the failure of most of the experiments, was the nega- tive one of not preparing at the time the debt was contracted the sure means for its ultimate cancellation. The experiences of the older states of New York, Pennsyl- vania, and Maryland will first engage our attention. The experi- ment of New York, studied from the standpoint of finance, is easily divided into two periods: (i) That of sound and (2) that of unsound financiering. "IniSij, on entering upon the construction of the Erie and Champlain canals, a sound policy of finance was devised. It was determined to place no reliance whatever on the contingent revenues of the proposed work, but to constitute a fund which should, without possibility of failure, meet the interest on the loans requisite for the construction of the canals." A fund was constituted out of existing "taxes on steamboats, on salt, on goods sold at auction, and on some other EARLY PERIOD 9 property." Such was the able management of this fund that "at the close of 1826, when the canals were completed, the debt was only ^7,737,771, while the amount of money that had been actually expended was ^8,401,394."' And the management was such for the next ten years that in 1836 the whole of that part of the debt falling due in that year was paid off and a fund was being accumulated for meeting the remainder when it should fall due. And such was the credit of the state that when the state offered a large premium for the bonds having a long time to run the offer was not accepted.'' ■ However, a less pleasing chapter is to be written for New York after 1836. The success of this first experiment of course naturally led to others, but in these later undertakings the former sound financial policy of the state was abandoned. Between April 1825, and May 1836, eight new canals collateral to the Erie, with a combined length of 360 miles, costing a total of S9, 377,760, were constructed, and "proved expensive failures." The expense of keeping these canals in repair during this time exceeded the revenue derived from them by ^402,908. As these canals greatly increased the business upon the Erie Canal plans for its enlargement were projected in the year 1834. These plans were followed by others of still greater magnitude. The canal commissioners advised that the limitations of the amount of loans for state enterprises direct and for the aiding of private corporations should be governed only "by a regard to the amount of state stock which would be sent into the market during any year."' Such a policy, we are rightly told, "was a total reversal of I that on which the Erie Canal had been constructed ; namely, that of setting aside specific sums derived from taxation for the pur- pose of meeting the principal and interest on loans, and confin- ing those loans to necessary works." Furthermore, an enormous expenditure on the enlargement of the Erie Canal was projected, based on prospective revenues to be derived from it. Further " Hunt's Merchants' Magazine, xviii. p. 245. ^ Ibid., p. 246. ^ Ibid., p. 247. 10 STATE AID TO RAILWAYS IN MISSOURI large additional loans were proposed, for which the state was to be responsible. It was provided in each case that the state should be reimbursed from the profits of the enterprise, any direct taxation being thus avoided. How unsound these propo- sals were subsequent history showed. This policy prevailed until 1841, when the total actual debt of the state was g 17,309,000, with works under construction which would require ;S24, 590,000 for their completion, making a total actual and prospective debt of g68, 5 5 7,000. Even the policy of allowing only a reasonable amount of stocks to be thrown on the market in any year in order to limit the expenditures of the state was disregarded. Between January 1839 and March 1 84 1, the bonds issued to the Erie Railroad were sold regardless of law and of price.' But the state was unable to go to the full extent of this "wild-cat" policy. In 1841 many of the safety-fund banks failed and the state had to issue $348,107 of 5 per cent, stock to restore to the "general fund " the amount that had been borrowed from it for the benefit of the banks. To save the honor of the state a law was passed in 1842 levying a tax of i mill on the $100 valuation of property and establishing a sinking fund for the extinguishment of the debt in twenty-two and a half years. ^ In 1848 the outstanding debt of the state was $22,137,066, of which 21 million dollars were chargeable to internal-improve- ment ventures. 3 What makes the experience of New York in internal improve- ^ Hunt's Merchants^ Magazine, xviii. p. 248. ^ Ibid., p. 250. 'Erie and Champlain Profitless works Preserving credit of t canals he state Issued t 7,739,771 14,472,257 5,422,136 909,500 3,665,700 1,563,000 % $1 Redeemed 7.739,771 2,949,531 346,006 Outstanding 11,522,726 5,076,130 Bankrupt companies Solvent companies 3,665,700 1,063,000 500,000 Totals ,?33,772,364 [1,189,302 S22, 137,066 See Hunt's Merchants' Magazine, xviii. p. 251. EARLY PERIOD I I ments after 1836 so deprecable is the fact that at the time the state possessed one great canal which was rapidly paying for itself. Between 1838 and 1848, although the earnings of the Erie Canal were increased more or less by the help of the collat- eral canals, the earnings of the main canal represented almost the whole of the canal earnings of the state. The earnings of the Erie Canal in the year 1847 were $3,360,272 and the earn- ings of all the canals in the state were only $3, 531, 771. These figures are fairly representative of the whole preceding decade.' In the list of state attempts to secure internal improvements, the experiment of Pennsylvania, if not first in order in point of success, certainly comes first in order in point of magnitude and of the exhibition of weakness on the part of the state adminis- tration at almost every turn. Pennsylvania had early seen the importance of connecting the Great Lakes and the interior in general with the Atlantic seaboard. She had accordingly, in 1789, commenced "a series of improvements of various descrip- tion — which encountered various difficulties and embarrass- ments." On this account the construction of some was carried on very slowly, while that of others was abandoned altogether. However, immediately after the completion of the Erie Canal, the spirit of rivalry caused the state of Pennsylvania to begin (July 4, 1836) what was described by a writer in 1840 as "that •great system of internal improvements which for extent, magni- tude, and utility stands unrivaled in modern times."'' The main object to be accomplished by Pennsylvania was the connection of Pittsburg with Philadelphia by means of a composite line of canal and railwa}'. This work was finally completed in 1834 at a cost of $14,583,816. Meantime six collateral canals, with a total mileage of 314 miles, had also been constructed at a cost of $6,471,994.3 During this time, however, the state had not maintained a judicious system of taxation. The tax laws then (1834) in exist- ■ Hunt's Merchants' Magazine, xviii. p. 253. 'Tarxner,Descriplion of the Canals and Railroads of the United Stales (1840), p. 96. ^Hunt's Merchants' Magazine, xx. pp. 257-iJ. 12 STATE AID TO RAILWAYS IN MISSOURI ence, had been placed on the statute books as late as 1831, and "were only temporary measures; they were intended to sup- ply an interest fund until the revenue from the public works was sufficient for this purpose, and they would have expired by limi- tation in five years, if they had not been repealed."' But it was estimated at this time that with the resources then arising from "a tax oi 2}4 per cent, on collateral inheritances, a tax on personal property, auction dues, county rates and levies, escheats from dividends on turnpike, bridge and navigation stock," and from the net income of the canal, which was ^252,735 the first year (1835) after its completion, the state "would soon have defrayed its interest, and permitted a relaxation of taxes," had it discontinued its policy of aiding internal-improvement enterprises. ° There was in fact, a relaxation of taxes, but not through a discontinuation of the aiding policy. It is in this connection that the bank feature enters into the Pennsylvania experiment, and enters in a way at once different from and more significant than that of any other state. Upon the expiration of the charter of the second bank of the United States, this corporation turned to the state of Pennsylvania to secure a new charter. The charter was granted upon the conditions that the bank would agree "to pay as a bonus for its charter 4.5 million dollars to purchase Penn- sylvania stocks at a high rate to the amount of 6 million dollars, to loan to the state at 4 per cent, interest, for a period not exceeding one year one million dollars and to subscribe to railroad and turnpike stocks, ^675, 000," making a total of ;gi2,i 75,000. Moreover, in the act chartering the "United States Bank," sev- eral forms of taxation, which had formerly been a source of con- siderable financial strength, were discontinued. The title of the act was "an act to repeal the state tax on real and personal property, and to continue and extend the improvements of the state by railroads and canals, and to charter a state bank to be called the United States Bank. "3 This first great misstep even- ' Worthington, Historical Sketch of the Finances of Pennsylvatiia, p. 38. ' Hunt's Merchants' Magazine, xx. p. 259. ^ Ibid., p. 259. EARLY PERIOD I 3 tually hurled the state of Pennsylvania over the precipice of insolvency. Under the impulse of the act chartering the bank and "of the influence which effected its passage," new improve- ments were begun on a large scale, causing the expenditure of many millions. Many of these enterprises were finally aban- doned by the state, and some passed into the hands of companies which "paid no consideration for them."' It is a short story to trace the downward course of Pennsyl- vania after 1836. The stringency felt ever^^where throughout the country in 1837, did not reach its worst in Pennsylvania until October 1839, when the "United States Bank" failed the second time. "The 5 per cent, stock of the state which had sold for 115 in 1833, would not sell at all in 1839."^ The state now being driven to take refuge in taxation, a revenue law was passed in 1840 which was intended to be a vigorous measure. It yielded in 1841, however, only $33,000, whereas it was expected to yield in that year ;S6oo,000. The state then, as if the past two years had taught no lessons in banking, granted the right to certain banks to subscribe to a loan for the com- monwealth, in notes of one, two and fi\e dollars denomina- tions, issued by themselves up to a fixed percentage of their respective capitals. These "relief notes" were issued to the extent of $2,220,265. As they speedily depreciated, they became "the only medium in which the state received revenues. "^ This step completed the embarrassments of the state. She, thereforp, set about taking vigorous measures to restore her credit. From carefully collected data, the estimate is made that from the beginning of internal improvements in Pennsylvania, "in 1826 to the regeneration of public credit in 1844, the state raised 58.6 per cent, of its revenues by loans, and only 11.4 per cent, by taxation;" and of the vast expenditure ($74,216,694) of this period, "76.8 per cent, was employed in constructing the public works and in paying interest on the loans contracted therefor."* In 1845, after the state had become able to resume the pay- ' Hunt's Merc/ianis' Magazine, xx. p. 260. ^ Ibid. ^ Ibid,, p. 261. •^ Worthington, Historical Sketch of the Finances of Pennsylvania, p. 63. 14 STATE AJD TO RAILWAYS IN MISSOURI ment of interest, the debt of the state was $40, 703, 866,' almost every dollar of which was incurred on account of public works. In 1853 a special committee estimated that the total cost of the public works up to that time had been ^89,747,768.° As the railroad and canal tolls had amounted to $25,342,020, the net cost would be $64,405,748. It is possible that, after many years of costly experimenting, the system of public works in Pennsylvania seemed to be an utter failure, and that generally, observers saw less value in the public works of the state than they really possessed. At any rate, it was stated in 1849 that "the immense loans and expenditures of the state of Pennsylvania to develop her resources had been of very little avail." As the coal industry has always been one of the greatest of the state, the fact that in 1849, of the three mil- lion tons received in Philadelphia, only 192,51 1 were shipped over the state works, 3 indicates that these works were not well con- ceived, at least regarding one of the main industries of the state. All that has been said gives great color to the statements that the public works of the state of Pennsylvania were " conceived without judgment and executed without skill," that " they were laid out less with a view to their ultimate success than to benefit private lands," and that on this account, better routes were com- manded by private companies, which naturally " drew business from the state lines."'' As early as 1840, public opinion had so changed regarding the system of public works undertaken that a proposition to sell the works was carried at a general election by a majority of thirty thousand. The works were sold in two groups eighteen years later for 1 1 million dollars,s or about one-sixth of their net cost to the state. Maryland began agitating the question of constructing canals as early as 1824.'= A Convention was held in Washington in ' Worthington, Historical Sketch of the Finances of Pennsylvania, p. 64. "Ibid., p. 28. 3 Hunt's Merchants' Magazine, xx. p. 269. •■Ibid., p. 258. 5 Worthington, Historical Sketch of the Finances of Pennsylvania, p. 31. 'McSherry, History of Maryland, p. 362. EARLY PERIOD I 5 1823 regarding the construction of a canal "by Cumberland to the coal banks on the eastern side of the Alleghenies, and thence as soon as practicable to the highest point of navigation on the Ohio or Monongahela." And, in accordance with the recommendations of this Convention, "an act was passed by Virginia on the 27th of January, 1824, and subsequently con- firmed by Maryland, Pennsylvania, and the United States, to incorporate the Chesapeake and Ohio Canal Company." By this legislation Maryland obtained, "the right of constructing through any portion of the District of Columbia, a lateral canal, to terminate at the city of Baltimore." The United States government becoming interested in this canal enterprise, subscribed for ten thousand shares of stock. And the cities of the District of Columbia being authorized by Congress to become stockholders, subscribed for fifteen thou- sand shares. The city of Baltimore becoming alarmed, lest this enterprise should inure to the benefit of the cities of the District of Columbia rather than to her own, began agitating the question of constructing a railroad to the waters of the Ohio ; and at a public meeting held in the city in February 1827, the road was determined upon. This road was called the Baltimore and Ohio Railroad. "To bestow an equal encouragement on the railroad (as compared with the canal just mentioned), the state subscribed for five thousand shares of its stock, and authorized the city of Baltimore to subscribe for thirty thousand shares."' The story for Maryland is now practically the same as that for New York and Pennsylvania. Enterprise after enterprise was projected. Several of the "schemes were never undertaken: — but to those that were commenced, the state subscribed largely, and the consequence was soon felt in a heavy debt," which in a short while reached the sum of 16 million dollars. ' In 1840 many of the companies failed, and the burdens fell upon the state. The interest dues in this year were so great as to produce "a deficit in the treasury of nearly ;g6oo,000 — an amount almost twice as great as the whole revenue of the state." ■ McSherry, History of Maryland, p. 364. 1 6 STATE AID TO RAILWAYS IN MISSOURI In 1842, the state defaulted.' In the course of time, the peo- ple became willing to submit to taxes sufificiently high to redeem the honor of the state ; and in 1848 Maryland resumed the pay- ment of interest.^ At this time, however, when "active steps were taken to preserve the faith of the state, the two great pub- lic works seemed to recover their energies." From this time both were pressed forward under able management. The actual funded debt of the state at the close of the year 1846, after the state had been bankrupt four years, was g 1 0,5 15,311. Other bonds were issued, but not negotiated, to the extent of $4,696,- 473, making a total of $15,211,784.3 We now pass to the consideration of the experiments of the western states. With the possible exception of Ohio, which made a worthy attempt at efificient taxation in the early days of her experiment, the attempts to secure internal improvements in the western states were more extensive and at the same time even less systematic than in the eastern states. This uniformity suggests the existence of a common cause. This cause lies chiefly in the fact that a broad expanse of fertile soil, suggested unlimited agricultural resources, which could at once be realized upon if the products of the farm could be transported to the markets of the world. The comparative slowness of the growth of demand, although infinitely greater in this period than in any preceding period in the economic development of the country, was not taken into account by the pioneers of the prairies. The other element in this common cause, and by no means a small one, was the absolute dearth of financial wisdom. It is true that the failures of the banks in New York and Pennsylvania had a more or less damaging effect on the internal improve- ments of those states ; but no part of the debts of those states was due to bonds issued in behalf of banking companies. ^ In many of the western and southern states the case was different. ^ Bankers^ Monthly, i. p. 550. °See copy of "The Resumption Act," ibid., p. 661. '^Bankers' Monthly, i. p. 460. 4 Committee Reports, No. 294, XXVII. Congress, 3d session, pp. 54 and 94. EARLY PERIOD 1/ Here the people thought that they might become wealthy "by establishing banks under the supposition that paper money was necessary for the sale of produce."' Although we cannot enter upon the history of the banking institutions of the western and many of the southern states dur- ing this period, it should be observed that the banking feature is a very important element in connection with the internal-improve- ment enterprises of many of these states, and especially of Indiana and Illinois. Michigan did not enter into banking proj- ects. She had, however, been admitted to statehood just in time to enter as a state into the internal-improvement follies of 1837. And judging from the boldness of this state of woods- men in these undertakings it is fair to presume that had the state been a few years older she would have tried all the novel- ties which her sister states were trying. Indeed, even after paying the high price of her internal-improvement venture dur- ing the years from 1837 to 1840 she was not content until she had tried the banking experiment later. But this is not the place to give an account of that piece of disastrous experience. The success of the Erie Canal and the active interest of the older states in general furnished a great stimulus for the enter- prises of Ohio, Indiana, Illinois and Michigan. The experience of Ohio, however, dates from about the time ( 1826) of the revival of interest in internal improvements in Pennsylvania, brought about as we have seen through jealousy of the success of New York. The activity of Ohio in internal enterprises of these times resembles that of New York, in passing from a conserva- tive attitude at first to one of careless speculation later ; but dif- fers from the activity of both New York and Pennsylvania in not being mixed up with a faulty, if not corrupt, banking system. The forward movement in the experiment of Ohio extends over a period of eighteen years, from 1825 to 1843. The sys- tem of public works of Ohio may be said to date from 1825, although the Miami Canal was begun in 1820. The influence of ■ Hunt's Merchants' Magazine, xvii. p. 578. 1 8 STATE AID TO RAILWAYS IN MISSOURI the Erie Canal project of New York upon Ohio is seen in the fact that Governor Clinton had accepted an invitation from Ohio to be present at the beginning of the work of construction upon her system of internal improvement, July 4, 1825." The Ohio Canal, consisting of one canal three hundred and nine miles in length and several branches, was completed in 1832, at a cost of ^4,244,539. The Miami Canal, forty-four miles in length, begun in 1820, was completed in 1827 at a cost of ^4 5 7,669.° The state also constructed an extension of the Miami Canal from Dayton to its junction with the Wabash and Erie Canal, and likewise constructed the Wabash and Erie Canal, so far as it extended through Ohio. Up to 1835 the state of Ohio was rather successful in canal construction. It then had two canals, aggregating 400 miles in length, which were "exceedingly well constructed" and had been of "vast service to the state," although they had "never yielded a net revenue equal to 6 per cent, of their cost. "3 The year 1836 marks a great advance in the internal improve- ment work of the state. A great number of railway companies, incorporated between 1832 and 1836, asked at this time for aid from the state to assist in the construction of their roads, In response to these requests, the legislature in the session of 1836-7 passed a law to prosecute further undertakings, and to sub- scribe to the stock of turnpike, railroad and canal companies. The conditions were that after one-half of the stock of a turn- pike or two-thirds of that of a canal or railroad had been taken by individuals, the object should be approved by the board of public works, and the state should subscribe for the remainder of the stock. Under this law, the state subscribed to turnpike, railroad and canal companies, stocks .amounting to the sum of ^2,973,770. Of this amount, gi, 921, 675 represented a half interest in each of twenty-six turnpike companies.'' The conservative feature in the Ohio experiment consists in the fact that when the state commenced her system of internal •Hunt's Merchants' Magazine, xxi. p. 393. ' Ibid., p. 395. 'ibid. ilbid., p. 396, 397. EARLY PERIOD I9 improvements, she "established a co-ordinate and coextensive system of taxation." This scheme of taxation was expected to add annually to the state funds a small sum in excess of the interest due on the canal bonds. For the year 1832 and each succeeding year, until three years after the completion of the canal, the tax was expected to "yield ^40,000 annually, above the sum of interest, and for each year thereafter ^25,000 excess over the interest, until the fund formed by these additional sums should be sufficient to redeem the principal of the loans cre- ated as they matured.' All went on successfully under this system till the Ohio and Miami Canals were completed in 1836. Difficulties now arose. The canals did not yield immediate returns, and the state was at the same time committed to various other enterprises. So when the stringency of 1838-9 came on, Ohio, like other states, found herself in "the prosecution of extravagant systems of expendi- tures." Meantime the stocks of these enterprises were sinking in value under the increasing urgency for money. As it was thought that to abandon the works would be to cause the state to suffer great loss, further loans were negotiated. But this also could not be done without great difficulty and great loss,^ and under the great weight of so many and various projects, the state was soon obliged to take measures for relief. In March 1843 accordingly a law was passed with this end in view. Although this law made a new appropriation of 1.5 million dollars in state bonds at 7 per cent, "to complete the public works, and discharge the claims of contractors, as well as those of turn- pike and other companies," it prohibited the further increasing of the state debt, compromised with railroad companies by releasing the liens held against their roads, and converted the sums already loaned into stock. Subscriptions to turnpike com- panies were closed. ^ This law marks the close of the forward movement in the aiding policy of the state ; her energies were henceforward occupied in taking care of the debts contracted. Although the ^Hunt's MercAan/s' Masazine, xxi. p. sgg. ' /6id., p. 400. '^Ibid. 20 STATE AID TO RAILWAYS IN MISSOURI system of taxation established at the beginning of her experi- ment was intended to be "co-ordinate and coextensive" with the system of internal improvements, it did not prove to be so. "In the six years ending with 1844, the deficit of the interest fund reached nearly 1.6 million dollars," and this, " notwithstand- ing that the rate of taxation reached a high figure."' Although the state retained her stock in canals, railroads and turnpikes, she had a debt on this account in 1849 of $19,- 173,223. Moreover, "in addition to the sums of money thus borrowed for the construction of the public works, the sinking fund of nearly two million dollars, created by the law of 1825, appears to have been absorbed, as well as the proceeds of land granted by Congress, (and) sold for cash," and also the proceeds arising from the redemption of lands, " to the extent of nearly two million dollars."^ In 1849, although the tolls on all the canals but one were increasing gradually, the insufficiency of these tolls for the payment of interest "made it annually neces- sary to aid the interest-fund by the canal tax." The law of 1825 proves that the people of Ohio did not expect the canals to pay for themselves, in a direct return to the treasury of the amounts invested in them ; yet subsequent events show that the taxing power had to be applied much more vigor- ously than was at first intended. In 1850, the people of Ohio got their debt of nearly 20 million dollars under control. A writer of that year, after summing up the taxable resources of the state, and the taxes recently collected, asserts that "the ability and willingness of the people of Ohio to pay taxes is thus placed beyond question, and the results of the past year develop the fact that the limit of both debt and taxation has been reached, and that the present amounts collected are not only equal to the payment of the interest, but afford a considerable sum towards the extinguishment of the debt." 3 Of all the states that launched out upon the sea of internal improvements prior to 1840, Indiana, Illinois and Michigan had the most canvas spread and the least ballast; and of these three ' Hunt's Merchants' Magazine, xxi. p. 408. ^ Ibid., p. 407. ^Ibid., p. 409. EARLY PERIOD 2 1 Illinois drew the least water. The Illinois and Michigan Canal of Illinois, " was conceived soon after the commencement of the Erie Canal of New York,"' and originated in the act of 1823. Between 1832 and 1836^ numerous railroads were chartered. But notwithstanding these facts, and the fact that some land had been granted to Illinois by the general government, for canal and railroad purposes prior to 1 837 ^ the real movement in Illinois for internal improvements did not begin until this latter year. When the people of the state became convinced of the great possibil- ities of a general system of improvements by the state, they became extravagant in their demands. In December 1836, a great convention met in Vandalia, at that time the capital of the state, on about the same date as the meeting of the legislature. This convention was " composed of some of the ablest men of the state, who favored a general system of internal improvements, and their object in meeting at this time was to exert an influence upon the members of the legislature to compel them to support and further all proceedings that would serve to aid and carry out their cherished schemes." The convention " indulged in the wildest fantasies and fell into the strangest vagaries."'' In the following February the legislature passed an act which formed the basis of " an extensive system of internal improvements by means of canals and railroads " and which " not only came fully up to the requirements of the convention .... but went over two millions and a quarter beyond." This act appropriated $10,230,000 for the building of railroads and the improvement of rivers ; $200,000 of the first sums collected were to be distributed among those counties through which no railroads extended to be used by them in making wagon roads and bridges.^ Later in the session, the canal, then in progress of construction, was added to the system of public works. "^ ^Illinois in /Sj7, p. 55 ; also Brown, History of Illinois (1844), p. 415. = Ackerman, Early Railroads of Illinois, p. 13. 3 See United States Land Laws, Hmse Ex. Doc. 47, part 3. XLVI. Congress, 3d session, passim. ■i Davidson and Stuv^, History of Illinois, p. 435. 5 Brown, History of Illinois, pp. 423-427. "■ Davidson and Stuv^, History of Illinois, p. 486. 22 STATE AID TO RAILWAYS IN MISSOURI The act of February 1837, contemplated the construction of 1 34 1 miles of railway. The roads were to be state works exclu- sively. The state spurned the idea of aiding private enterprise or of waiting for private enterprise to build her railways. Of the roads chartered by this act only one was ever completed, that running from Meredosia on the Illinois River to Springfield and known as the Northern Cross road. It was on this road at Mer- edosia, November 8, 1838, that "the first locomotive that ever turned a wheel in the great valley of the Mississippi" was put in operation.' The work of construction on the internal improvements was begun in every part of the state at the same time, both at the termini of the roads and at intermediate points, so that no part of the state would feel that any other part was given any advan- tage. Excepting the single road already mentioned, work upon all the roads was abandoned in less than three years. The absolute folly of the Illinois plan of securing public works may be fully understood when it is known that the popu- lation of the state in 1835 was only 271,727 and the taxable wealth of the state only ^58, 889, 525.^ It is thus seen that at one session the legislature appropriated for internal -improvement purposes sums equal to more than one-sixth of the entire wealth of the state ; and this was done, moreover, at a time when the state was in debt and had "no available means of her own. "3 The ill success of most of the enterprises, the low price received for the bonds of the state, and the prospects of an enormous addition to the debt of the state in a very short time, with no corresponding addition to her resources, had the natural effect upon the people of the state. This effect is shown in an extra session of the legislature for the purpose of disavowing its own foolish act of 1837. In February 1840, just three years from the beginning of the internal-improvement enterprises, two acts were passed which resulted in the abandonment of all railroad work in the state. ' Davidson and Stuv^, History of Illinois, p. 435. ''Ibid., p. 438. 3 Brown, History of Illinois, p. 419. EARLY PERIOD 23 At this time, if all the work done on the Illinois and Michi- gan Canal before the state assumed the work of its further con- struction is included, the state could boast of only 105 miles of canal and twenty-six of railroad.' In 1841 the canal was "about half done," and of the 1341 miles of railroad contemplated in 1837 "fifty-five miles . . . [were] completed and all the rest of the work abandoned."^ The only line of railroad com- pleted cost one million dollars ; and because it could not pay expenses it was sold a few years later for ^100,000.3 The out- standing debt of the state in 1841 was $13,257,292. Of this three million dollars was incurred in assisting banking institu- tions : nearly all of the remainder was chargeable to internal improvement. If we should insert "Indiana" for "Illinois" in the account just given and change the dates slightly we should almost have the history of the internal-improvement experiment in that state. In 1832, Indiana had authorized a loan of $200,000 for the Wabash and Erie Canal, and in 1834 had chartered a banking institution with ten branches in which she had taken stock to the extent of $1,390,000.'' The selling of the bonds of the state for both of these purposes and the large discounts of the new bank- ing institution were the elements of the speculative mania notice- able in Indiana prior to 1 836. So, when the internal-improvement epidemic struck the state in 1836 the result might have been fore- told. The state passed a law January 7, 1836, authorizing a loan of ten million dollars for internal-improvement purposes. Of this amount 6.2 million dollars was devoted to canals, $50,000 to the improvement of White River, 1.3 million dollars to one railroad and $4,450,000 to two turnpikes. = As in Illinois, operations on all the works were begun simultaneously ; and like Illinois and Michigan, Indiana had only prospective funds for the payment ^Tanner, Description of the Canals and Railroads of the United States (1840) p. 198. = Committee Reports, No. 396, XXVII. Congress, 3d session, p. 89. 3 Davidson and Stuv^, History of Illinois, p. 447. ■1 Committee Reports No. 2q6, XXVII. Congress, 3d session, p. 87. 3 Hunt's Merchants' Magar^ine, xxi. p. 152. 24 STATE AID TO RAILWAYS IN MISSOURI of the principal and interest of her loan. It was soon "evident that 20 million dollars would not more than half suffice to com- plete any portion [of the works] in consequence of the necessity of spending all the money that could be got in all parts of the state at once."' By 1839 the state had exhausted her credit, work on the internal improvements was for the time suspended, and the Board of Internal Improvements itself was discontinued the next year. The bonds of the state issued on account of internal improve- ments amounted to ^11,322,000, which sold for gg, 582, 133.' Including the bonds issued for the state bank and those issued for other small items, the total bonds of the state amounted to $14,057,000. Of this debt the state lost directly through "wild- cat" banks and railroad companies $3,559,791.^ In September 1841, the outstanding debt of the state was $12, 751, 000, of which all but about three million dollars was due to internal improve- ments.'' At this time instead of having anything in the form of an income from internal improvements, Indiana had to hypothe- cate $665,000 in the bonds of the state " to raise means to pay the interest on the internal-improvement debt."s Of these bonds hypothecated only the sum of $29,000 were sold.* The state could not collect taxes levied and from 1840 to 1847 made no further effort " to pay the state interest. However, the receipts of the outstanding treasury notes for the state dues annually diminished the amount [of the debt ] and cleared the way for the healthy operation of the tax law subsequently enacted."' In 1846 a settlement of the debt was effected. A law was passed compromising with the bondholders of the Wabash Canal ; the canal and its lands were placed in the hands of trus- tees who were to complete it with funds subscribed for that purpose by the bondholders. The state was then to provide for one-half of the old debt and one-half of the arrears in interest by taxation ; the other half of the debt and of the interest were to ■ Hunt's Merchants' Magazine, xxi. p. 152. ^ Ibid., p. 154. ^Ibid., p. 155. < Committee Reports, No. sgb, XXVII. Congress, 3d session, p. 87. ^ Ibid. 'Hunt's Merchants' Alagazine, ji^i. -p. 156. 'Ibid. EARLY PERIOD 25 be a charge upon the canal.' About 1850 private companies took up the work, and several roads were built and successfully operated. The internal -improvement experiment in Michigan was as short lived as that of Indiana and Illinois. And in comparison with these states, in proportion to her population and taxable wealth, the magnitude of her scheme was quite as great as those of the older states. It is in the matter of releasing herself from internal-improvement enterprises that Michigan surpassed both Indiana and Illinois. It is not intended here, however, to con- nive at the partial repudiation by the state of portions of her debt.= The chief general causes for speculative excitement were the same in Michigan as in other western states ; there the sales of public lands in 1836 amounted to five million dollars, while all the sales of public lands from 18 18 to 1848 amounted to only nine million dollars. 3 The desire for internal improvements in Michigan was as great as anywhere else in the West. This great anxiety resulted in the act of March 21, 1837, which contem- plated the construction of 557 miles of railway, 231 miles of canal, and the improvement of 321 miles of river navigation. The act also authorized a loan of five million dollars for these purposes. •• Upon the works undertaken — five railroads, two turnpikes, three canals, and the improvement of four rivers — the state had expended by November 1847, the sum of ^3, 541, 552, and had issued bonds to the extent of $5,943,324.= Because of the failure of certain purchasers of the state bonds to remit the regular payments in 1842, the public works of the state had to be temporarily abandoned.* Many of the smaller works were abandoned for all time. Only two main lines of railway, " the Central" and "the Southern," were afterwards continued ; but 'Hunt's Merchants' Magazine, xxi. p. 581. ''Scott, The Repudiation of State Debts, pp. 161-164. 3 Hunt's Merchants' Magazine, xxii. p. 132. ^ Ibid. 'Ibid.,-p. 134. f-Ibid., p. 136. 26 STATE AID TO RAILWAYS IN MISSOURI these only under many difficulties. At the close of 1845, just a few months before the legislature disposed of these roads to private companies, 146 miles of the Central Railroad had been completed at a cost of §2,238,289, and 68 miles of the Southern had been completed at a cost of ^1,125,590.' Because the debt (^5, 61 1,000)'' of the state was pressing heavily upon her population, then 304,278, possessing taxable property to the extent of only §28,922,000, it was decided early in I 846 to dispose of the roads to private companies. For the Central road the state received two million dollars in state indebt- edness, or about 90 cents on the dollar of its cost, and for the Southern road $500,000, or little more than 43 per cent, of its total cost. 3 The gross income of both these roads for the years 1844 and 1845 ws^s only §536,992, or less than i^ per cent, on the sum invested. By the terms of the sale the Central Railroad Company had to complete its road from Kalamazoo to Lake Michigan within three years from the date of purchase and to reconstruct within two years the fifty miles west of Detroit. Similar requirements were made of the Southern company. After these companies took up the work of construction, the roads were pushed rapidly to completion.'' In disposing of her roads the state of Michigan received a very much greater per- centage of the original cost of construction and imposed obliga- tions upon the purchasing companies much more favorable to the state than had either Indiana or Illinois. The following states had in 1841 internal-improvement debts ranging from one to six million dollars : Georgia, Kentucky, Tennessee, Massachusetts, South Carolina, and Virginia. The situation of internal-improvement matters in these states in 1841,= just after the business depression of that period had reached ' These sums include " furniture of the roads and shops," " materials on hand " and " 10 per cent, interest during construction."— Hunt's Merchants' Magazine, xxii, p. 138. " Committee Reports, No. 2g6, XXVII. Congress, 3d session, p. 80. 3 Hunt's Merchants' Magazine, xxii. pp. 138-139. ^ Ibid., xiv. p. 22. 5 Committee Reports, No. 2Qb, XXVII. Congress, 3d session, pp. 50-100. EARLY PERIOD 2/ the nadir point, may be briefly summarized. Georgia possessed only one railroad, 145 miles in length, the grading of which was " nearly completed." For this bit of a road the state had become indebted to the extent of gi, 390,000. The debt of Kentucky amounted to $3,085,000, and had been "created for the con- struction of turnpike roads and slack-water navigation." The former were constructed by companies in which the state " gen- erally subscribed one-half of the stock;" the "river and lock navigation for steamboats " was in each instance " exclusively " a state work. Of the one thousand miles of turnpike roads undertaken, five hundred miles were completed and were paying tolls. The cost per mile ranged " from S4200 to 87800 exclu- sive of bridges." Of " river and lock navigation " there was to be "completed by the first of January, 1842, 290 miles." Tennessee had assisted a great number of turnpike and a few navigation companies. The works were at this time (1841) described partly as " unfinished " or " utterly worthless," and partly as "well-advanced" and "completed." These works in such various states of advancement had cost the state ^3,398,000. Massachusetts began to aid railroads in 1837, but confined her gifts to only a few roads, taking stock in one to the amount of $995,000; the state granted in all $6,044,555 °^ ^'d-' ^^^ ^^ has been argued, and seemingly very pertinently, that this activity of the state was needless, because during the time in which the state invested six million dollars private enterprise invested the sum of 24 million dollars in railroad undertakings in the state. ^ Even if at first the state deliberately entered into the assistance of railroad construction as a bit of paternalism, it does not seem that she chose to keep up the experiment indefinitely ; the amount of six million dollars represents the limit of her railroad ventures. In 1841 the state works were nearly all in "successful operation; " two, however, were "not completed." In South Carolina nearly four million dollars of the entire debt of $5,691,000 was contracted for internal improvements which were " partially abandoned" and partially "completed." ' Hunt's Merchants' Magazine, xvii. p. 584. - Ibid. 28 STATE AID TO RAILWAYS IN MISSOURI Virginia had undertaken to assist more than fifty turnpike companies besides several railroad and river improvement com- panies, and had contracted a debt on this account of $4,037,000. In 1841 there seems to have been little or nothing accomplished.' § 4. Only a word of further analysis of the debts of the states at this time is necessary before taking account of the peti- tion of several of the states to the general government for relief from the burdens brought upon themselves by internal improve- ment and banking experiments. The whole of the debts of the states in 1841 ( ;S23 1,644,1 1 1 )° was not contracted for internal improvements. Nearly 50 million dollars were contracted wholly for the purpose of assisting banking institutions or for entering directly into the banking business. The 15.4 million dollar debt of x'\labama, the seven million dollar debt of Mississippi, and the two million dollar debt of Arkansas were for banking purposes alone. The great debt §23,985,000 of Louisiana, with the excep- tion of only §256,000, was incurred to assist banking institutions and one association of planters in the state. Of the small debt of §842,261 of Missouri, the bank debt was §272,273, while the internal improvement debt was only §20,000 3 §5. Possibly the most instructive feature of this extraor- dinary exhibition of paternalism in nineteen of our states, whether in aiding or in constructing canals or railways or in aiding banking institutions, is the attitude which several states took toward the general government upon becoming conscious of their inability to carry out their enterprises. This attitude is shown in an appeal made by them to the general government for relief. Citizens from Pennsylvania, Maryland, Ohio, and Vir- ginia sent memorials to Congress asking that the United States government assume the payment of the debts of the states to the extent of 200 million dollars.'' Whether or not there is any special praise due to the western states generally and to most of the ■ Committee Reports, No. 2q6, XXVII. Congress, 3d session, pp. 63-65. •Ibid., p. 106. ^Ibid., pp. 50-100. *nid., pp. 17-46 and 459-461. EARLY PERIOD 29 southern states for not sending memorials to the same effect, it may safely be conjectured that had a bill been passed for the assumption of the debts of all the states they would have readily accepted the gift. The memorials of the states demonstrate that in this case a little paternalism created a desire for a great deal more ; the only difference was that there was a change in direction. But if the states had succeeded in having their debts assumed through their far-fetched reasoning that the assumption of the state debts in 1790, and that the distribution among the states of the " surplus " in the form of a loan in 1836 established a precedent for what they were then asking,' what might have been expected in the future ! Surely there would have been a precedent for assuming the debts of the states under any and all circumstances, the purposes for which the debts had been incurred being utterly disregarded.^ §6. The disastrous conclusion of this period of state activity, it is properly stated, marks the rise of great industrial corporations as a national feature in the United States.' Whether or not this is a matter to be greatly solicitous about, there has not yet been time enough to demonstrate. There is a possibility of course, just as there is in all cases of violent changes of policy, that the reaction against state activity has gone too far ; there is enough evidence accessible to prove that in more than one case both the states and the nation have suffered wrongs at the hands of voracious corporations. But in many of these cases, as in New York, Pennsylvania, Indiana, Michigan, and Missouri, and the national government, the crime of defrauding the public has been a work in which two parties were interested. The principals, it is true, have been the corporations ; but the trusted representatives of the people have shared in the spoils. Furthermore, there is not a single case in the whole list of the states attempting the construction or the assistance in the con- ' Committee Reports, No. 2g6, XXVII. Congress, 3d session, p. 14. °See the various items of debt in many of the states. Ibid., pp. 50-101. 3 Adams, Public Debts, p. 339. 30 STATE AID TO RAILWAYS IN MISSOURI struction of public works between 1825 and 1840 in which there is evidence of commanding administrative ability. In the case of almost all there is an absence of what can be called immacu- late honesty. It may be objected, indeed, that many corpora- tions default and thereby bring burdens upon thousands. But, it may be answered, that the failure of a corporation can affect only a comparatively small number, whereas the failure of a state affects all within it. §7. Before taking up again the thread of the story directly concerning the internal improvements of Missouri, it is neces- sary for the complete understanding of the policy of the state in this matter to cast a brief glance at two other lines of activ- ity of more or less moment in which the state became interested in her corporate capacity between 1837 and 1844. Although Missouri proceeded no further in the matter of internal improve- ments in 1836-7 than the appointment of a Board and the negotiation of a loan of ^20,000 for its expenses, she did not at this time hold aloof from banking — that other enterprise in which so many of the states involved themselves. It has been mentioned that in his message of 1836 Governor Boggs recom- mended the establishment of a state bank with the capital allowed by the constitution. Such a bank he thought would "afford ample means not only for commercial purposes," but would enable the state "to prosecute a system of internal improvements commensurate with her wants."' Here is seen the same erroneous view of banking as existed in other states at this time. And since throughout the West in those times, a bank which was not a bank of issue was no bank at all, the words of the governor indicate the same mistaken idea of the real nature of money that existed in all the surrounding states. The history of the bank shows "how it afforded ample means" for running the state into debt. The constitution of the state permitted the establishment of one banking institution with five branches having a total capital ^ Senate Journal, iS^y, p. 25. EARLY PERIOD 3 I of five million dollars, one-half of which should be reserved to the state.' In accordance with this provision an act was passed February 2, 1837, authorizing the establishment of such an institution. From the very beginning of this banking experi- ment, an excess of administrative inefficiency on the part of the state concerning it was manifest. In less than three years after it began operations a special committee had to be appointed to investigate the relations existing between it and the state. This committee reports : " It is impossible from the correspond- ence between the executive and the bank to ascertain the num- ber or the amount of bonds outstanding or when issued ; either the evidence has been lost or not preserved or not communicated. It seems from what is communicated that it was only necessary to ask, and the governor issued, and this sometimes without a return of the bonds in lieu of which the new bonds were asked. . The correspondence shows the grossest want of care in the execution of the acts and in the management in the interests of the state." "= That this institution, or at least its support by the state, was superfluous and uncalled for is demonstrated by the fact that up to 1844, seven years after it began business, even with the failure to negotiate more than a small part of the bonds issued to it for the stock of the state, it had "more capi- tal than it could employ." ^ And had the bonds been sold the money arising therefrom would have remained "idle in the vaults of the bank;" and the state would have been "compelled to pay interest on the same amounting to ^133, 080 annually, a sum almost equal to the annual revenue of the state, without any means of so doing but by a direct and oppressive taxation."'' To illustrate the value of such an institution it is sufficient to state that the dividends on the stock (^272, 263) owned by the state in her own right from the time the bank began busi- ness in 1838 to November i, 1844, amounted to only §78,094, while the interest on the bonds issued for this stock amounted 'Constitution of the State, Article 8, La-ws of Missouri, 1845, p. 41. "Auditor's Report, 1883-4, part 2, pp. 48-49. ^Senate Journal, 184;, h.^fenii-s.,f. 178. 'Ibid. 32 STATE AID TO RAILWAYS IN MISSOURI to gi 10,949.' The funds (^675, 667) invested in the bank for school purposes suffered "in like proportion;" and there conse- quently resulted a deficit and not a surplus for this important object. From these facts it would seem that the examining committee of this year was wasting its time in raising the ques- tion "whether or not the bank had answered the purposes for which it was created;" and especially does it seem so when we find that they state further that "the history of the bank proves most conclusively that it can never become a source of revenue to the state." Other troubles followed in the course of the history of this bank. At one time the sum of g 120,900 was stolen.^ The losses to November i, 1854, from the beginning of the bank January i, 1838, were $459,658, while the aggregate net profits for the same period amounted to only $2,362,611.3 Had the bank lost no money its net profits up to 1853 would have been $2,822,269. The efficiency of the administration of the bank can be appreciated therefore by the fact that out of every six dollars it made it lost one. The total loss sustained by the state up to 1853 growing out of her connection with the bank amounted to $220,551.93.'' Nothing extraordinary seems to have developed in the history of the bank between 1853 and the date of its reorganization as a national bank in i866.3 It of course struggled through the panic of 1857 and the follow- ing depression like other banks. When the state's quota of stock was sold in 1866 at a premium of $8.50 on the share the state realized a small profit, thus partially offsetting her former losses.^ However, as an experiment in state activity and especially as an investment scheme which was to "afford ample means" for internal-improvement projects, the bank experiment of Missouri was a most signal failure. ^Senate Journal, 184s, Appendix, p. 182. "Ibid. i8ji. Appendix, p. 26 et seq. ^Ibid. i8s5% Appendix, pp. 94 and 112. * Ibid. 1853, Appendix, p. 45. i Laws of Missouri, 1866, p. 14. ^ Audit07-'s Report,-! 883-4, pai't 2, p. 55. EARLY PERIOD 33 §8. Not disheartened at the limping success of her bank- ing project as it appeared in the early forties, the state of Mis- souri attempted at this time a small industrial undertaking in the form of a tobacco warehouse in the city of St. Louis.' Having no money in the treasury the state issued $25,000 in ten-year 10 per cent, bonds for this purpose. The warehouse opened for business October 24, 1843.^ -^t the end of the first year it had earned only a small fraction of the annual interest (^2500) on the bonds issued for its construction. Notwithstanding the recommendations of the committee on the examination of the warehouse (1845) that the experiment be continued "to protect the planters against exorbitant charges" and "to prevent a .monopoly," the state warehouse had, from the report of this com- mittee, charged more for the same service during most of the year 1844 than had the Planters' warehouse of the same city. During 1843, however, the state warehouse had charged a little less. 3 The anuual fees arising from the warehouse enterprise during the first five years of its existence seldom amounted to enough in any year to pay more than one-third of the year's interest on the bonds issued for its construction. •• Consequently the committee appointed in 1848 to examine the condition and prospects of the undertaking had "no hesitation in recommend- ing the sale or the lease" of the warehouse. In March 1849, a law was passed authorizing the sale in order to get the state free from an unprofitable enterprise. The warehouse was not finally disposed of, however, till 1866; it then brought gi 32,000. Just how much expense it had been to the state after 1849 is "o*^ apparent. 5 § 9. For the short space of two years the state remained comparatively free from industrial undertakings. She then began her experiments in the matter of aiding railways. But before ' Laws of Missouri, 1843. ^ Senate Journal, 1843, Appendix, p. 24. '^Ibid., p. 25. ' House Journal, i84g, Appendix, p. 256. ^Laws of Missouri, 1863-6, p. 199 ; also Governor's Message, Senate Journal, iS6y, p. 22. 34 STATE AID TO RAILWAYS IN MISSOURI beginning the account of this experiment it will be necessary to complete the account of her preliminary attempts in the matter of obtaining internal improvements. The attitude of the state from 1839 to 185 I can now be very easily understood after the cursory glance given to the experiences of other states and to her own attempts in other matters than that of securing trans- portation facilities. During the session of the legislature following the one (1836-7) which chartered so many railroad companies to no purpose, a proposition to assist a single company was for a time favorably considered. The railroad contemplated was to con- nect St. Louis with the Iron Mountain. The people of Missouri at this time entertained great hopes of the immediate development of this great deposit of iron ore. No aid was granted to the enter- prise proposed,' but a very important step was taken at this ses- sion in the matter of internal improvements — a board of internal improvements was established.^ The constitution of the state provided that internal improvements "should forever be encour- aged " by the government of the state, that it should be the duty of the general assembly as early as possible to ascertain the most suitable objects for improvement in the matter of roads and navigable rivers, and to provide "by law for a systematic and economical application of the funds applied to these objects." 3 In accordance with these provisions, the Board of Internal Improvements was appointed in 1838. It consisted of five members, two serving two years and three serving four years. The duties of this board were stated to be " a general supervision and control over all state roads, railroads, slack-water naviga- tion, or canals that might be authorized by law, wherein the state should own or reserve any interests or rights, immediately or prospectively." Their work was not only to supervise in a gen- eral way; through their agencies they were "to construct places of depot, bridges, walls, culverts, viaducts, and all other works necessary to carry into effect the improvements authorized." ^ Senate Journal^ i8j8-Q^ pp. 208-209. 'Laws of Missouri, 1838-9, p. 67. ^See Constitution, Ibid., 184s, p. 41. EARLY PERIOD 35 As a matter of security on the part of the state, bonds, oaths, and the like were required from each of the members of the board ; and no member could own real estate within two miles of any of the public works under construction. As a remuneration for performing the tasks of this office, each mem- ber was to "receive three dollars for each day of service while actually employed in the duties of his office." The funds for the prosecution of the works under the direc- tion of this board, like the similar funds of Indiana, Illinois, Michigan, and other states, were all of a prospective character. They consisted ( i ) of all moneys that might be raised by the sale of stocks or by loans, (2) of all appropriations for such objects, (3) of the proceeds from tolls and rents of completed works, (4) of proceeds from lands granted by Congress for aiding such works, (5) of net proceeds of public land entries, (6) of all grants or donations that might be received from indi- viduals or corporations, (7) of all profits from publications regarding internal-improvement matters in the state, (8) of all rents of water or steam power, and (g) of all other proceeds arising in any way from the construction or lease of such works. It can thus be seen that no funds for the prosecution of the work of this board were already in the hands of the state. The one fund, "the road and canal fund," from which there was now a possibility of receiving a small sum for internal-improvement purposes, was rendered inaccessible by the internal-improvement act' February 11, 1839, which declared that this "fund" should never be used for purposes other than those for which it was origi- nally intended. This "fund" was constituted at the time of the formation of the state government. It consisted of 3 per cent, of the proceeds of the sales of all the public lands in the state. These proceeds were to be applied to the construction of "public roads and canals" within the state and under the direction of the legislature.' ^Laws of Missouri, 1838-g, p. 67. ' It should be noted that in all 5 per cent, of the proceeds from the sale of public lands was set aside. The other two-fifths, or 2 per cent., was to be applied under the 36 STATE AID TO RAILWAYS IN MISSOURI Two days after the establishment of the Board of Internal Improvements, a further act was passed directing the attention of the board to specific enterprises for the coming year and appropriating $20,000 for its expenses.' The board was directed to survey the Osage, North Grand, Salt, and Merrimac rivers, beginning at the mouth of each and ascending to certain points ; also to survey the route so often proposed for a railroad from St. Louis to the Iron Mountain. The board was to report to the next general assembly the results of its labor and to make estimates of the cost of improving the several rivers and of con- structing the railroad. The board thus constituted in February 1839, organized for work in the city of St. Louis on the sixth of the following May. A little more than a year later it made its first and only report to the general assembly, December 20, 1840.^ The board had surveyed the streams and the line of railroad as had been ordered. In the report it is stated that the sum needed for the improve- ment of the Salt, Osage, and Merrimac rivers, would be about four million dollars, and that that needed for the railroad to the Iron Mountain would be about $2,942,000. Leaving out of account the fact that these estimates were too small, a very com- mon mistake of those times, they clearly demonstrated that if the people of Missouri ever achieved anything in the matter of canal and railroad construction, they would have to make provisions for funds on a much larger scale than they had ever yet dreamed of. direction of Congress in building a road or roads to the state of Missouri {U. S. Stalutes at Large, vol. iii. p. 545)' This 2 per cent, was applied by several succeed- ing acts of Congress to the extension of the Cumberland Road westward from Cumberland, Maryland, its eastern terminal. This road, by the act (March 29, 1806) establishing it, was to extend only to the Ohio River. Subsequent acts extended it through Indiana and Illinois. The only act referring to any point in Missouri as an objective point for this road is that of March 2, 1831, appropriating a small amount (S265.85) for arrearages on the survey of the road from Janesville to the "Capital of Missouri" (U. S. Statutes at Large, \o\. iv. p. 469). The 2 per cent, fund of Mis- souri was usually included in the acts making appropriations for this road from 1820 to 1838 (See U. S. Statutes at Large, vol. ii. p. 357). ^Laws of Missouri, 1838-g, p. 75. ^ House and Senate Jou7-nals, 1840-1, Appendix, pp. 458-506. EARLY PERIOD 37 §10. However, early in the forties no state in the Union was very aggressive in the matter of going into debt for internal improvements ; the lessons of 1837 and 1839 were yet too vividly impressed upon the memory. And although in 1841 (Septem- ber 4) several states — Alabama, Indiana, Illinois, Ohio, Missis- sippi, Missouri, Louisiana, Arkansas and Michigan — received each a grant of 500,000 acres of land to be applied to internal- improvements under the direction of their respective legislatures,' such was the depressed condition of affairs that no immediate use was made of the funds arising from the sales of this land. It has been seen that the state debts as a whole incurred on account of internal improvements and banking up to 1841 amounted to 231 million dollars, and that almost in every case these enterprises resulted disastrously. This wholesale breaking down of the schemes of so many states would therefore naturally cause all states, then contemplating the construction of public works, to take a very conservative course, if not to abandon the idea altogether. Moreover, the vicious currency system which existed for some years prior to the collapse of the internal- improvement enterprises of the states and which was in no small measure the cause of it, still existed as the nightmare of all indus- trial undertakings. This system was peculiarly detrimental in the western states simply because banking was more inefficiently carried on in the West than in the East. During the years from 1840 to 1844 the disturbance to industry in the West was due to bad currency, to overproduction in some commodities, and in some degree to the tariff of 1842.° Missouri at this time was almost wholly agricultural, and the depression of this industry had a serious effect upon all others within the state. §11. Taking into account the economic condition of the country in general, the outcome of the internal-improvement ' United States Statutes at Large, vol. v. p. 453. 'See letters in answer to questions sent out by the Secretary of the Treasury con- cerning the causes of the depressed condition of the country ; especially with regard to the tariff act of 1842 and the currency. Report of the Secretary of the Treasury, 1845, pp. 489, 551, 554, 589, and 592. 38 STATE AID TO RAILWAYS IN MISSOURI experiment of the other states, and the little likelihood of success of the small industrial undertakings of Missouri, as evi- denced in their beginning, there is no occasion for surprise at the inactivity of this state in 1844 and 1845. The lessons taught by the failures of other states are reflected in the inaugural address of Governor Edwards in November 1844. The governor advised that "too many improvements should not be undertaken at any one time," and in general that it would be best for the state to pursue a "middle course." However, the state did not follow even a middle course. Upon a proposition to establish a new Board of Internal Improve- ments to continue the work of the old, which had now served out its term, the Senate committee reported unanimously that "it would be inexpedient to establish a Board of Internal Improvements at this time."' This committee also reported adversely upon several matters of local interest before it, because it was "evident that the Senate would not make any appropri- ations of the grant of land by Congress to this state for the pur- poses of internal improvements during this session of the legis- lature." The land grant of 500,000 acres could not yield an amount large enough for any extensive work within the next few years, because a law, recently passed, allowing settlers till 1847 to prove their pre-emption titles, would retard the sales of land.'' The legislature furthermore passed measures which relieved the state as such, for the time being, at least, from all fear of being committed to a system of internal improvements, great or small. The two funds possible for such improvements, the "Road and Canal Fund," or the "Three Per Cent. Fund," and the proceeds of the 500,000 acre land grant were both distributed at this ses- sion among the counties of the state, to be used by them in the construction of roads. 3 The distribution among the counties was made "share and share alike," no account being taken of the position or needs of one county as compared with others, or ^Senate Journal, rS-fs, p. i68. "Ibid., Appendix, p. lo. 3 See Senate Journal, /S-fS, p. 347, and 1847, p. 26; also Revised Statutes of Mis- souri, 1843, p. 956. EARLY PERIOD 39 the possibility of developing the resources of the state in gen- eral by the construction of a few main highways. By the year 1847 the people of Missouri, having been oppressed by the crises of 1837 and 1839, and by an unsound currency during a large part of the decade from 1840 to 1850, having practically failed in their banking and warehouse under- takings, and not being blessed with full crops during much of this period,' were ready, in matters of internal improvements, to go back to the foot of the ladder and start anew. Governor Edwards says in his message of this year to the legislature that " the best mode of facilitating the construction of public works — macadam- ized roads, railroads and canals- — if the railroad has not super- seded the canal — ^and the permanent improvement of our navigable streams, is to prepare the people to appreciate the uses and advantages of such works ; and this again can be done in no other mode so successfully as by sending the schoolmaster into every village and hamlet in the land, and by giving every proper encouragement to the education of the great mass."^ ^12. Notwithstanding the fact that the timid feeling which pervaded the whole state regarding the projection of internal improvements by the state did not completely pass away for some four years yet, the people wanted railways at once. The country at large was recovering from the depression which fol- lowed the panics of 1837 ^^'^ 1839. Signs of returning prosper- ity were seen on every hand. In many parts of Missouri^ in both city and country, the population was increasing by immigration very fast; and the people of the state were "beginning to feel a deep and lively interest on the subject of internal improvements and to see the absolute necessity of commencing some general system of public works, in order more successfully to avail them- selves of the natural advantages " by which they were surrounded. They wished to open up a market "for the surplus products of their labor and industry . . . and to aid in the develop- ' Governor's Messages, Senate Journals, 1844 and 1843. ' Senate Journal, 1847, P' 33' 40 STATE AID TO RAILWAYS IN MISSOURI ment of the inexhaustible mines of iron, coal, lead, copper, and other valuable minerals," which abounded "in various parts of the state."' Moreover, at this time the vicious system of cur- rency which had been in use so long in the West had begun to break down of its own weight. Until recently the Bank of Mis- souri had made the practice of receiving and lending the irre- deemable notes of banks of other states ; but, about this time, there had begun a general improvement in this matter. "All the depreciated and worthless paper of other states" had ceased to circulate in Missouri.^ Furthermore, the establishment of the Independent Treasury by the general government in 1845 ^.s a "specie-paying and specie-receiving institution "3 did much, in this time of general misapprehension of the true nature of money, to restore business upon a sound basis by giving to it the one element needed — certainty. The general trend toward better .times being evident and the desire for internal improvements being so strong, the attempt was made in the legislature of Missouri in 1847 to repeal the laws of 1845 distributing the "Three Per Cent. Fund" and the proceeds of the 500,000 acre land grant among the counties, in order that these funds might be applied under the direction of the legislature to state enterprises. The attempt proving fruit- less, the friends of internal improvements had to be content with seeing a few private railroad companies incorporated. The friends of one of these companies now memorialized Congress for land grants to be used in aiding the construction of the pro- jected road," This company was the Hannibal and St. Joseph, incorporated February 16, 1847.= The main features of its charter will be noticed later.^ This road was to connect St. Joseph in Buchanan county on the Missouri River with Hanni- bal in Marion county near the Mississippi. Both towns were •See Memorial to Congress, Laws of Missouri, 1847, p. 353. ^ Senate Journal, 184^, p. 1 6. 3R. J. Walker in Continental Monthly, February 1863. "See Memorial to Congress, Laws of Missouri, 1847, p. 353. ^ Laws of Missouri, 1847, p. 156. 'See below, chap. iii. pp. 3-7. EARLY PERIOD 4 1 increasing "with almost incredible rapidity," and were sur- rounded by a large extent of fertile country. The memorialists did not overstate the facts in regard to the nature of the soil in the section of the state through which this road would pass when they represented it as " equal to any upland in the West, capable of the greatest amount of production of almost every species of agricultural staples, and everyway susceptible of the highest state of cultivation." The memorialists asked for "alternate sections of the public and unappropriated lands along the line upon which it might be deemed most expedient to establish" the railroad. It was believed by the memorialists that with "the aid thus added to the means which the state of Missouri could apply to this object and which those interested therein would cheerfully invest in such work," the railway could be completed within a few years, and that it would greatly promote the interests of the state and general government. It was also argued that this road would give "an outlet to our rich and valuable trade with Sante Fe and other Mexican towns, which trade [was] becoming daily more and more important, and would offer many facilities to those who [were] desirous of emigrating to Oregon or the more distant provinces on the Pacific."' During the four years which elapsed before Congress decided to answer this appeal for land, the spirit of commercial enter- prise exhibited renewed energy in Missouri. Many more pri- vate railroad companies were incorporated ; and additional memorials were sent to Congress asking for land to be used in the construction of railroads and also in the improvement of the rivers of the state.^ Among the companies incorporated during this time was the Pacific Railroad Company.3 This company was to construct a road from St. Louis to the city of Jefferson and thence to some point on the western boundary of the state in Van Buren county." The whole of this line would therefore ' See Memorial to Congress, Laws of Missouri, 1847, p. 354. '■'Laws of Missouri, i84q, pp. 655-664. 3 March 12, 1849. — Ibid., p. 219. -iNow Cass county. 42 STATE AID TO RAILWAYS IN MISSOURI lie south of the Missouri River and would be for a great part of its length parallel to it. As yet, however, Congress had not answered the many petitions of Missouri asking for land to be used in assisting railroad construction. Moreover the people of the state were as yet very conservative in the matter of commit- ting the state to the prosecution of a general system of internal improvement. In 1848 upon assuming the duties of his ofifice, Governor King stated that the experience of our sister states demonstrates that "sound policy dictates the rejection of any scheme to burthen the state with a heavy debt or impair its credit."' The conservatism of the state is also shown at this time in the feeling generally expressed, to assist in the construc- tion of only a limited number of railways. And although at times the desire to improve the navigation of the state would have extended the activity of the state and also that of Con- gress to the improvement of a great number of rivers of the state, the general tendency was to urge the improvement of only a few of the more important streams.'' § 13. About 1850 there was made what may be called a second general attempt, though less marked than that of 1837, to secure the advantages of internal improvement through the direct activity of the states. This attempt, however, was confined almost wholly to the southern states. It was at this time that Missouri began her notable experiment. Situated as the state is, almost in the geographical center of the Union, it was natural that her people should have been eager to divert a por- tion of the future transcontinental trade of the country to a route lying through her borders. The gold discoveries in Cali- fornia at this time gave greater strength to the desire ; and indeed during the whole period in which the state was interested in aiding the construction of railroads this idea exerted a o-reat influence. As time went on, however, the chief interest was transferred through necessity from these external considerations ^ Senate Journal, iS4g, p. 43. » Memorials to Congress, Laws of Missouri, 184S and /S4Q. EARLY PERIOD 43 to the more immediate matter of developing the internal resources of the state itself. The people of St. Louis, at this time the chief commercial center in the Mississippi valley, favored more and more the introduction of railroads as time demonstrated that her water- ways were inadequate for her needs. From time to time the city rendered much material assistance to several roads ; and counties and municipalities generally took immediate advantage of the privilege given them by the state to subscribe bonds, or to give aid in other ways, to projected railroad enterprises. §14. Taking into consideration the reasons for aiding the railways and the manner of aiding them, the length of time the state was engaged in the enterprise, and the extent to which the state became involved through the default of most of the roads and their subsequent sale, the experiment in Missouri, as com- pared with those in some of the older states, is a rather unique and complete one. An account of this experiment constitutes the most interesting chapter in the economic history of the state. CHAPTER II. THE BEGINNING OF THE POLICY OF AIDING THE RAILWAYS. §1. It will have been observed that in the period of the greatest activity of the states in internal-improvement matters, extending from about 1820 to 1840, the New England states did not in their corporate capacity enter into banking and railway enterprises, and that they did not assist very much in the develop- ment of such enterprises. These were states, however, in which private enterprise was awake to the needs of the times and where, for that reason, private capital was amply supplied for banking and internal-improvement undertakings. It was stated by a writer in 1847 that "the New England states, where the greatest proportion of bank capital and of public works exist, are precisely those where the governments have done nothing for the promotion of those objects."' The only attempt among these states deserving of mention was that of Massachusetts ; and this state, as soon as she observed that private individuals were putting capital into railroads in the state at the rate of four dollars to her one dollar, declined to make further investments in such enterprises. The fact that there existed a sufficient amount of private enterprise in the state of Massachusetts to make possible such activity in the construction of railroads as then took place, gives the key to the general fact that the New England states did not as such go into the matter of railway construction. The annexed table shows clearly that those states which left such work to private enterprise had, according to the number of inhabitants and the amount of taxable wealth of each, quite as ample railway accommodation in 1850 as the states which aided the railways and were not in debt for them : ' Hunt's Merchants' Magazine, xvii. p. 578. 44 BEGINNING OF THE POLICY OF AIDING RAILWAYS 45 States liot aiding Maine Vermont New Hampshire Massachusetts... Connecticut .... Rhode Island . . New Jersey .... Delaware Florida Alabama Mississippi .... Louisiana Wisconsin States Aiding, (l) Primary. New York Pennsylvania . . Maryland Ohio Indiana Illinois Michigan (2) Secondary. Virginia North Carolina. South Carolina. Georgia Tennessee Kentucky Wealth in 1850 . Si 22, 92. 103, 573, 155, 80, 200, 21, 22, 228, 228, 233. 42, 777,000 205,000 652,000 342,000 707,000 508,000 000,000 062,000 862,000 ,204,000 951,000 ,998,000 ,056,000 1,080,309,000 722,486,000 219,217,000 504,726,000 202,650,000 156,265,000 59,787,000 430,701,000 226,800,000 288,257,000 335,425,000 201,246,000 301,628,000 583,169 3:4,120 317,976 994,514 370,792 147,545 489,555 91,532 87,445 771,623 606,526 517,762 305,391 3,097,394 2,311,786 583,034 1,980,329 988,416 851,470 397,654 1,421,661 869,039 668,507 906,185 1,002,717 982,405 236 2,290 39,310 342,844 309,878 244,809 90,368 472,528 288,548 384,984 381,684 239,459 210,981 d >.^ >,S >> >'rt " w Sot S c > % •5 " ■sS^ ^g ooig ■3g§ |5 al « ^ II §„ 2q8 121 2. II 369 168 4- 462 5« 4-47 1,142 2. 551 65 3-55 50 30 .625 304 40 1.52 16 II ■76 54 2.36 244 55 1.07 So 30 ■35 89 •37 20 136 •47 1,649 1,098 1.60 1,087 5.38 1.50 335 172 1-53 690 1,341 1-36 256 S51 1.26 149 1. 126 •95 411 33 .68 483 328 1. 12 249 162 1.09 291 135 1. 01 784 200 482 2^34 77 380 •25 a" : •44 1. 14 1.45 1. 14 1.48 •34 .62 •17 .62 •31 •37 .14 .06 •53 •47 ■57 ■34 •25 • 17 1.03 •33 .28 •43 .86 .07 3 United States Census, 1870, Industry aiid Wealth, p. 10. b Tbid., 1850, p. ix. f Hunt's Merchants' Magazine, xxv., July, 185 1, p. 121. The writer does not indeed intend to assert that all states in which private capital was relatively large per capita refrained from entering in their corporate capacity into railway and canal construction. New York, Pennsylvania and Maryland, in 1837, possessed quite as much wealth per capita as did any of the New England states. But in these states private enterprise did not keep pace with public expectation. The reason for this was doubtless that there did not exist a sufficient amount of private 46 STATE AID TO RAILWAYS IN MISSOURI capital for the prosecution of the great systems of internal improvements obviously demanded by the undeveloped resources of the states and surrounding country. In 1850 the contrast between the northern and the southern states in the matter of constructing railroads is quite similar to that between the New England and the western states during the early period.' The fact that in many of the northern states constitutional amendments had been passed^ to prevent the states as such from constructing public works cannot be regarded as the main reason why these states did not again attempt such enterprises when the general business of the country began to revive about 1850. Had there existed between any two single states or group of states in the West in 1850, such a commer- cial rivalry as existed between New York and Pennsylvania in 1826, it is safe to assert that constitutional barriers would have been removed. Since 1840, notwithstanding the many blunders of previous years and their resulting burdens, the western states, both north and south, had grown greatly in wealth ; and of these the northern had grown much faster than the southern. The chief reasons for this, as is commonly conceded, were the greater industry of the northern people, and the greater attrac- tions which a free soil offered to immigrants from the Old World. Many of the southern states, feeling that they would be more or less, distanced by their northern neighbors in com- mercial development, if they depended wholly upon private enterprise, resolved to resort to a use of their credit to secure funds for the construction of railways. Of those states which had already failed in the early period, some now determined to try it anew to a greater or less extent ; these were Virginia, Georgia, South Carolina and Tennessee. Other states which adopted the policy of aiding railways at this time were Dela- ware, North Carolina, Louisiana and Missouri ; in each case, however, the state went no farther than lending aid.3 South ' See De Bow's Review, xx. p. 386. = Adams, Public Debts, p. 341. 3 See De Bow's Review, ix. p. 224 ; xx. pp. 386-9 ; xxi. p. 401 et Seq. ; also Hunt's Merchants' Alagazine, xxv. p. III. BEGINNING OF THE POLICY OF AIDING RAILWAYS 47 Carolina and Delaware granted only a small amount of aid and developed no systematic plans. The remaining states began more pretentious systems.' Of these systems, that of Missouri soon assumed the greatest proportions. Up to the time of the first grant of aid by the state for the purpose of assisting in the construction of railways, the people of Missouri had been sending memorials to Congress for several years asking for grants of land to be used in constructing rail- ways and in the improvement of the navigable streams of the state. The great desire to improve the roads and navigable rivers is reflected in almost every message from the governor to the general assembly during the whole of the period from 1838 to 1851. § 2. In 1847 the people of Missouri began "to see the abso- lute necessity of commencing some general system of public works in order more successfully to avail themselves of the natural advantages by which they were surrounded." They wished to open "a way to market for the surplus products of their labor and industry" . . and to aid "in the development of the inexhaustible mines of iron, coal, lead, copper and other min- erals," which abounded "in various parts of the state," and which needed "only to be explored and fully opened to make them add incalculably to the wealth of Missouri and of the Union." ° Just as the other states had set forth the value of their natural resources in' 1837, the people of Missouri in 1849 declared that "no state in the American Confederacy" could boast of mightier natural resources than could Missouri. 3 It is very true that the resources of the state had begun to attract a great deal of attention, and people were migrating in great numbers to the state ; but the greater part of those who came at this time were attracted by the possibilities of a virgin soil rather than by the "mountains of iron" and "vast beds of copper, lead, cobalt and coal." The population of the north- ■ See chap. vi. '' Memorial to Congress, etc.. Laws of Missouri, 1847, p. 353. 3 Governor's Message, Senate Journal, iS4q, p. 42. 48 STATE AID TO RAILWAYS IN MISSOURI ern or agricultural part of the state was increasing at this time much faster than that of the southern or mineral portion. In 1850 almost the whole of the population of Missouri was engaged in agriculture ; and the shipments of agricultural prod- ucts to St. Louis during the years preceding 1850 show "that this industry was growing rapidly."' The mineral resources of the state were not being developed so rapidly, although there were signs of increasing activity. This industry, however, was now beginning slowly to develop ; nine foundries had already been established in St. Louis. In 1852 there were cold- blast furnaces at the Iron Mountain, running from "three hun- dred to three hundred and twenty days in a year, averaging about five and one-half tons per day to the furnace." The product of 185 1 amounted to 3431 tons. At Pilot Knob there was at this time one company which had one forge "of seven fires for making wrought iron ;" the annual product of this forge was 10,000 tons.'' Concerning the copper and lead industries of this part of the state, which indeed constituted about the whole of such indus- tries in Missouri, the following statement is given by a shipper interested in the matter at the time: "The greatest resources of this section of the country are its minerals which are found in great abundance; copper, lead, iron, salt, zinc, and several other minerals unknown. I received ten thousand pounds of red cop- per which I sold in New York and have been informed that it was of an excellent quality. The copper ore is abundant and yields a good per cent. Lead ore is found from five to eight miles back of this place (St. Genevieve) and our lead mines are pronounced by English and German miners, richer, easier worked, and at less expense than the famed mines of Galena. I ship annually from this place three million pounds of lead. "3 The chief center, however, to be developed by the railroads soon to be commenced, was the city of St. Louis, at this time a ' See p. 51 below. '• Western Journal and Civilian, viii. (May 1852), p. 136 et seq. 3 Hunt's Merchants' Magazine, xxvi. (March 1852), p. 308. BEGINNING OF THE POLICY OF AIDING RAILWAYS 49 place of 80,081 inhabitants.' In 1850 St. Louis was by far the largest manufacturing center in the Mississippi Valley; the capital invested in manufactures was $4,377,711, giving employment to 7321 men and 11 30 women. The total value of the annual product turned out by the various industries was ;? 15,400,340. Of the one hundred different branches of business, twenty-five turned out an annual product valued at $200,000 each ; three turned out an annual product valued at more than one million dollars ; and one a product valued at more than two million dollars.' Although St. Louis was at this time the greatest manufactur- ing center in the Mississippi Valley, its real importance as a bus- iness center, and especially as a distributing point for the com- merce of the Mississippi Valley and the country in general, can be properly estimated only by a comparison with other similar centers. Such a center was Chicago now springing into exist- ence a few hundred miles distant on the western shore of Lake Michigan. This trading post had grown from 4470 inhabitants in 1840 to 30,000 inhabitants in 1850. Although this town did not possess great wealth such as St. Louis possessed, yet it had been making rapid strides in both wealth and population during the years preceding 1850. The table annexed below exhibits the relative strength in 1850 of the two centers in the principal manufacturing enterprises. It will be seen that the two places had about the same amount of capital invested in the principal .industries. But in the aggregate, because of the great number of small industries in St. Louis, Chicago had only about one- fourth as much capital invested in manufactures of various kinds as had St. Louis. It was, however, mainly as a distributing center that the city of St. Louis was now demanding so much attention from the people of Missouri ; and this may well have been because their proud city could not compare so favorably with the trading post ' United States Census, 1850. " Hunt's Merchants' Magazine, xxvi. p. 314 el seq. For facts concerning the manu- factures of the city, see p. 50 below. 50 STATE AID TO RAILWAYS IN MISSOURI Industries i i . in (. E p 2; i S .5 11 c ■s h I'i h "3 .2 in '0 '^„ §•£ 1.1 Annual sales of Chicago industries Foundries and machine shops. Manufacturers of agricultural im- plements Wagon makers.. Cabinet makers.. Flouring mills . . . Tanneries Planing mills.. . . Carriage makers . Brass foundries . . 9 I 32 . 50 I 19 9 2 8 . 2 . 10 . 53 ■ 43 • 44 • ^(389,000 $180,500 359,000 545 121 195 181 103 35 138 22 226 248 158 619 291 267 ^76 40 159 55 82 38 80 56 56 215 $595,000 146,585 182,800 2,367,750 248,000 96,000 130,000 25,000 498.950 288,822 147,270 301,470 $241,900 390,250 22,275 72,760 4 439.500 5 70,200 3 47,000 56,600 17,000 72,000 155,000 181.000 60,000 30,500 134,600 240,000 46,700 Brass and Bell foundries 22,500 43,000 99,300 Factories of lard 125,000 16,500 47,000 30,000 235,37s 33,500 63,000 70,000 Coopers Tobacco and 32,485 43,180 89,000 Brickyards «!i,378,330 §1,279,000 on Lake Michigan in the matter of commerce, as in the matter of manufacturing industries. The annexed table will show that in many of the chief items of commerce, such as corn, wool, lumber and hides, Chicago was already in advance of St. Louis. Moreover the total number of "steam boats, barges, keels, and flat-boats," 3047, arriving at St. Louis in 1851 carried a tonnage of only 683,140, while the 2279 "steamers, propellers, schoon- ers, brigs and barks," entering the port of Chicago in the same year, carried a tonnage of 958,600. ^ Already had the rivalry begun between the two places as markets for the produce of the territory recently opened up by -See Hunt's Merchants' Magazine, xxiv. p. 314 et seg.; also, iitJ., xxvi. p. 510. ' Jbid., xxvi. pp. 320 and 436. BEGINNING OF THE POLICY OF AIDING RAILWAYS COMPARISON OF RECEIPTS AT ST. LOUIS AND CHICAGO IN 1851." 51 Articles Wheat, bu Flour, bbls Corn, bu Oats, bu Barley and malt, bu. . Pork, cks. and tcs " boxes and bbls . " bulk, pes " bulk, tons Salt, sacks " bbls " lbs Hemp, bales Lead, pigs Tobacco, hhds Beef, tcs and cks " bbls Hides Whisky, bbls Sugar, hhds " bbls. and boxes lbs Coffee, sacks Molasses, bbls hhds Lard, bbls " tcs " kegs Lumber, ft Wool, bales At St. Louis 38: ,700,708 793,892 ,840.909 794,421 101,674 15,298 103,013 768,819 147 216,933 46,250 ■ 65',366 503,571 10,371 5,640 8,872 90,736 47,991 29,276 36,687 101,904 40,231 14,465 37,743 14,450 ,820,016 1,128 At Chicago 388,077 51,650 2,647,465 334,148 (Barley) 36,111 (lbs.) 2,390,248 (bbls.) 8,241 (bags) 78,414 115,522 1,170,700 (lbs.) 1,033,648 (lbs.) 1,402,135 1,558,686 Obs.) >,57i 848,876 5,189 2.563 2,884 3,765,836 (bags) 13,111 2,663 450 (lbs.) 2,069,625 125,523,122 (lbs.) 1,088,553 the Illinois and Michigan Canal. This canal completed direct communication between St. Louis and Chicago making each place a market for the produce of territory hitherto naturally tributary to the other. During the year (1848) in which it was opened for business, 964,134 bushels of wheat were shipped from the Illinois River to St. Louis, while in 1849 about 500,000 bush- els came through from the Illinois River to Chicago. "These facts," said an interested writer of the times, "show that the grain trade of that river will come to Chicago or go to St. Louis as prices may rule relatively high at the North or South; and since a single penny per bushel may be sufficient, when there is nearly an equipoise between the two, to turn the scale either ' See Hunt's Merchants' Magazine, xxvi. pp. 325, 434, and 439. 52 STATE AID TO RAILWAYS IN MISSOURI way, the whole subject commends itself forcibly to those who have the power of regulating the tolls " upon this canal.' In 185 1 the number of steamboats arriving at St. Louis from the Illinois River was second only to that of the arrivals from the Upper Mississippi.' The opening of this canal almost doubled the lumber trade of Chicago within one year, and the territory reached by the canal soon became the greatest lumber market Chicago had. 3 Such being the facts of trade in 1850-1, both St. Louis and Chicago were making strenuous efforts to secure better railway facilities; but in this matter, Chicago was far in advance. The Galena and Chicago Railroad was completed 80 miles west from Chicago in 185 i. The company had recently declared an annual dividend of 15 per cent, and was fast pushing its work of construction. The Rock Island and Chicago Railroad extended six miles from Chicago, connecting with the Michigan Southern. The Central Railroad Company, which was soon to begin a branch running from its main line in Clinton county to Chicago, had already made great progress and had just recently disposed of four million dollars worth of bonds. It was expected that the Southern Michigan and the Michigan Central would soon reach the city; and by means of these the whole northeastern seaboard would "be brought into railroad communications with Chicago." The Northwestern had completed fifteen miles of the main line and two branches ; this was "the best paying road connected with Chicago, its net income ranging from 30 to 40 per cent, on the original cost." The Western Railroad connected with the first branch of the Northwestern at O'Plain River, and was completed to Salt Creek, a distance of six miles. The ■ Hunt's Merchants' Magazine, xxvi. p. 434 et seq. = From New Orleans 300 " the Ohio 457 " Illinois River 634 " Upper Mississippi 639 " " Missouri 301 " Cairo and other points 294 Hunt's Merchants' Magazine xxvi. p. 319. 3 /bjj,^ p. ai,^ BEGINNING OF THE POLICY OF AIDING RAILWAYS 53 Southern Road was completed south of the city ten miles, and a "cash dividend of 14 per cent, had been declared by the company for 185 1." Other roads in the vicinity of Chicago were being constructed which would become cross lines between the main lines. Others, projected in Canada, connected with the ports on the Great Lakes with which lines of steamers from Chicago already made connection. ' The city of St. Louis, notwithstanding the fact that her com- mercial supremacy might already be questioned, remained as yet very complacent in matters of commercial rivalry. " Her natural position" was her great heritage. " Knowing her wealth as well as the activity and proverbial industry of her citizens," St. Louis viewed " with no jealous eye the efforts made in the state of Illinois and elsewhere to carry out railroad enterprises such as the Central Railroad from Chicago and Dubuque to Cairo and the various cross lines that were being extended from the Lake to the Mississippi." These latter roads, profitable as they might be to parties interested, would, it was thought, "mainly benefit St. Louis by converting the thinly inhabited country" through which they were to pass into "populous and flourishing districts connected with St. Louis by intersecting roads. ""^ Nevertheless, the opening of the Alton and Springfield Rail- road in 185 I, as it resulted in the necessity of running an extra packet between Alton and St. Louis, deeply impressed the citi- zens of the latter city with the necessity of an extensive system of railway communication. 3 But this work of railway construction was not begun till July 4, 1851. And at the close of that year the city had only nine miles of road on one line to rival the many lines already completed for several miles out of Chicago. The desire to develop the internal resources of the state and to open up tributary territory for the already thriving metropolis of St. Louis were indeed two of the principal causes which led the state to adopt the policy of assisting in railway construction ; but these after all can hardly be said to have been at this time 'Hunt's Merchants' Magazine, xxvi. (April 1852), p. 441 et seq. ^/^/o'. (March 1851), p. 309. 3/i5;fl'., xxviii. p. 420. 54 STATE AID TO RAILWAYS IN MISSOURI the chief causes. During the years preceding and following 1850, railroads were being projected from the Atlantic seaboard to the lakes and to the Mississippi River, and from the lakes and the Mississippi westward to the Pacific. The people of Missouri were greatly interested in the lines of railway coming from the East, and also in those to be extended to the West. In 1850 the Atlantic seaboard states had a continuous line of railway, " commencing at Portland in the State of Maine, passing successively through Boston, Providence, New York, Philadel- phia, Baltimore, Washington, and Richmond, and terminating at Wilmington (N. C), the total length of which was nearly one thousand miles." From Wilmington the communication with Charleston was maintained by steamboats plying along the coast. Several of the above cities were already centers from which great railroad systems radiated. Furthermore, Charleston, S. C, and Savannah, Ga., were points from which other great lines of railway communication issued westward. That which proceeded from Charleston extended "across South Carolina to Augusta on the confines of Georgia, throwing off a branch northward to Columbia, the capital of the state." From Augusta the line of railway was "continued westward through Georgia, passing through Madison and Decatur, to the left bank of the Tennessee River, throwing off a branch to Athens." From Savannah the line of railway passed through the state of Georgia and the town of Macon, and united with a former line at Decatur. These lines of railway communication were continued westward to the left bank of the Alabama River, on which the transportation was continued by steamboats to Mobile and thence to New Orleans ; another line connected the above roads with the Tennessee River, by which the navigation was " continued through the Mississippi Valley, to the left bank of its great tributary, the Ohio."' Lines were also projected in 1850 which in four years would unite Memphis with Knoxville ; and a company had been incorporated to extend this road to the Virginia line. Then from the com- pletion of the Tennessee and Virginia road Baltimore would be 'Lardner, Railway Economy (1850), p. 327 et seq. This map is taken from "Committee Reports, XXXI. Congress, ist Session, No. 140." (Report ( ney's Railroad to the Pacific.) Other railways on the map besides those designated projected were al projected railways. For lack of reliable information, however, it is impossible to designate exactly tho had been actually constructed and those that had been only projected. A good summary of the roa. lly constructed is given in Lardner's "Railway Economy in Europe and America" (1850), pp. 327-331 BEGINNING OF THE POLICY OF AIDING RAILWAYS 55 connected with Memphis.' There was at this time little doubt that the Memphis and Charleston Railroad, organized in April 1850, would be put under contract and completed in some two or three years. ^ Such were in main outline the railways pro- jected in the eastern portion of the country which were of special interest to the people of Missouri and particularly to the inhab- itants of St. Louis. The question of the location of a railroad across the western portion of the continent received at this time far more general and special attention in the Mississippi Valley than that relating to any road or system of roads across the eastern portion. Although attention was directed to the scheme of connecting the Pacific Coast with the interior of the United States before the acquisition of California and Texas, ' after the acquisition of these large ter- ritories the intensity of interest in such a great enterprise was greatly increased, as is shown by the many conventions and pub- lic meetings held regarding this matter between 1846 and 1850, and by the resolutions of man}- state legislatures favoring the carrying out of some plan."* Three different routes were at this time generally suggested. The first, a northerly route, suggested by Mr. Asa Whitney, of New York, was to extend from Lake Michigan through Prairie Du Chien and South Pass, and then northwest to connect with the Columbia River. And by virtue of a memorial to Congress, asking public lands to be used in constructing a road along such a route, Mr. Whitney has the honor of being the first to take practical steps towards securing a line of railway communication from the interior to the Pacific Coast. Among the several states which passed resolutions endorsing Mr. Whitney's plan were the following southern states : Georgia, Tennessee, Alabama, Maryland, and Kentucky. ' De Boiu's Review, ix. p. 224. 'Ibid., pp. 222 and 314. 3 See Mr. Asa Whitney's first memorial to Congress " relative to the construction of a railroad from Lake Michigan to the Pacific Ocean." Ex. Doc, 2d session, XXVIIL Congress, No. 72. ■• Reports of Committees, 1st session, XXXI. Congress, No. 140, pp. 2 1 to 93 ; see also map opposite taken from this report. 56 STATE AID TO RAILWAYS IN MISSOURI Each of these states mentioned among its reasons for endorsing this plan that such a road because of its great commercial importance to all parts of the country would " tend to consoli- date our Union."" However, about the time of the cession to the United States of the great California territory, the southern states began to express a desire for "a more southern route." Two such routes were at this time marked out ; one was to extend westward from Memphis, Tennessee, and one from St. Louis, Missouri. It was also suggested that there be one main line extending west from Fort Independence, Missouri, following the Santa Fe trail to Santa Fe, then the course of the Gila River to San Diego and along the coast to San Francisco ; to the east of Fort Independ- ence branches could be extended to any point. ^ Rivalry of course sprang up between southern cities as to which one should become the eastern terminus of the line to be projected. In the fall of 1849 two great conventions were held ; one in St. Louis, and one in Memphis, concerning the route to be selected for the proposed road from the Mississippi to the Pacific Ocean. As might be expected, each convention repre- sented that the city in which it met was the proper point from which such a great national highway should be projected west- ward and buttressed up its claims by arguments more or less specious. As has been stated by other writers, these conven- tions represented largely local interests. However, the feeling in the South which gave rise to the desire for better immediate communication with the West, although not exhibited in either of these conventions, had a much more than local significance. A southern writer of this period, in speaking of the routes in question, says: the "South has generally favored Mr. Whitney's scheme and several state legislatures have adopted resolutions in its favor, recommending its adoption, but since the acquisition of California and the increased agitation of the slavery ques- tion, she has felt a strong desire to have the road located as far ^Ex. Doc. 1st session, XXXI. Congress, No. 140, pp. 55 to 6r. = Committee Reports, 2d session, XXX. Congress, No. 145, p. 46. BEGINNING OK THE POLICY OF AIDING RAILWAYS 5/ south as possible."' However, both the St. Louis and Mem- phis conventions, so far as the language of their memorials is concerned, were conceived in a broad spirit of nationality.^ The slavery interests of the South, however, were considering the matter of western railway connection with no little concern. The above writer continuing, discusses the influence of Mr. Whitney's proposed road upon the South, from the standpoint (i) of its extension for its full length upon free soil, and of the belief (2) that the rapid settlement bt the country along the line would "be prejudicial to the South by increasing a population hostile to her institutions." Of course, the arguments of this writer in favor of this road, from the standpoint just men- tioned, and that too upon the conditions 3 "of a continuance of the union of the states" and"* " of a dissolution of the states and the formation of a southern confederacy," is here of only passing interest. What Missouri feared, and that wholly from a com- mercial standpoint, was that unless she intervened the southern route favorably considered would pass near by but not through ' Z>e Bow's Review, ix. p. 60 1 . ° " The Memphis convention, acting upon the broad spirit of nationality in which it was convened, refrained from any expression of opmion as to the topographical mer- its of the different routes which have been proposed from time to time. The feeling which animated the convention was above all local jealousies and sectional prejudices. The convention was for the road, and in favor of that terminus and route, begin where it should and run where it might, that would best subserve the great ends and objects of the road." — Report of the proceedings of the convention, CominiUee Reports, 1st session, XXXI. Congress, No. 140. The St. Louis convention, which consisted of more than one thousand delegates from twelve states of the Union, and which received letters of encouragement from many noted men of opposite political beliefs, could have been none other than a con- vention assembled in the interests of the country in. general. The representatives from the several states were as follows : Missouri, 543 ; Pennsylvania, 18 ; New York, I ; Ohio, 8 ; Indiana, 37 ; Kentucky, 9 ; Illinois, 379 ; Wisconsin, 4 ; Iowa, 69 ; Mich- igan, I ; Louisiana, i ; Tennessee, 7. Letters were received from the following named gentlemen regretting they could not be present and encouraging the matter in every way : Levi Woodbury, Z. Pratt, Richard M. Johnson, Lewis Cass, John C. Cal- houn, Henry Clay, Martin Van Buren, William H. Seward, Levi Hubbell, Thomas H. Benton, Jr., James Gadson, John N. Niles and others. — Proceedi7tgs of the National Railroad Convention which assembled in tlie city of St. Louis, October is, r84<). 3 See map, p. 55. * De Bow's Review, ix. p. 612. 58 STATE AID TO RAILWAYS IN MISSOURI her territory. The road from Mobile to Chicago' already men- tioned, was to be, according to the writer just quoted, the great artery which would make connection with the main trunk line to be built by Mr. Whitney, and which would give the South all the advantages that she could hope for from any southern route.'' Notwithstanding the fact that the people of Missouri at this time were often more or less justly charged with not following out in the best way their economic prospects, the state did not lack individual men who grasped the whole situation both as concerned the local needs of the state, and as concerned the cor- relation of the railroad enterprises of Missouri with those of national importance east and west. In an address to the Board of Directors of the Pacific Railroad, in June 1850, Mr. Thomas Allen, President of the company, stated the facts of the com- mercial situation of the city of St. Louis and the state of Mis- souri with regard both to local and general interests in a vivid way and sounded the note which in a short time roused the peo- ple of the state to action. As a matter of fact the people of Missouri for the past ten years had depended altogether too much upon their "natural" advantages for means of transportation. Mr. Allen admitted that nature had done much for them. But he added: "It is precisely because she has done so much that we have not felt the necessity of doing anything for ourselves, while our neigh- bors at the north and the south of us are making the greatest exertions to triumph over nature, and to obtain by art these advantages which nature has denied them. At the same time it is not to be denied that our relations to the navigable rivers con- stitute our chief natural advantages." It was true that the interior of the state was building fast but not so fast as St. Louis. This was the case because it was not alone with the interior of Missouri that St. Louis found "a profitable traffic." She had reached out in many directions, and if the trade of the Upper Mississippi and of the Illinois had been diverted from her, the 'See map, chap. ii. p. 16. ^ De Boiv's RevieiL\ chap. ix. p. 612. BEGINNING OF THE POLICY OF AIDING RAILWAYS 59 consequences would have been felt to be of serious weight. The commerce which was building up St. Louis was mainly "the produce trade" and to this end, Iowa, Illinois, and even Wiscon- sin contributed largely. In the year 1849, the number of steam- boat arrivals from the Upper Mississippi were 806, from the Illinois River 686, while from the Missouri River there were but 355. The numerous barges, keels, flat and canal boats which arrived in St. Louis came chiefly from the Upper Mississippi and the Illinois. The building of railroads would increase the diversity of the trade of St. Louis. While she then enjoyed a large carrying trade of a certain character, railroads to the min- eral regions would result in the springing up of large factories. Such transportation facilities would "make St. Louis the manu- factory and machine shop as well as the emporium and metrop- olis of the Mississippi Valley." "At the north," Mr. Allen continued, the inhabitants were applying "superior industry and energy" to the "great productive capabilities" of their country. This energy was leading them to plan for railroads. "We see railroads projected from Chicago to Cairo, from Spring- field to Quincy, from Springfield to Terre Haute, from Peoria to Oquawka, from Galena to Chicago, from Alton to Springfield (Illinois) and from St. Joseph to Hannibal, in our own state ; all of them, but the first mentioned, are commended to the public as probable links in the great chain which is to connect the Atlantic and the Pacific. On the south of us we see pro- jected and chartered the Missouri and White River Railroad, and the Missouri and Mississippi Railroad, railroads in Tennessee, reaching to the Mississippi, while our countrymen in the extreme south aided and backed by the topographical corps of the United States are urging forward a railroad by the Gila route to the Pacific at San Diego, which should have a terminus upon the Mississippi below the mouth of the Ohio. While these move- ments are going on around us, St. Louis is doing nothing but relying confidently upon the centrality of her position, her large capital and advanced growth, and her produce trade." The nature of the great natural highway of commerce of the 60 STATE AID TO RAILWAYS IN MISSOURI state, the Missouri River, was plainly stated by Mr. Allen. "There it lies," he said, "turbid, dangerous, uncertain, full of snags and sand bars, and ever-changing channels, causing high insurance, costly transportation, and subject to many drawbacks and disappointments." However, upon this highway, such as it was, commerce had " trebled in three years," and was then " requir- ing an average of one steamer per day for every day in the year." ' Congress was not, however, at this time favorable to the proposals for a southern route. In the report of the committee of Congress (March 13, 1850) upon the plan suggested by Mr. Whitney and those suggested by the conventions of St. Louis and Memphis, the whole matter of decision in favor of one or of the other routes turned on the question of means, which was regarded "as the sine qua iion" of plans for such great enter- prises. The committee thought, as the two conventions offered no plans for means other than those of the national Treasury, that the plan offered by Mr. Whitney was by far the best. On the line selected by Mr. Whitney there were public lands which as suggested by him could be used for the purpose of construct- ing a road. On the lines selected by the southern conventions, there was on the contrary only a small amount of public lands. It was further stated by the committee that the eastern terminus of Mr. Whitney's road on Lake Michigan would be "more equal and fair for all parts of the United States on the east of the Mis- sissippi than any other point farther south." This would "appear by the measurement of distances from this terminus on the routes of transportation existing and surveyed to the Atlantic ports; north and south." Mobile, it was shown, is nearer to this terminus "by three hundred miles than New York, and five hun- dred miles nearer than Boston." Again, Mr. Whitney's route, though farther north, was regarded as the most favorable because the mountain passes which it traversed being of much lower altitude than those farther south, would be less in danger of being blocked by snow during the winter months. ^ ^ De Bow's Review, VIII. (June 1850), p. 571. = Committee Reports, 1st Session, XXXI. Congress, No. 140, p. 11. BEGINNING OF THE POLICY OF AIDING RAILWAYS 6 1 Notwithstanding the great and growing favor of the route selected by Mr. Whitney, Senator Benton of Missouri, one of the few men in the state who not only at this time but at a very much earlier date had fully recognized the great importance of looking to the future in the matter of developing western facilities of transportation for the state, had already (February i8, 1849), before the formal report of the congressional committees in favor of the northern route, introduced a bill for the construction of a Central Pacific Railroad, which should begin at St. Louis, ter- minate at San Francisco, and have a branch to the Columbia River. The plan presented by Senator Benton involved national as opposed to private enterprise in the construction of the road. "The road," he says, "which I propose will be national in its character — in all its features and parts ; national because no private resources are equivalent to such a work nor fit for it. I look upon it, Mr. President, that all propositions to have this road made as a private road by individuals or companies are utterly condemned by the magnitude of the undertaking, by the question of Indian title and possession, and by the impolicy and illegality of sending individuals to treat with the Indian. I go against all schemes of individuals or of companies and especially those who come here and ask of the Congress of the United States to give themselves and their assigns the means of making a road and taxing the people for the use of it. . . . The American people are themselves to furnish the investment and then these individuals are. to levy a toll equal to the amount invested. . . . I repudiate the whole idea."' Senator Benton's bill, although reported back to the Senate without amendment by the committee to which it was referred, was never passed. ° But the plan which it set forth was highly pleasing to the people of Missouri. The general assembly of the state expressed the willingness in a memorial to Congress regarding the proposed road " to pledge all proper state legisla- tion, whether by guaranteeing a right of way or otherwise, to ■ Cong. Globe, 2d Session, XXX. Congress, p. 472. ^ Senate Journal, 2d Session, }^XX. Congress, p. 283. 62 STATE AID TO RAILWAYS IN MISSOURI protect and secure the progress of this work " through the state.' In accordance with this promise and on the same day of the sending of the memorial, the legislature of the state passed an act giving the right of way through the state to the United States for the proposed road.' Although for the time no bill passed Congress favoring the northern route, the favor shown to this route by both the Houses of Congress in the report already mentioned was evidence enough to prove to the people of Missouri that the construction of a great national railway by the general government according to the plan of Senator Benton must not be depended upon. They therefore very naturally concluded that they must upon their own account make an effort to secure railway communication with the West at the earliest possible date if they would keep pace with the enterprise of other states. In his message to the general assembly of Missouri, Decem- ber 30, 1850, Governor King says: "Our enterprising country- men both north and south of us who have an interest in different routes are most laudably engaged in pressing forward their plans, which, if successful, will not only turn into different channels the countless millions of wealth the roads east of us would bring into the state, but we shall be deprived, moreover, of being the receptacle of that golden stream of commerce which is at no distant day to flow in upon us from the west. . . . Let it once be seen that we do not intend to aid in this great work and the roads east of Missouri will be made to diverge to points where energy and enterprise have been more successful. The action of our present legislature is to settle the future destiny of Missouri."^ Thus the one thing which now seemed almost fully established was that the natural advantages of Missouri and of St. Louis, the Missouri and Mississippi rivers, were inadequate for present and especially for future needs. Railways must be built. The great question now to be answered was how to secure funds for the construction of the necessary lines. The experi- ^ Laws of Missouri, 184Q, p. 647. ^Setiate Journal, 1S31, p. 36. -Ibid., p. 116. BEGINNING OF THE POLICY OF AIDING RAILWAYS 63 ences of other states, which have been already considered, were sufficient to give a decided negative to one possible course for the state to pursue. These experiences demonstrated conclu- sively to the people of Missouri that the state should not attempt the construction and operation of roads wholly as a state enter- prise. "Furthermore," says Governor King, "it is presumed that the people are not prepared for that increase of taxes which would be required to meet even the interest upon such a debt as the immediate construction by the state of any considerable por- tion of the projected improvements would necessarily entail."' This being the case, no funds, to be sure, for actual construction could be raised by taxation. The state might have become a stockholder in the proposed roads and issued her bonds for that purpose as had been done between 1837 and 1840 to a great extent by Virginia and some other states. But Missouri was now trying this plan in her attempt to assist banking enterprises, and had already found it a very costly one. So in 185 1 the governor had to say concerning this manner of aiding internal improvements, " I deprecate the policy of the state becoming a large stockholder, or engaging in any considerable work of internal improvement," as tending to " overwhelm the state in debt, without any means of extricating itself except by a bur- densome tax upon the people."^ But private enterprise unassisted could not in 185 1 be depended upon to take the matter in hand. The population of the state was only 682,907, possessing a taxable wealth of only 889,460,803.3 It is evident that in a state of such limited resources companies could not be formed for the construction of lines of railway demanding large amounts of capital. Further- more, the whole of the resources of private individuals capable of being devoted to railroad enterprises could not at this time ^ Senate Journal, i84g, p. 43. ^ Senate Journal, 1851, p. 36. ' Auditor' s Report, 1850, pp. 16-17; to get this amount the writer estimated the value of slaves on the basis of the unit of taxes paid on town lots and land. The U. S. Census of 1870, Industry and Wealth, p. 10, puts the wealth of the state for 1850 at 8137,247,000. 64 STATE AID TO RAILWAYS IN MISSOURI be called forth. This is quite obvious from the considerable amount of attention which was still given to the question of improving the small streams of the state. As late as the fall of 1849 the leading periodical of the state said editorially: "If the rivers of the state of Missouri were improved by dams and locks, so as to afford slack-water navigation as far as practicable, there would exist no great necessity for railways; for • such improvements, in connection with macadamized or planked roads, would afford the means of transportation to every part of the state.'" §2. As it was regarded bad policy for the state to engage in the work of actual construction or to aid in the construction of the roads by becoming a stockholder, and as private capital unaided was not equal to the task, the only course open by which the people of Missouri could get the desired means of transpor- tation was that of combining private capital with public credit. In 185 1 Governor King says : "With the aid which the state can give, and in a way by no means oppressive to its citizens, the roads can be built; without this aid the work must fail."^ As there was not sufficient capital in the state, capital must be imported ; and this, it was thought, could best be done by using the credit of the state. It was also held that by using the public credit simply, the state did not become involved in the manage- ment of the roads in any way. This was thought to be best because private enterprise was "generally found to be more keenly alive to the proper direction of works of this character than the public, acting through their officers," who did "not always feel an immediate responsibility."^ As indicative of the caution and good sense of the legisla- ture, the decision made in the beginning of the experiment to aid only a limited number of roads, was of the greatest impor- tance to the undertaking as a whole. The Senate committee on ^ Wesiern Journal and Civilian. 'Senate Journal, iSsj, p. 37. 3 Report of Senate Committee on Internal Improvements, Senate Journal, /8s/, Appendix, p. 246. BEGINNING OF THE POLICY OF AIDING RAILWAYS 65 internal improvements, after recommending the aiding of the Hannibal and St. Joseph and the Pacific railroads, stated that, although there were some other " subjects of a kindred nature before the committee," they were of the "opinion that these two railroads ought to be distinctly presented and considered sepa- rately from other schemes of improvement." It was indeed true, as the governor, in recommending state action said, that the great error in the efforts of the people of Missouri in making improvements had been that they had "not given the energies of the state to the completion of one or two objects at a time."' § 3. As a result, therefore, of the increasing commercial activity of the times, and in accordance with the recommenda- tions of the governor and the wishes of the best informed and most energetic people of the state, the legislature passed the first act February 22, 185 1, granting aid to the railway enter- prises.'' Only two roads were aided, the Hannibal and St. Joseph and the Pacific. To the Hannibal and St. Joseph there was granted 1.5 million dollars, and to the Pacific two million dollars in the bonds of the state. Although the plan of aiding railways now adopted was more or less changed during its future development, the main features remained the same. These were (i) that the roads aided must have a certain bo7ia fide subscription to their capital stock before any bonds of the state would be granted; (2) as often as a certain sum was spent by the companies in actual construction the state was to issue its bonds to the companies for a like amount, to be sold by the companies at not less than par. In the case of the two roads aided the /^wz« 7?(ff subscription was 1.5 million dollars each, and the amount to be spent before receiving an issue of bonds was $50,000. After the expenditure of each ^50,000 of private funds the governor was to issue $50,000 of the bonds of the state until the state grant ' Senate Journal, 1831, p. 36. ^ Compilation of the Laws in Reference to such Railroads as have received Aid from the State, p. 6o. 66 STATE AID TO RAILWAYS IN MISSOURI was consumed. For convenience, this may be styled the dollar- for-dollar policy in blocks of ^50,000 each. The bonds of the state granted to the companies were 6 per cent, twenty-year bonds. As a security to the state for the bonds issued the com- panies were to give the state a first lien on the roads. The condition of the state financially at this time was good. It had an annual income of more than a quarter of a million dollars, property was rated low, and the rate of taxation was not high. The taxes levied, however, were of several kinds ; there were taxes on polls, lands, town lots, salaries, notes and bonds, and personal property. The table' below gives the amounts yielded by those taxes respectively in 18 50. The debt of the state at this time was only 8764,629,'' which, of course, was not felt to be a burden. The state had now entered upon an enterprise which was for seventeen years to demand almost the whole attention of the administrative officers of the state, which was then to be sur- rendered to private enterprise for completion and which was to leave a debt upon the state that would not be paid off until a period of more than fifty years had elapsed from the time of the beginning of the experiment. Items Valuation in 1850 Revenue yielded Polls, 85,546 '. . ^32,152.65 Lands, 9,511,251 acres ^36,099,407 72,511.74 Town lots, 34,663.5 24,563,830 49,127,68 Slaves, 69,422 Not given. 39,215.19 Salaries 1,237.97 Notes and bonds 12,821.73 Personal property 10,797,566 21,689.22 ^228,756.18 See Auditor's Report, 1850, Senate Journal, 1 83 1 , Appendix, pp. 16-17. 'This is exclusive of the amount (^272,263) of stock owned by the state in the Bank of Missouri, but inclusive of the amount (« 1 24,026) which the state owed to the bank. — Ibid. CHAPTER III. THE EXECUTION OF THE POLICY OF STATE AID. 1851-1860. § I. Two companies, the Hannibal and St. Joseph and the Pacific, which would construct main lines of railway across the state from east to west, were now already aided to the amount of 2.5 million dollars. And as has already been seen, there were other applicants for aid before the internal improvement committees of the legislature when the above amount of bonds was granted in February 185 1. Now that these two companies had been aided, former applicants or new ones came forward in a short time to ask for like favors.' And in course of time the state extended aid to four other companies, and further aid to the Pacific for an extensive branch of its road. The new companies to be aided were (i) the North Missouri, incorporated March 3, 185 1,' which was to construct a railroad from the town of St. Charles, passing up the divide between the tributaries of the Mississippi and Missouri rivers to the northern boundary of the state; 3 (2) the St. Louis and Iron Mountain incorporated also March 3, 1851,'' which was to build a road from the City of St. Louis, or some point on the main line of the Pacific Railroad to the Iron Mountain or Pilot Knob, and to have the privilege of extend- ing the road within ten years to the Mississippi river at Cape Girardeau, or at any point below that city within the state, or to extend the road from the Iron Mountain to the southwestern boundary of the state; (3) The Platte County, incorporated February 24, 1853,^ which would construct a railway from the ^ House Journal, 1853, Appendix, pp. 3-6 and 27-37. = Compilation of the Laws in Reference to such Railroads as have been aided by the State, p. 28. ^ House Journal, 1853, Appendix, pp. 27-29. ■i Compilation of the Laws in Reference to such Railroads etc., p. 40. ^ Ibid., p. 50. 67 68 STATE AID TO RAILWAYS IN MISSOURI western terminus of the Pacific Railroad in Jackson county north- ward to St. Joseph, and would have the privilege of extending the road to the northern boundary of the state ; and (4) The Cairo and Fulton, incorporated February 20, 1855.' This latter company contracted to construct a railway from a point on the Mississippi river opposite the mouth of the Ohio at Cairo to the northern boundary of Arkansas where the Cairo and Fulton rail- road of that state crossed the line. The Southwest Branch of the Pacific Railroad had its genesis after Congress had made to the state the grant of lands for railroad purposes which had been the burden of so many memorials in past years. The Pacific Railroad Company quickly perceived from the terms of the grant that the portion, which would fall to it along the route " already marked out to the western boundary of the state near the mouth of the Kansas River, would be a much more limited amount, (because of the great number of pre-emptions already made) than the company had hoped for. However, along a route which could be selected south of the Osage River in Missouri and extending to the western boundary of the state, a large amount of land could be obtained. As two lines of railway were regarded by the company as better than one, they expressed the willingness to undertake the construction of a branch road, to leave the main line near St. Louis and extend to the boundary of the state near the southwest corner, on the condition that a further grant of aid be given to the company. In accordance with the recom- mendation of the company the right to construct a branch road was granted to it December 25, 1852 ;' this branch was afterwards known as the South West Branch of the Pacific Railroad. § 2. The charter privileges of the roads aided by the state were in no way essentia]ly different from those which were not aided. All of the railroad charters in Missouri at this time give evidence that the questions had already arisen there which have ' Compilation of the Laws in Reference to such Railroads etc., p. 55. '' House Journal, i8s3, Appendi.x, pp. 3-6. 3 Compilation of the Laws in Reference to such Railroads etc., p. 109. EXECUTION OF THE POLICY OF STATE AID 69 caused so much controversy from the origin of railways to the present time and which are by no means as yet fully settled. The state did not attempt at the beginning to fix rates for the transportation of either persons or commodities ; the companies were allowed "to charge and receive such tolls and freights for the transportation of persons, commodities or carriages" on their roads as would be "to the interest" of the companies,^ or in other words the companies might receive such tolls and freights as were "determined on by the directors." Rates of tolls and freights were to be kept posted up in all station houses. In some of the charters of 1849 a maximum limit of passenger and freight rates was imposed upon the companies. These rates were "not to exceed ten cents per mile for passengers and twenty-five cents per ton per mile for freight."^ The rate of dividends was, how- ever, in some cases more rigidly limited. The Hannibal and St. Joseph and the Platte County railroad companies could not declare dividends to a "greater amount than the net profits after deducting all expenses;"^ this provision was made for the pur- pose of securing the "integrity" of the capital stock. In the case of the Hannibal and St. Joseph and the Iron Mountain com- panies, dividends were further limited to not more than 20 per cent, of the capital stock paid in.* The charters of these roads were old charters of the style of 1837 ^^nd this provision limiting the amount of dividends was possibly retained through oversight. No restrictions were placed on the amount of dividends for the other roads ; they were, however, to be declared annually, or oftenerif necessary. The matter of publicity of accounts was settled in a summary way in the charters of the roads and by the general law regard- ing railroad corporations. The books and accounts of the com- panies were to be open at all times to the inspection of any agent of the state appointed for the purpose of examining them. • Compilation of the Laws zk Reference to such Railroads etc., pp. 13, 21, 31, and 45. "Laws of Missouri, 1840, pp. 173, 283, and 319. 3 Compilation of the Laws in Reference to such Railroads etc., pp. 13 and 53- * Ibid., pp. 13 and 45. 70 STATE AID TO RAILWAYS IN MISSOURI And the completeness of the report to be made according to the general railroad law of the state was all that the most exacting could have desired.' In the matter of publicity of accounts it thus seems that the legislature of Missouri attempted to secure in the beginning what has proved in later years to be so desirable and yet so difficult to obtain. Possibly the nearest approach to success in this matter in any state of the Union is that achieved by the railroad commission of the state of Massachusetts. Indeed the success of this commission regarding railway matters in general has been achieved by gradually bringing about entire publicity in regard to all those matters concerning which the commission think the community has a right to be informed. Such was the goal of this commission from the beginning.^ And the early railway charters in Missouri indicate that the necessity of such a course was at that time clearly perceived in that state. There was also present in the minds of the law-makers of Missouri the idea that railroads are in the nature of things a sort of public institution, and that sooner or later they must revert to the state. The provision that the roads should at a future date revert to the state was included in the charters of all but one of the roads aided by the state ; but it was not common to include this provision in the charters of all the other railroads incorporated during these years. 3 It was, however, included in the charter of the St. Louis and St. Charles Companv, granted February 20, iSsi,"* and in that of the Missouri and Mississippi Company, granted March 8, 1849.= The time to elapse before reverting to the state was for the first of these, thirty years, and for the second, fifty years. In the case of the roads to be aided by the state the limit of time was put at forty years for two and at fifty for the remaining three. The form of acquiring the roads was to be by purchase at a price set by competent appraisers mutually selected by the companies and the state. ' Compilation of the Laws in Reference to such Railroads etc., pp. 145-149. ^ Railroad Commissioner^ s Report, 1872, p. clxx. 'i Laws of Missouri, i84g, pp. 173, 283, and 319. '■Ibid., 1851, p. 365. ilbid., 1849, p. 377. EXECUTION OF THE POLICY OF STATE AID "I In the early period between 1837 "^"^ 1840 many railroad companies had engaged in the additional business of banking and often to their great loss. Because of this experience and because of the belief that the two branches of business could not be carried on profitably by the same corporation, the railway charters granted in Missouri after 1847 expressly forbade the companies to employ any part of their funds in any way in the banking business. Inasmuch as the state of Missouri now regarded herself as having entered upon a race with other states in the extension of railways into the undeveloped territory of the South, West, and Northwest, the question of time was one of no little importance. The time allowed to the companies for beginning the work of con- struction, however, would not indicate any great anxiety on the part of the legislature lest other roads might at an earlier date pene- trate to the regions toward which Missouri was directing her lines. That allowed to the Hannibal and St. Joseph Company before beginning the work of construction was three years from the date of incorporation (February 16, 1847) s-^d for completing the road three years from the time of commencing it. The Pacific Rail- road Company was allowed in its charter (March 12, 1849) seven years in which to begin its road and ten years thereafter to complete it. The North Missouri, which was to be the highway over which the trade of the fertile plains of Iowa and of Min- nesota would flow into St. Louis, was given nine years from the date of its charter (March 3, 1851) for beginning the work of construction and twenty years thereafter for completing it to the Iowa line.' At this rate one would not be surprised if this com- pany on reaching the Iowa territory should find the field already occupied by other companies. The St. Louis and Iron Moun- tain was to begin the work of construction within six years after the date of incorporation (March 3, 1851). The remaining two roads, the Platte County and the Cairo and Fulton, were not incorporated for some time yet. It was a privilege common to all the railroads of the state, aided or unaided, though not " Compilation of the Laws in Reference to such Railroads etc., p. 31- 72 STATE AID TO RAILWAYS IN MISSOURI always so stated in the original charter acts,' that they were exempted from taxation until they were completed and had paid one dividend. §3. The location and direction of the lines selected by the state as her beneficiaries indicate the general form which the people of Missouri thought the future development of the rail- way system of the Mississippi Valley would take. To be sure, all the companies to which the state was to grant aid were not yet incorporated ; but only one of the two railways yet to be aided was of much significance ; this was the Platte County, which, as has already been stated, was to extend from the west- ern terminus of the Pacific Railroad in Jackson county north- ward to St. Joseph and thence to the Iowa line. The Cairo and Fulton, in the southeast corner of the state, was of little conse- quence. So it will be observed that the system of railways to be aided by the state was to be a system radiating from St. Louis. Of course in the minds of Missourians St. Louis was to be the railway center of the Mississippi Valley ; and the chief single result to be achieved by these railways was the building up of this municipality. Three of the railways to be aided, together with the South West Branch of the Pacific, started either from the city or within a few miles of it. And already a short line, the St. Louis and St. Charles, had been incorporated for the purpose of extending the North Missouri to St. Louis. The Hannibal and St. Joseph would reach St. Louis by the Missis- sippi River ; and the North Missouri would cross the Hannibal and St. Joseph, thereby giving it additional access to the city. The Platte County Railroad was simply a northern extension of the Pacific at its western terminus ; the Iron Mountain road would be extended in a short time, it was hoped, to a junction with the Cairo and Fulton ; and in course of time these would make valuable connection with railroads in the south. These lines were not only at this time, but for some time to come, ' See section I2, act o£ December 25, 1852. Compilation of the Laws in Reference to suck Railroads etc., p. 67. EXECUTION OF THE POLICY OF STATE AID 73 regarded as sufficient to supply in a general way the natural demands of the Mississippi Valley. Although the Hannibal and St. Joseph and the Pacific extended east and west, and the South West Branch southwest, the system was founded upon the idea that the natural flow of commerce would be from north to south. The Mississippi River would continue to be the great central highway of commerce, as it was believed that trade would never to any considerable extent flow east and west across the continent. It was expected that the traffic of the Hannibal and St. Joseph and of the Pacific with its tributary, the Platte County Railroad, as well as the traffic of the North Missouri, would flow through St. Louis. This would be the case because St. Louis lay on the "natural highway,'' the Mississippi River. Commerce had always gone up and down this river and always would; the only demand for railroads was to assist nature, not to "triumph over her." This idea is to be kept in mind in studying the growth of the railroad system in Missouri. §4. The first work of railway construction in Missouri was done on the Pacific Railroad, in the city of St. Louis, Jul)' 4, 185 1,' only a few months afrer the first grant of aid. Very lit- tle progress was made, however, upon this road during the first year."" The Hannibal and St. Joseph Company did not begin the work of construction until the spring of 1853, two years after receiving its first grant of bonds. ' Further encouragement was seemingly necessary ; and this encouragement was received in June. 1852 in the form of a land grant from the Congress of the United States to the state of Missouri, to be used in aiding the construction of the Hannibal and St. Joseph and Pacific rail- roads.* For this purpose. Congress granted "every alternate section of land designated by even numbers for six sections in width on each side of the road ;" if, however, after the location ' Kansas City Review of Science and Industry, vol. vii. p. 167. "See below, p. 80. ^ Senate Journal, Adjourned Session, i8s5. Appendix, p. 94. ■• United States Statutes at Large, 10, p. 8 ; also Compilation of the Lavis in Reference to such Railroads etc., p, 3. 74 STATE AID TO RAILWAYS IN MISSOURI of the route of a road, it was found that any of those sec- tions had been sold by the government or pre-empted by set- tlers, then the company would be allowed to select, in the place of such sections, other sections of like kind outside of the six- mile limit but within fifteen miles of the road. These lands could be applied to no other purpose than that for which they were granted. Recognizing that additional value would neces- sarily accrue to the intermediate sections of land remaining in its possession, the government, as was usual in all grants of this kind during these times, stipulated that these sections should not be sold for less than double the minimum price (;?I.25 per acre) of public lands. Only 120 sections on a continuous length of the road for twenty miles could be sold while this par- ticular twenty miles were building ; if the railroads were not completed in ten years, the companies were to make no further sales, and the remaining lands would revert to the government. In making this grant, as in making other similar grants, it was provided that these railroads should "be and remain public highways for the use of the government of the United States, free from toll or other charges upon transportation of any prop- erty or troops of the United States," and that the "United States mail" should "at all times be transferred over [these] railroads, under the direction of the Post Office Department, at such rates as Congress might by law direct." Following this land grant another was made February 9, 1853, to the two states of Arkansas and Missouri. This grant was made for the purpose of aiding in the "construction of a railroad from a point on the Mississippi opposite the mouth of the Ohio River via Little Rock to the Texas boundary near Fulton in Arkansas, with branches to Fort Smith and the Mis- sissippi River."' It was a portion of this grant which fell to the Cairo and Fulton Railroad Company in Missouri, incorporated at a later date. The first of the two acts just mentioned was regarded by the friends of the aiding policy as a great boon to the state. Of ' Compilation of the Laws in Reference to such Railroads etc., p. 5. EXECUTION OF THE POLICY OF STATE AID 75 course this grant had to be apportioned to the separate railways by the legislature. Governor King, regarding the occasion an extraordinary one called an extra session of the legislature, August 4, 1852, less than two months after the land grant was made, for the purpose of enacting such laws as would more effectually and economica.lly apply the grant. During this ses- sion an act was passed to accept the grant upon the terms stip- ulated in the congressional act and to "apply a portion thereof to the Hannibal and St. Joseph Railroad." '■ It was also provided in this act that after the company had completed its road and declared a dividend, it should pay the same rate of taxes on the road and all the property pertaining to it as was paid on all other real and personal property in the state ; in case the company failed to declare a dividend within two years after the comple- tion of the road, then it should no longer be exempt from taxa- tion. In addition to the right to sell the lands granted, the company was given the right to issue its own bonds in order to secure funds and guarantee them by a mortgage on a part or all of the lands granted; the faith of the state however was in no way pledged for the redemption of the bonds issued by the com- pany. Although similar but separate bills were passed by both houses at the extra session of the legislature to apply a portion of the grant to the Pacific Railroad, no bill to this effect became a law till after a meeting of the regular session in the following December.^ After the terms of the grant had become known the railway companies naturally became anxious to know how much land could be obtained along the routes already laid out or suggested. The Pacific Railroad Company was more concerned about this matter than was the Hannibal and St. Joseph, because a greater amount of lands had already been pre-empted along its route; however, the route of the Pacific, west of Jefferson city, had not yet been fully determined.^ The company, according to its ' Compilation of the Laws in reference to such Railroads etc., p. 115. ^ Senate Journal, 1852-3, pp. 65-73- ^ Senate Journal, /^yj, Appendix, pp. 6-13. 76 STATE AID TO RAILWAYS IN MISSOURI charter was under obligations to extend its line from Jefferson City to the western boundary of the state. But on the two routes possible for this part of the road no great amount of public lands remained unsold or unclaimed; at best, one of the routes would yield not more than 563,000 acres, and the other not more than 400,000.' Furthermore, the company raised the question regarding the construction of the law, which required the railroad "as a consideration for the land, to remain a public highway, free of use to the government, without toll or other charge for the transportation of troops, munitions and other property of the United States." The company thought if the law meant that it was to do business for the government without the usual charges made against individuals, then the "land ap- plied to the Kansas route would be a burden instead of a benefit." That this may have been a shrewd method of finding grounds upon which to make a further plea for state aid is not improb- able. In the memorial in which the question is raised, the com- pany asks for further aid, and just in this connection adds that under the doubtful construction of the law, "if it were possible to provide other means for constructing the road in the direction of Kansas, the land grant might very properly, and perhaps more advantageously to the state, be applied to aid in the construc- tion of a road to terminate on the western boundary [of the state] south of the Osage River;" upon this route about 1.3 mil- lion acres of land could be obtained under the act. Here was also a "large section of the state rich in minerals, and a consid erable part of it fertile in agricultural resources [with] no facili- ties for getting to market." A road would therefore greatly develop and benefit this part of the state. In these suggestions is to be found the genesis of the South West Branch of the Pacific Railroad. To construct the two roads was, however, more than the company could do without "the fostering aid of the state" in the form of additional legal powers and a further loan of public funds. ' See Memorial of the Company to the General Assembly (December 13, 1852), Senate Journal, Adjourned Session, /8jJ, Appendix, p. 8. EXECUTION OF THE POLICY OF STATE AID ']'] The estimates given by the company at this time of the cost of the line to Kansas and of the branch to the south- west part of the state were certainly low, although they were "considerably higher" than those made earlier, because of the "increased price of iron and labor."' The cost of of the route to Kansas west of the first division, a distance 246 miles, was put at 6.3 million dollars, as a minimum, and 6.6 million dollars, as a maximum. The maximum limit would make the cost $26,820 per mile. The estimate of the cost of the line to the southwest was put up at a mini- mum of seven million dollars, and a maximum of eight million dollars. For the distance of 283 miles this would be about $28,200 per mile. It is of course quite probable that in making these estimates the company did not have in mind very fully equipped and perfected railways. The cost of railways in both the eastern and eastern-central part of the United States had been published in periodicals of these times, however, and these published figures should have led the pro- spective builders of the Missouri railways to make higher esti- mates, especially for the one to the southwest, which was to extend through a very rough country. In another respect also were the estimates and statements of the company unre- liable. They declared that although the cost of the roads might seem at first sight beyond the ability of the company to provide for, it must be kept in mind that "experience in railroad construction has generally shown that where two- thirds of the cost of the work can be raised, the other third and sometimes the whole of the superstructure and machinery can be provided for by the credit of the road itself ; [and] it seems evident that we are able to provide more than this ratio of means to cost for our projected lines and still our capacity has not been fully tested." The facts as recorded indicate, however, that this did not seem evident at that time. Of the estimated cost (6.6 million dollars) of the line to Kansas, the company had only 1.5 million dollars in ^ Senate Journal, Adjourned Session, /(Jjj, Appendix, p. 4. 78 STATE AID TO RAILWAYS IN MISSOURI the bonds of the state, and 82,714,700 in stock' subscriptions, both of which, so far as they should be used, would constitute a liability against the credit of the roads ; and as for the resources represented by the land grant, they were wholly prospective. For the branch to the southwest, estimated at eight millions of dollars, the company had yet no subscriptions to its stock, and no cash ; it was "reported" that the stock subscribed by counties in the southwest for the proposed line amounted to more than 8500,- 000, but this "included ;g200,000 understood to be subscribed by the Cherokee Indians." Indeed, few railroad men, even of that time, would have regarded a subscription by Indians of $200,000, which existed only in hearsay, as desirable collateral. It is thus clear that two-thirds of the funds necessary for con- structing the two lines had not been raised. About this time also the people of Washington county requested the Pacific Railroad Company to undertake the con- struction of a branch road from St. Louis to the Iron Moun- tain. This road would be on the same route or practically the same route as that already surveyed for the St. Louis and Iron Mountain Railroad. The Pacific Company spent ;g3,882 in surveying the route and expressed a willingness to under- take the construction of the branch road if the state would grant aid for the purpose. The estimate for this branch of about eighty-five miles in length was put at 1.7 million dollars, or ;g20,000 per mile. The company therefore asked that one million dollars of state bonds be granted for the branch to the southwest and 8750,000 for the branch from St. Louis to the Iron Mountain. In addition to the Pacific Railroad, the North Missouri also importuned the legislature of the state for aid. This company hoped for a grant of land in the future ; at present, however, it could hope for nothing more than a grant of bonds similar to the grants that had been made to the Pacific, and Hannibal and St. Joseph companies. This road was to be, as already stated, "one part of the great trunk line from the north to the south on ^ Senate Journal, 1853, Appendix, p. 38. EXECUTION OF THE POLICY OF STATE AID 79 the west side of the Mississippi, uniting the fertile lands of the Minnesota territory with the cotton and sugar fields of Louisi- ana," and thus giving a new outlet to the products of the north at the Gulf of Mexico.' The company considered the land through which this road extended equal in "fertility and capac- ity " to that through which the Chicago and Galena Railroad of Illinois extended, — a road which was "paying dividends of i8 per cent, per annum, without having reached a terminus." The estimate of the cost of this line was also very low. The length of the road from St. Louis to the northern boundary of the state was estimated to be two hundred and fifty miles and would cost " completed and stocked" five millions of dollars. Missouri at this time had in a small but in no insignificant way an experience similar to that of other states of a later period, in inserting into her railroad laws requirements so rigid as to hinder the investment of capital. The general corporation law passed by the legislature in March 1845 contained a pro- vision imposing upon all stockholders in corporations, unless otherwise expressly stated in the individual charters, a liability double the amount of stock owned. ^ It had already been found necessary to grant exemptions from this requirement to the Pacific, and the Hannibal and St. Joseph companies. Individ- uals were now ready to subscribe to the stock of the North Mis- souri Railroad, but, as they stated, they could not "for the sake of obtaining the profits upon one hundred dollars incur the lia- bility of paying two hundred more."' Before considering the grants of aid which were made in answer to the importunities of the Pacific and North Missouri Railroad Companies, attention should be directed for a moment to the progress in construction made by the Pacific. The whole of the first division, thirty-seven miles west from St. Louis, was expected to be completed and ready for use in the spring of ■ Memorial of the North Missouri Railroad Convention to the General Assembly of Missouri, Senate Journal, 1853, Appendix, pp. 27-36. " Revised Statutes of Missouri, 1845, p. 233 ; also Senate Journal, 1853, Appendix, p. 27. ^ Senate Journal, 1833, Appendix, p. 28. 80 STATE AID TO RAILWAYS IN MISSOURI 1853 ; a few miles of this were already completed in December, 1852. The preliminary survey and the securing of the right of way were nearly completed on the Kansas route and the com- pany was then only waiting the action of the legislature " to make a final location and to place another division, if not the whole road, under contract." "On the first of December [1852] the first locomotive west of the Mississippi River was launched upon the track, and on the ninth the first passenger train ran over the road a few miles west of St. Louis as far as completed."' The aid granted December 1852 is the second grant made by the state. ^ At the same time a portion of the congressional land grant of June 10, 1852, was transferred to the Pacific rail- road company. 3 This company was also given the right at this time to construct the branch road to the southwest part of the state, as already mentioned. To this branch, now known as the South West Branch of the Pacific Railroad, land was given by the state in the same manner as to the main line of the road. And the bonds of the state, to the extent of one million dollars, in accordance with the request of the company were also granted to aid in its construction. For additional funds for the construc- tion of the branch roads the act gave the company all power to issue bonds at rates of interest not exceeding 7 per cent, per annum, payable semi-annually, and to secure the payment of the bonds by a mortgage on the lands granted ; but the faith of the state was in no manner pledged for the redemption of the bonds. In addition to the grant to the branch road one million dollars were granted in the bonds of the state to be used upon the main line. It was also added that this line must be com- pleted " to its terminus, in Jackson county, and put into opera- tion within five years after the passage of this act." Authority to construct another branch road, the St. Louis and Iron Mountain, heretofore mentioned, was also given to the Pacific Railroad Company in a separate act of the same date. ^ Senate Journal, 1833, Appendix, p. 5. "^ Compilation of the Laws in Reference to such Railroads etc., pp. 63, 10$ and 109. 3 Ibid., p. 63. EXECUTION OF THE POLICY OF STATE AID 8 1 The St. Louis and Iron Mountain Railroad Company had been incorporated as an independent company March 3, 1851 ; but in the act of December 25, 1852, the road is described as the Iron Mountain Branch of the Pacific Railroad ;' and the bonds of the state to the extent of ;$; 50,000 are granted to the Pacific Rail- road Company to be used in the construction of this branch.^ Up to this time the route of the Pacific Railway had not been formally determined by statute ; but it was now definitely stated that it would extend through Jefferson City, and then westward by the most practicable inland route through Johnson county to any point in Jackson county which might be designated by the company, in spite of anything to the contrary which might be in its charter. The inland route west of Jefferson City was to be binding on the companj^, however, only on the condition that the counties through which this route lay should subscribe to the capital stock of the company, ^400, 000 in addition to what had already been subscribed. In case this subscription were not made the company was to be free in selecting the route between Jefferson City and its terminus in Jackson county. The route of the Pacific Railroad was now in a measure defi- nitely determined as far as the western boundary of the state. In order that the road should be more than merely a Missouri rail- way, and should at the earliest possible date reach the territory west of the state, another act was passed soon after, giving the company the right to construct and operate its road to any point or points west of the boundary of Missouri. ^ As no land could be devoted to this North Missouri Railroad the legislature was more favorable in the matter of granting bonds. The road was granted two million dollars in 6 per cent, twenty-year bonds of ^ Compilation of the Laws in Reference to such Railroads etc., p. 109. ^ In case this branch remained in the hands of the Pacific R. R. the bona fide sub- scription to its capital stock necessary to secure an issue of the state bonds had to be only ;?3oo,ooo. But in case the Pacific R. R. Company did not begin the worli of con- struction within twelve months from the date of this act (December 25, 1852), the lease of the state should be transferred to the St. Louis and Iron Mountain R. R. Company, and the bona fide subscription would then have to be raised to $500,000 before getting any of the bonds from the state. — Ibid., pp. 68 and no. 3 Compilation of the Laws in Reference to such Railroads etc., p. 27. 82 STATE AID TO RAILWAYS IN MISSOURI the state, which were to be delivered in blocks of ^50,000 each. No bonds, however, were to be delivered until the company had a bona fide subscription to its capital stock of one million dol- lars. As in the case of the other roads the state took for secu- rity a first lien on the road and all its appurtenances. By the end of December, 1852, the five lines of railway, which constituted the great system of roads radiating from St. Louis to all points of the compass west of the Mississippi River, had all received aid from the state ; the total aid granted amounted to S8, 2 50,000.' The policy of aiding the roads was looked upon with much favor by the general public. Several months before the acts of December 1852, which granted in all 84,750,000, but some time after the general system had been conceived and the granting of further aid was a foregone conclusion, a writer states in behalf of the Missouri experiment, that the people of Missouri "have decided for themselves what, under Providence, shall be their destiny. They have entered upon measures of public improvement whose vastness is only equaled by the wisdom which has planned them ; and such is her solid wealth and credit and the fixed purpose of her people that they will certainly carry out what they have begun. She will not be stopped either by any failure on the part of Con- gress to do her justice in the application made by her for a fair share of the public lands but will push to completion her great roads. " = The actual work of construction was, however, a matter-of- fact business, the full meaning of which had not yet dawned upon the corporations which were so hopeful of spreading a net- work of railways over the state. The Pacific Railroad Company 'To the Pacific Railroad, act of Feb. 22, 1851 ^2,000,000 Pacific Railroad, act of Dec. 25, 1852 1,000,000 South West Branch, act of Dec. 25, 1852 1,000,000 Hannibal and St. Joseph, act of Feb. 22, 1851 1,500,000 North Missouri, act of Dec. 23, 1852 2,000,000 St. Louis and Iron Mountain, act of Dec. 25, 1852 750,000 S8, 250,000 ■Hunt's Merchants' Magazine, vol. xxvi. (March 1852), p. 309. EXECUTION OF THE POLICY OF STATE AID 83 completed and opened for business its first division of thirty- seven miles west from St. Louis, July 23, 1853. This division was found to cost ^1,769,874, or upwards of ^47,000 per mile, an amount nearly twice as great as at first estimated. If the cost of fencing, side-tracks, depots, buildings, and rolling stock, in all g 1 70, 1 49,' be deducted, the average cost per mile for this roadbed, "fully ballasted for about three-fourths of its length," would be $43,219. Since the first division had thus so far exceeded the early estimates concerning it, there was no escape from the conclusion that the second division, extending from Franklin to Jefferson City, a distance of eighty-eight miles, would also cost far more than the original estimates. The company, near the close of 1855, estimated that the amount then necessary to complete the road to Jefferson City would be only 8230,000.^ This amount added to the amount already spent (86,473,670), would make the cost of the road to Jefferson City $6,703,670, or more than the maximum estimate originally assigned for the cost of the whole line to the western boundary of the state. To be sure, most of the bonds sold to secure funds for the construction of the road were sold at a discount. However, the whole of the interest, discount, commission, and exchange charges up to this time amounted only to $612,111, and deducting this from the amount actually spent in construc- tion ($6,569,240), the cash cost of the road to Jefferson City becomes $5,957,129 for 125 miles of road, or $47,657 per mile.^ The funds for the construction of this portion of the road were provided for the most part from the sale of bonds. The whole grant of state bonds, three million doUarSj-ihad been received 'Fencing »30.558 Side tracks 32,100 Depots, etc. 13,091 Rolling stock QSiOOO JSi7o,749 — See Senate Journal, /Sjj, Appendix, p. 257. 'Senate Journal, Adjourned Session, /8jj, Appendix, p. 199. 3 See Appendix i. Table i. * Ibid.; also Senate Journal, Adjourned Session, iSjj, Appendix, p. 115. 84 STATE AID TO RAILWAYS IN MISSOURI and sold, netting a slight premium. The contributions of St. Louis City and St. Louis county (each ^500, 000 in its own bonds) had been received and disposed of. In the spring of 1854, however, the company was very short of funds. More had been expected of the farmers and townspeople along the route than they were now doing. The farmers, whether near the road or not, were now getting higher prices for their prod- uce than a few years previous, and did not see any profit in subscribing to an enterprise which would yield a return only at a more or less distant date. The Western Journal and Civilian characterized the situation graphically, and championed the interests of the road by calling upon the taxpayers of St. Louis county to respond to the request recently made by the com- pany for an immediate subscription of 1.2 million dollars to the capital stock of the road. According to this journal, the inter- ests of Missouri now suffered through the action of three ele- ments of opposition to the success of this road: "(i) The force that is applied to the Iowa route, and is already building a bridge across the Mississippi at Rock Island ; (2) the force that is applied to the Texas route and has already obtained a grant of land twenty miles in width from the Sabine to the Rio Grande ; (3) the force of inertia — the indisposition of the people of Missouri to build the Pacific road through their own state immediately out of their own resources."' The people of St. Louis county, being very anxious that the road should make progress as fast as possible, responded to the gall for help and came forward with a gift of 1.2 million dollars in cash, payable in annual installments running through four years. The county- anticipated the gift, however, by issuing short-time bonds to the company.^ Of this amount the company had received, before the close of 1855, ^875,000; and yet so urgent was its need of funds that it issued its own bonds to the amount of $348,000, based upon the remaining portion of the St. Louis grant.3 From 'Vol. xi. (March 1854), p. 62. '^ Senate Journal, Adjourned Session, i8s5. Appendix, p. 28. '^Senate Journal, iSjJ, Appendix, p. 249. EXECUTION OF THE POLICY OF STATE AID 85 counties and individuals liie sum of $928,692 in cash had been received. In the spring of 1855 the company was again so pressed for funds that the state made it two special short-time loans, one of $200,000, and one of $300,000.' The conditions upon which the company was to obtain the second loan were, however, never fully complied with, and therefore the special bonds of this amount were never issued by the state.'' From other sources some further minor amounts were raised ; up to this time the net receipts from transportation and rents, of property had amounted only to $55,853.2 The route of the South West Branch was finally located November 16, 1853.'' This route would extend from Franklin on the main line of the Pacific, thirty-seven miles from St. Louis, in a southwesterly direction, descending into the valley of the Gasconade eighty-nine miles from Franklin ; this constituted the first division. Continuing in a southwesterly direction 190 miles from Franklin it would reach Springfield, the terminus of the second division. Thence the third division of the route would extend to the western boundary of the state in New- ton county, 283 miles from Franklin and 320 miles from St. Louis. 5 The finances of this road were not in a promising condition when work was first begun on it in June 1855.* The $500,000 subscription necessary in order to secure the first installment of the state grant was not yet secured, although strenuous efforts had been made to obtain it, both in St. Louis and along the line of the road. The amount subscribed by the counties through which the road was to extend and by individuals residing in these counties and in St. Louis was only $369, 000. ' The company had also tried without success to negotiate a loan of four million dollars, based upon the first-mortgage bonds of this branch and a ' Compilation of the Laws in Reference to such Railroads, etc., pp. 69-70. ^ Senate Journal, Adjourned Session, f8s5,p- US' ^ Ibid., pp. 28-31 ; also Appendix i. Table i. 'Ibid.,f.^T. ^Ibid. <^ /bid., p. ^S. T Ibid., Appendix, p. 49; also Appendix i, Table ii. 86 STATE AID TO RAILWAYS IN MISSOURI second mortgage on the main line.' The contractors, having subscribed ^100,000 and believing that the deficit would be made up, began work June I, 1855. By October of the same year work was in progress along the whole line of the first division, a dis- tance about eighty miles from Franklin on the main line ; but although a great amount of work had been done, no payments had been made to the contractors.'' Consequently nothing can be said regarding the cost of the road at this time. The route of the North Missouri Railroad was not finally located till October 16, 1854.^ The route of this road also was divided for purposes of construction into three divisions : the first extended from St. Louis to St. Charles, a distance of nine- teen miles, the second from St. Charles in a northwesterly direc- tion to a junction with the Hannibal and St. Joseph Railroad in Macon county, 147 miles, and the third from this junction directly north to the state line, a distance of sixty-one miles, making the whole line 228 miles in length. The work of construction was begun on the first division about the first of June 1854, and the whole of this division was opened for business on the twentieth of August of the following year. The actual cost of this portion of the completed road very greatly exceeded the estimates of three years earlier. This divi- sion of nineteen miles cost very nearly one million dollars, or more than $52,000 per mile.-* If, however, only one-half of the general expenses up to date be charged to the first division, the cost per mile would yet be more than $44,400 per mile. And if then the total discounts on the bonds to date ($44,148) be deducted, the cost per mile still remains about $42,200. This amount is in striking contrast to the estimate of 1852, which put the whole line, supposed then to be 250 miles in length, at five million dollars "completed and stocked," or $20,000 per mile. 5 And yet, in 1855, notwithstanding the great cost of the first divi- sion, the second division, between St. Charles and the junction ' Western Journal and Civilian, vol. a. (June 1852) p. 12. '^ Ibid., p. 59. 'Senate Journal, Adjourned Session, /8jj, Appendix, p. 49. 'Ibid., p. 66. ^ Senate Journal, i8s3. Appendix, p. 29. EXECUTION OF THE POLICY OF STATE AID 87 with the Hannibal and St. Joseph, was estimated to cost only g28,obo per mile. The third division, however, was then estimated at the high figure of ^51,724 per mile.' The funds for the construction of the first division of the North Missouri as in the case of the Pacific were obtained by disposing of a portion of the bonds subscribed by the county and city of St. Louis, and of those granted by the state, and from payments in cash by individuals. ° The Hannibal and St. Joseph Railroad Company, though the first to be incorporated, was very tardy in beginning the actual work of construction. Much time was consumed in preliminary surveys, and the route was not finally located until March, 1853; the line as then determined was 206^ miles in length. 3 In order to expedite the work of construction the route was divided into eight sections of about twenty-five miles each, and the work of construction was begun in the spring of 1853. By October 1855, "the first four divisions on the eastern portion of the line were under construction and the whole of the first division and a portion of the second, in all about thirty miles, [was] very nearly ready for the superstructure : " the extreme western division was also under construction. Up to this time, however, so little had been accomplished that nothing can be said regarding the actual cost of the road per mile. But it is to be observed that the original estimates made by the chief engineer of the com- pany in 1853 were at this time increased considerably more than one-third; the early estimate put the cost of the whole line including stock at S4, 65 5,200, but in November, 1855, this amount was raised to $6,268,700." The former estimate would make the road cost ;S23,ooo, and the latter about $30,400, per mile. Although this company was tardy in beginning work, it was soon to make greater progress than any of the others. Eastern capitalists had become interested in the road, and had already secured a controlling interest in the capital stock. Of the ^ Senate Journal, Adjourned Session, i8js, Appendix, p. 64. " Ibid., p. 65 ; also Appendix i. Table iv. ^Ibid., p. 94. ^ Ibid., p. 98. 88 STATE AID TO RAILWAYS IN MISSOURI $1,402,700' subscribed up to the close of 1855, one million dol- lars was subscribed by individuals in Boston and New York ; after 1853 a majority of the directors of this company were non- residents of Missouri. ° At this time the company had almost completed the surveys of the land granted to it and found that the amount would be about six hundred thousand acres.' Although no portion of these lands had been sold, they would necessarily be in demand very soon because they lay in the agri- cultural portion of the state which was being occupied very rapidly through immigration. The total resources (;g2,8o2,70o) of this company in 1855, exclusive of possible receipts from land, bore a greater relative proportion to the estimated cost of the whole line of its road than did the resources of any other com- pany, excepting those of the St. Louis and Iron Mountain. The route of the St. Louis and Iron Mountain Railroad was finally located September 8, 1853 ; the line extended from St. Louis to Pilot Knob, a distance of eighty-six miles. The work of construction was begun on the north end of the line in the fall of 1 8 5 3 ; and at the close of 1 8 5 5 it was expected that a small portion of the road would be completed within a few months.' A large portion of the road was "in quite an advanced condition," and there seemed to be good reason to expect that so far as the means of the company would permit, it would "progress rapidly towards completion." In the case of this line, as in the ease of others, the work thus far completed furnished a criterion of the probable cost of the road sufficiently definite to cause the offi- cers of the company to increase materially the estimates of 'This amount should have been raised to 1.5 million dollars before the company received any of the bonds of the state (Act of February 21, 1851). But the first issue of the state bonds granted was made December 28, 1853 {Senate Journal, Adjourned Ses- sion, 183s, Appendix, p. 115), or nearly two years prior to the date of the report stating that ^1,402,700 was the total amount subscribed {/did., p. 99). It is quite probable, however, that the state was misled by a second subscription of one million dollars stated to have been made by eastern capitalists, November 18, 1853 [Ibid., p. 96), something more than a month prior to the first issue of bonds. This last subscription was never entered upon the books of the company [[bid., p. 96). ' Senate Journal, Adjourned Session, /8ss, Appendix, p. 96. ^/iid.,p.gy. *Ibid.,p.yy. EXECUTION OF THE POLICY OF STATE AID 89 former years. The estimated cost of this road of eighty-six miles, including rolling stock, was now put at 4.1 million dollars, or about ^47,600 per mile.' For the amount of work to be accomplished in order to secure a completed road, the resources of this company were more nearly adequate than those of any other road aided by the state. The total resources of the com- pany amounted to §2,993,300, of which 1.5 million dollars were in the bonds of the state. ° The progress of construction on the roads aided by the state at the close of 1855 may be very briefly summarized. ^ The Pacific railroad had almost reached Jefferson City, and had con- sumed the entire amount of state aid"* and almost all the city and county aid received. The North Missouri Railroad Company had completed the first division of its line, extending from St. Louis to St. Charles, and had commenced a second division, extending from St. Charles to a junction with the Hannibal and St. Joseph ; and had drawn g6oo,000 of the state grant. The Hannibal and St. Joseph Company had something over one hun- dred miles in process of construction, but no part was completed ; it had drawn 8580,000 of the state bonds granted. The St. Louis and Iron Mountain Company, although it had a " considerable por- tion" of its road under construction, had completed no part of it ; of the state grant §400, 000 had been received. Taking into consideration the length of time that had elapsed since the begin- ning of the work of construction it is thus seen that very little had been accomplished. Only one road, the Pacific, had really made progress at a rate that could be called desirable, and this road had cost twice as much as had been estimated at the begin- ^ Senate Journal, Adjourned Session, i8sj. Appendix, p. 78. ' Ibid., p. 79 ; also Appendix i. Table v. 3 Pacific Railroad Company South West Branch Bonds granted ;?3,ooo,ooo 1,000,000 2,000,000 1,500,000 1,500,000 Amount issued ^3,000,000 Amount remaining J!l,000,000 North Missouri Hannibal and St. Joseph St. L. and Iron Mountain 600,000 580,000 400,000 1,400,000 920,000 1,100,000 9,000,000 4,580,000 4,420,000 ^Senate Journal, Adjourned Session, tSjj, Appendix, p. 115- go STATE AID TO RAILWAYS IN MISSOURI ning of the enterprise. And, as has been seen, the cost of the work on all of the other roads aided, so far as the companies had proceeded with the construction, had already demonstrated that each of them would cost from 30 to lOO per cent, more than was originally estimated. § 5. No sooner had the railroad development of the state been fairly begun, than the anxiety for the development of the iron industry of the state began greatly to increase. The sys- tem of railroads to which aid was granted, amounted to nearly iioo miles. As each mile required one hundred tons of iron rails, and as iron cost ^75 per ton, delivered in St. Louis, the com- pleted system would demand eight million dollars worth of railroad iron.' A writer of the time asks if Missouri shall "carry coals to Newcastle in both cases :"..." shall the money of Missouri be sent to England where there is an abundance of money, and shall the iron of England be sent to America where there is an abundance of iron?" And further, he says, "Ynoney is wanted in Missouri, and so great is the demand for it that interest twice as high as the law allows is currently given for its use ; and even three times more than the legal rate is not an uncommon figure ;" and again, "how can these eight million dollars be spared from the state, when the want of money is three times greater than the law assumes that it should be ? This money cannot be spared. The want of it added to the present want would paralyze and perhaps crush the mercantile with every other order of business, and leave our railroad system like the roofless frame of an unfinished building.'"' Such mistaken ideas of the real situation is what prevents to a great extent, in the early days of a new community, even that degree of development of which the community is capable. A new community cannot develop all its resources at once. High interest was paid in Missouri at this time because ' The statement made by the Western Journal and Civilian that the several rail- ways aided by the state amounted in all to 1200 miles of road is wide of the mark about 100 miles; and therefore its estimate of nine million dollars for iron is too large. — Western Journal and Civilian, ix. p. 381. " Western Journal and Civilian, xi. (March 1854) p. 442. EXECUTION OF THE POLICY OF STATE AID QI of the great risk which always accompanies investments in a comparatively new state ; the writer is correct, however, in urg- ing the repeal of the usury law, limiting the rate of interest. The development of the resources of any state, young or old, is limited by the amount of capital obtainable for this purpose, and the amount of capital obtainable is limited by the capacity of the community to furnish the collateral demanded by those who lend money. Again, the quantity of money in a state has usually nothing whatever to do with the amount of industry being carried on in that state. If Missouri had bought the iio, 000 tons of iron needed, from Liverpool or Pittsburgh, she would have paid for them in the end with her agricultural and mineral products. The demand for railroad iron simply meant an additional demand for these products. So the question for Missouri was not one of the quantity of money, but of the form of investment for the capital then obtainable upon the resources of the state. If an investment in the manufacture of rails would have furnished rails cheaper than they could be bought at Liverpool or Pitts- burgh with the products of the farm and of mines, then would it have been best for the people of the state to engage in the iron industry. Yet even then the iron industry might soon have gone to the wall because of the discovery of iron mines of less refrac- tory ores. Indeed during the preceding year the senior editor of the journal which was at this time advocating iron manufac- tures admitted, with some spleen however, that the "iron beds of the uninhabited hyperborean region bordering on Lake Superior . . but recently made known to civilized men were already attracting more attention than those of Missouri." ' § 6. The fact that the cost of the various roads was so much greater than at first estimated resulted in an impression that the state funds were probably not being applied in the best of faith to the extension of the roads ; this impression had become gen- eral early in the year 1855. It was also quite generally felt that the roads were not making progress at a sufficient rate of speed. ' Western Journal and Civilian, ix. (September 1853) p. 381. 92 STATE AID TO RAILWAYS IN MISSOURI Consequently the General Assembly passed a resolution March 5, 1855, to investigate the "work and management" of all those companies to which the state had extended aid. The work of the committee appointed under this resolution was very thorough; it undertook "to scrutinize closely the acts of those entrusted with the administration of the affairs of the railroad companies for the purpose of ascertainiug whether abuses had grown up, and whether the state and the people had been justly dealt with in their management ; whether errors had been committed, and if so, by whom and to what extent."' The railway companies did not resent the investigation. The Pacific Railroad at this time engaged by far the largest amount of attention. "Because of the greater magnitude of its work and of the much larger expenditure by it than any other, in addition to other causes," it had been regarded by many with more suspicion than the others.'' Although the location of the road from St. Louis to Jefferson City had been the cause of much dissatisfaction, the investigating committee were convinced that the board of directors, in deciding upon the route selected, were influenced "only by proper motives." The chief matter of con- cern to the people was whether or not the company had not paid exorbitant prices "to the contractors for work to be by them sub- let at greatly reduced prices, the difference going to enrich them and to impoverish the company." ^ From the " History of Con- tracts "■• on the first and second divisions of the road as given in the report of the committee, and stated to have been taken from the books of the company, it appears that exorbitant prices were not paid to contractors. The first division of thirty-seven miles was divided for purposes of construction into twenty-eight sections, and each section was let to a separate contractor. In many of these cases the contractors became embarrassed and the company had to assume the payment of workmen in order to insure the completion of the ' See Report of the Committee, Senate Adjourned Session, iS^s, Appendix, pp. 3-1 23. "^ Senate Journal, Adjourned Session, J 83s, Appendix, p. 5. ^ Ibid., p. 16. "Ibid., pp. 17-22. EXECUTION OF THE POLICY OF STATE AID 93 work. "The contracts on the first division were let when labor was cheap," and when contractors had had "no expe- rience .... in doing work in Missouri." Labor increased in price during the period of construction of this division "from seventy-five cents to one dollar and twenty-five cents per day. A great deal of sickness prevailed upon the line most of the time. The cholera made its appearance nearly every year on almost every section. Provisions of all kinds rose to very high prices. Material was found more difficult of excava- tion than any one could have supposed. All of these diffi- culties combined increased the cost much over original estimates." Although the work upon the second division, from Franklin to Jefferson City was let in larger contracts than that upon the first division, it was difficult to get labor at such prices as would enable the contractors to do the work. The profits of the con- tractors were "very small — inmost cases absolutely nothing; in a few instances, 8 or lo per cent, may have been made." In the construction of the second division there was a repetition of the troubles experienced on the first, "among the most serious of which was that of cholera." Many deaths "occurred each season from this cause, which of course delayed the work. This coupled with the want of ready means greatly increased the cost of the work. At times indeed the work was nearly stopped on this account. The iron for the first division, 4000 tons, cost, delivered at St. Louis, $4^, per ton. For the second division, the 8800 tons cost delivered upon the line about $75 per ton; all was English iron excepting some 320 tons from Wheeling." In addition to the increased cost of labor and materials, there was the further burden of the greater amount of interest on state bonds to be paid. A greater proportion of this interest than was expected had to be paid out of the capital instead of out of the earnings of the road because of the delay in the completion of the work. The additional cost of larger amounts of machinery and rolling stock found necessary for the use of the road must also be added. Another element to be considered is that of the skill or lack of skill in the supervision of the construction. The work g4 STATE AID TO RAILWAYS IN MISSOURI on the Pacific Railroad had been managed by persons "who, however qualified for the work and faithful in their discharge of it, were operating in a new fiicld under novel circumstances, [and] ignorant necessarily of the material to be dealt with in the work of construction." Taking all of these facts into consideration, the committee were "constrained to think" that, though the result would "still show a large, perhaps a too greatly increased cost," the reasons for the increase would be apparent; and that therefore the necessity of accounting for it by "the alternative of wasteful expenditure"' would be obviated. The North Missouri Railroad Company was also exonerated by the investigating committee. Althoygh the first division of this road had cost about one-third more than at first estimated, the investigations of the committee satisfied them that all the affairs of the company had been "conducted faithfully, skillfully, and systematically."" The remaining companies, the Hannibal and St. Joseph, and the St. Louis and Iron Mountain, it will be remembered, had not up to this time completed very much work ; at all events, they had not completed an amount sufficient to furnish the basis for a detailed criticism. The most general cause, possibly, for a greatly increased cost of the roads arose out of the constant and urgent demands for funds. The securities of the companies to a great extent had to be given to contractors at a heavy discount. Means had to be secured. The railway builders in Missouri found out that in railway building at least "industry is limited by capital." Since all of the companies were, to a greater or less extent, limited in the amount of their ready funds, it became necessary, as the only way of securing the completion of their roads within any reason- able time, to call in the aid of those whose means or credit would enable them to accept in payment the securities the companies could give to them. It is thus seen that the means which could be treated as ready cash in the prosecution of the work could be obtained only by granting liberal discounts. ^ There were also ^ Senate Journal, Adjourned Session, 1855, Appendix, pp. 26-27. ''Ibid., p. 64. ^3id., p. 114. EXECUTION OF THE POLICY OF STATE AID 95 certain smaller items, by which unexpected expenses had been incurred. On the general subject of salaries of the officers of the companies, however, the committee found "nothing to con- demn." ' The large amounts paid out as engineering expenses, which had been the cause of more or less criticism, the commit- tee likewise justified ; and it properly added that just in propor- tion as the preliminary and subsequent surveys are elaborate and thorough is the final location likely to be the best. The sums paid for land damages were large and generally in excess of the estimates. For this, however, there seemed to be no remedy except in cases where the companies were able " to procure a relinquishment before actual location." ^ Regarding the matter of profits and contracts, it has already been seen, from the records of the companies, that the contractors did not make enormous profits. The final conviction of the investigating committee was, however, that the contractors did make large profits. They regarded the "mode of constructing railroads " which then prevailed "with all the companies" in the state, — that is, "the plan of making large contracts with individuals and firms," — not the best, and assigned as a reason that " probably the average profits of large contractors did not fall below 1 5 or 20 per cent, on the whole work." It was suggested that a part of this amount could be saved by letting the work in small contracts. It was the opinion of practical men, however, that the plan of large contracts which prevailed generally throughout the country was the best. The committee did not favor the idea of requiring the companies to publish the terms made to the main contractors, for the reason that the contractors would not be able " to sublet the work at such a price as would permit them to realize a just profit, or indeed any profit whatever."^ There was one element, however, which increased the cost of railroad construction in general and which the committee did not mention ; this was the tariff duty on rolled bar-iron. This duty has been reduced considerably by the act of 1846 but had not '^ Senate Journal, Adjourned Session, 1855, Appendix, p. III. ^ Ibid. ^ Ibid., p. 16. 96 STATE AID TO RAILWAYS IN MISSOURI been wholly wiped out. The duty left on iron rails by this act was 30 per cent, ad valorem;^ and the removal of that duty would have saved millions of dollars to the railroad industry between 1846 and 1861. The condition of many of the rail- roads in 1854 was, however, that of strained borrowers ; and this certainly was the case with the Pacific railway, the most advanced of those in Missouri. A trustworthy writer says in this connection that "were it certain that by abolishing the tariff duty, the price of rails would be reduced 30 per cent., still but few of the railroad companies of this country would be in a better condition than they are at present. They have already carried more bonds to market than can be sold ; and unless they resort to the common sense and safe method of building railroads by the application of their own money instead of relying solely upon the sale of bonds to purchase iron, they will be compelled to suspend operations until a more propitious season."'' The committee, in conclusion, notwithstanding the fact that ^4,580,- 000 of the nine million dollars already granted to the roads in the bonds of the state had been issued to them, and that at this time (November 1855) ^^^s than one hundred miles of railway were in operation, expressed the hope that, in some way by which the state could be made most secure, her aid might be given to complete the various roads now under construction. 3 The work which this investigating committee did was the kind of work which should have been done by a Board of Public Works, had one existed at the time. Certain acts granting aid to the Pacific and to the St. Louis and Iron Mountain roads provided for a Board of Public Works for these roads ; but the work of this Board did not extend to any of the other roads. ■• It must therefore be held that in the matter of looking after her inter- ests in the great railway undertaking into which she had now entered the state of Missouri signally failed in providing the necessary safeguards in the form of a competent Commission or ' Taussig, Tariff History of the United States, p. 125. ' Western Journal and Civilian, xii. (March 1854), p. 81. ^ Senate Journal, Adjourned Session, /8jj, Appendix, p. 123. "Ibid., pp. 161 and 163. EXECUTION OF THE POLICY OF STATE AID 97 Board of Public Works. An excellent system had been devised for securing annual reports to the General Assembly from the several companies ; but up to this time, nearly five years after the experiment of aiding railroads had been begun, the state had no central authority to which these various reports were to be submitted. The board which existed, recognizing plainly their limitations, stated that "to enable a Board of Public Works to discharge their duty properly to the state and other parties interested, there should be associated with them an intelligent [and] practical engineer ; and a board thus constituted should have their powers and duties clearly defined by the legislature." It was also the opinion of the board that " had this policy been adopted at the commencement of the system," some of the errors, which had been committed, would probably have been avoided and a considerable sum thereby saved to the state and to the stockholders.' The legislature did not, however, exercise a jealous care over the interests of the state. Already indeed the way was being paved for a new grant of aid larger than all the previous grants combined. §7. The House Committee on Internal Improvements, "see- ing that the railroads had not progressed as rapidly as had been expected," thought "some means must be devised to help them." The capital necessary for the construction of the roads " not being available in the state," a large portion of it had to be "borrowed from the accumulation of foreign wealth." And a "little examination showed the committee that the source of difficulty in borrowing capital was in the lien held by the state on the different roads," a lien which "necessarily retarded the negotiations of loans abroad."'' Therefore the committee recom- mended that the "priority of the lien of the state should be on the private stock and not on the road itself, that the road itself so fast as built should be used as a credit on which to borrow money from abroad ;"= and a bill was presented to the legis- ^ Senate Journal, Adjourned Sessioti, /.Jjj, Appendix, p. 161. '^See Majority and Minority Report, House Journal, 1855, Appendix, p. 391. gS STATE AID TO RAILWAYS IN MISSOURI lature embodying these suggestions. But the priority of the state's lien was not set aside at this session of the legislature. There is seen here, however, the genesis of the idea, that a second lien was good enough for the state — the one party which so far had been an efiScient source of help. It is the same form of proceeding that prevailed later but on a much greater scale in connection with our transcontinental Pacific railways. Analyzed as a borrowing transaction, the securing of a loan by means of the stock of a company is an attempt to make one credit suffice for two debits, or, in the form suggested by the internal improvement committee of the Missouri legislature, it is an attempt to make one liability serve as a resource, against which another liability may be incurred. The private stock of the company was already a liability. To use this as the basis for securing the state bonds, another liability, was to attempt to turn one liability into a resource. It is an attempt to juggle at book- keeping. The debits here represent amounts loaned by creditors, and such bookkeeping would necessarily result in leaving one of the creditors unrecompensed in the end. It has been seen thus far ( i ) that up to the close of the year 1855 a much smaller amount of work had been accomplished than the railway companies had expected to accomplish, and (2) that this amount had cost much more than was at first estimated, proving that the cost of the completed system would exceed by many millions the original estimates. However, the state now began to feel that her own destiny depended in a larger measure than ever upon the completion of the several railways. Indeed failure now would reflect upon the honor of the state, to say nothing of the financial loss. And to the end that success might finally come, it was publicly advocated that the state should sac- rifice the first lien held on the railways so that the companies might go into the market with their own first-mortgage bonds.' We have seen, however, that the companies were already bor- rowing to excess. The state therefore for the time being very wisely held to her decision not to release her first lien. ■ Western Journal and Civilian, xiv. (1855), p. 297. EXECUTION OF THE POLICY OF STATE AID 99 § 8. Although appeals in the form of memorials to the legis- lature were not at this time made by the several companies, they were all very solicitous of obtaining whatever aid the state might grant. The general feeling throughout the state seems to have been that more help should be given to the railways ; and this feeling led to a further grant of bonds. In this, the second period of grants, the climax of the aiding policy was reached. The legislation of the year 1855 bound the state for an amount larger than the total of all the previous grants, the sum of bonds granted and guaranteed, amounting to eleven million dollars. Most of this bounty was the result of one act, December 10, 1855.' The reasons for this act as given in a preamble were, (i) that the roads might be completed as soon as possible and (2) that the first lien of the state prevented the companies from negotiating loans on their own account. It was also provided in the early part of the year that all bonds could be sold at their " real market value." That the state had very great confidence in the success of the enterprises is also further shown in the act of December 10, by its changing the proportion of aid granted to the amount of private funds expended. The former policy of granting one dollar of aid for one dollar of private funds spent was changed to that of granting two dollars of aid for one of private funds spent. The interest relief act of December 7, 1855, which established a fund" for the payment of interest for the companies in case any of them should default, is indicative of the confidence of the state in the ultimate success of her plan ; but on the other hand, it is also indicative of a lack of confidence on her part in the immediate success of the companies. In addition to the almost excessive confidence exhibited in the legislation of 1855 there was also exhibited in more than one instance a certain lack of business sense. When a state enters into industrial undertakings it must exercise the same busi- ^ Compilation of the Laws in Reference to such Railroads as have received aid from the State, p. 73. "^This fund consisted of ^200, 000 appropriated at once (fund to be formally con- stituted July I, 1856) and $100,000 to be appropriated annually for a period of thirteen years. 100 STATE AID TO RAILWAYS IX MISSOURI ness sagacity and caution that are demanded of private indi- viduals and corporations. An act of March 3 reduced the subscription to the capital stock of the South West Branch necessary to secure an issue of the state bonds from $500,000 to $300,000.' An act^ earlier in the year dispensed with the $50,000 block feature, rendering it easier to secure the bonds of the state. Moreover the whole grant of bonds in December 1855 (ten million dollars) was made in the full knowledge of the report, already mentioned, of a special committee appointed to investigate the condition of the railroads of the state. In this report, 3 in addition to what has already been stated, the legisla- ture was informed that " the boards which have conducted the affairs of the various companies have been composed in a large part necessarily of those who have no experience in these mat- ters." Further evidence of weakness on the part of the state will be seen as we progress with our study. So far the weakness is that of indefiniteness of policy and lack of caution. The whole trend of the legislation of 1855, viewed from a business standpoint, was to diminish the security offered by the roads to the state for the bonds loaned to them. The act of December 10, 1855, granting and " guaranteeing " in all ten million dollars of aid to the several railroad companies, was truly a product of the times. Although it marked the cli- max of the experiment of aiding railway construction in Mis- souri, it was only the advance wave of the tide of speculation which in the country at large was to reach its flood level more than a year later. A glance at the appended table,'* showing the ■ Compilation of the Laws in Reference to such Railroads etc., p. 71. = Ibid., p. 69. '> Senate fournal, Adjourned Session, i8s5. Appendix, pp. 3-123. 4 Number of companies Year Total capital stock 17 Jan. 23 to Feb. 6, 1837 ^7,875, 000 2 1838-9 2,800,000 None 1840-1 None None 1842-3 1844-5 I 1846-7 2,000,000 Amount carried forward 12,675,000 EXECUTION OF THE POLICY OF STATE AID lOI sum total of the capital stock of the railroad companies incor- porated at the respective sessions of the legislature, from 1836 to 1861, will show clearly that the railroad activity of 1855, and the state grant of the same year, were but special cases of the unsound speculation then rife throughout the country, and which resulted in the panic of 1857. The most encouraging feature of the act of December 10, 1855, was that in which provision was made for a general board of public works ; this board was to consist of three members elected by the voters of the state, and holding office for four years. The board was to inquire into the construction and man- agement of the railways aided by the state and report to the governor "not less than once a year;" for this purpose they were to " have access to the books and papers " of the com- panies. The board was also permitted to call to their aid a com- petent engineer. A less encouraging feature of this act was the attempt made in it to provide for a sinking fund for the purpose of redeeming the bonds of the state issued to the various railway companies. The act provides that in addition to the provisions already made for the payment of the interest and the principal of the bonds of the state by the several companies, each company shall pay to the treasurer of the state " 1% per cent, in each year on each thirty-year bond, and 2}4 per cent, in each year on each twenty-year bond .... sold or hypotheca- ted." The first year's payment was to be made within sixty Number of companies Amount brought forward 6 8 S 7 12 19 4 S 14 I Year 1848-9 1850-I 1852-3 1854-5 -(adjourned session)i855 1856-7 -(adjourned session) 1857 1858-9 -(adjourned session)l859-6o 1860-1 Total capital stock $12,675,000 17,130,000 16,800,000 16,600,000 16,050,000 16,250,000 57,300,000 24,000,000 6,850,000 35,450,000 2,500,000 102 STATE AID TO RAILWAYS IN MISSOURI days after the sale or hypothecation of the bonds. The com- panies were also to pay to the treasurer of the state " not less than 10 per cent, per annum upon the net earnings " of their roads after completion. These sums were to be invested at not less than 7 per cent, to constitute a sinking fund for the pur- poses just stated. For the companies this provision simply meant that the state would charge them higher rates of interest for the loans advanced ; it meant that the thirty-year bonds would now cost the companies 7^ per cent., and the twenty- year bonds Sj4 per cent, annually, instead of 6 as heretofore. The untimeliness of such a requirement becomes obvious if one keeps in mind the financial condition of the companies at this period ; at this very time they were not able to provide private funds at the rate of one dollar for each dollar of aid granted by the state, and had accordingly been compelled to ask the state to grant two dollars of aid for each dollar of private funds spent. The ineffectiveness of the sinking-fund provision was demonstrated in less than a year after the passing of the act. § 9. The work of construction during the last months of I8S5 and the year 1856 was carried on against severe odds. The Pacific Railroad Company had a large floating debt when the act of December 1855 was passed ; consequently the greater part of that grant was used in liquidating this debt.' The bonds disposed of for this purpose, gi, 695, 000, were sold at a discount of from 14 to 16^ per cent.; so that the shrinkage on the whole was $253,826.= Of the g6oo,000 of " land " bonds which the company issued July i, 1856, and secured by a mortgage on the 126,000 acres of its land, only a few could be sold because of the "condition of the money market."' November i, 1855, the hastily constructed bridge over the Gasconade River succumbed under the weight of a heavy-laden excursion train ; thirty-one persons were killed and a heavy financial loss was sustained by the company.3 Although, by means of the receipts ' Jlouse Journal, i8j6~7. Appendix, p. 394. ■' Ibid., p. 282. ^ Senate Journal, 186^, Appendix, p. 876. EXECUTION OF THE POLICY OF STATE AID IO3 just mentioned, and some small receipts from other sources, the company had been able to put the road in good running order as far as opened, supplying the necessary rolling stock and main- taining its credit, it was compelled to confine its advanced work to the first forty miles west of Jefferson City. The company appealed strongly for more aid, alleging that the earnings of the road when opened to Warrensburg (Johnson county), "would pay a good interest on the expenditures, [and] protect the state against loss." The company asked that the remaining 1.3 million dollarsof the grant of December 10, 1855, be issued upon terms less rigid than those of the act granting it, and that two million dollars additional in the bonds of the state be granted.' Of the five million dollars estimated as necessary for the completion of the road the company had now only the 1.3 mil- lion dollars in the bonds of the state already granted (which could not be drawn until half of that amount was spent by the company), ^650, 000 in subscriptions west of Jefferson City, and its own "land" bonds, which could not be sold.'' Such was, the financial condition of the most advanced road in the state at the close of 1856. On the South West Branch the work of construction had been carried forward by the contractors, even though the com- pany could not raise the funds to pay them.s No bonds of the company had as yet been sold. Capitalists would not purchase them because the " only security for the bonds was the mortgage on the road and the lands belonging to it; the road had yet to be built and the failure to build the road forfeited the title to the land." So the risk was "too great" for buyers of bonds ; ^ and the company could see no relief except in further help from the state. The Hannibal and St. Joseph Railroad Company, although having done but little as yet in the matter of construction, had succeeded in raising its available and prospective resources to an amount which assured the "speedy completion of the road ^ House Journal, 1856-J, Appendix, p. 395. ''Ibid., p. 397. ^Ibid., p. 398. ••Ibid., p. 399. 104 STATE AID TO RAILWAYS IN MISSOURI beyond any probable contingency." ' The state's grants to this company, in all, three million dollars, had been sold; private sub- scriptions had been paid to the amount of ;gi, 393,800; and the mortgage bonds of the company to the extent of four million dollars had been negotiated. This would make the whole resources of the company 88,393,800.^ Of course large deduc- tions must be made from this amount for discounts. 3 The first division of twenty-five miles west from Hannibal was completed and the work of laying the track on the second division was begun at the close of 1856. The first division east from St. Joseph was nearly completed and the grading was in a "good state of progress on all the interior divisions." Iron rails and locomotives were now being delivered at both ends of the road.* On the St. Louis and Iron Mountain the work of construction had progressed much more rapidly than in the three years preceding. Although only twelve miles of track south from St. Louis were now laid, the company hoped to have the entire road to Pilot Knob ready for the cars during the summer of 1857. To do this, however, the company felt compelled to ask further help from the state to the extent of $970,000. The company was very hopeful of a large business from the region of Pilot Knob and Iron Mountain, alleging that the freight alone to be furnished by the great iron and mineral beds in that region would pay a good dividend upon the cost of the road and secure the prompt payment of the interest on the bonds of the state. The company thought, however, that in case the road should be completed to the Arkansas state line a further sum of 2.3 million dollars in the bonds of the state would be necessary .s The North Missouri Railroad Company was pressing forward the work of construction on the second division (146 miles), between St. Charles and Macon City, their point of junction with the Hannibal and St. Joseph road. Only one million dollars, of the grant of December 10,1855, was applicable to the construc- ' House Journal, 18^6-7, Appendix, p. 404. '/itii., pp. 310 and 411. 3 See Tables, Appendix i. ^ Hmise Journal, 1836-7, Appendix, p. 413. ^ Iliid., pp. 415-422. EXECUTION OF THE POLICY OF STATE AID 10$ tion of that part of the road north of the Hannibal and St. Joseph, and the company thought they would need more aid from the state to complete that portion.' § 10. It is thus very plain that at the close of 1856 all of the companies in the state, with the single exception of the Hannibal and St. Joseph, were sorely pressed for funds. Further evidence of this is seen in the fact that none of the companies, except the Hannibal and St. Joseph, had complied with the sinking-fund requirement of the law of December 10, 1855.' Such was the conditions of the companies ; and yet the people of the state were very anxious that the roads be completed at an early date. Taking these facts in connection with the further fact that a spirit of speculation was general throughout the country, we have the causes which led March 3, 1857 to the passage of the fourth and last important act granting aid to the railroad companies. ^ This act was passed notwithstanding the fact that the state was now bound to the extent of $19,250,000,'' only one-half of which had been issued to the companies, and that less than 300 miles of track had been laid. 5 Furthermore, this act was passed in •■ House Jouynal, 1836-7, Appendix, p. 361. -Ibid., p. 253. 3 Comi>ilation of the Laws in Reference to such Railroads etc., p. 89. 4 Authorized Issued Balanced To the Pacific R. R. and S. W. B. 89,000,000 84,900,000 84,100,000 " Hannibal and St. Joseph 3,000,000 1,500,000 1,500,000 " North Missouri 4,000,000 2,240,000 1,760,000 " St. L. and Iron Mountain 3,000,000 993,000 2,007,000 " Cairo and Fulton 250,000 250,000 19,250,000 9,633,000 9,617,000 See Auditor's Report, October i, 1 [856, Senate Journal, 1856-7, Appendix, p. 30. _ Miles of track laid November 1857 January 1859 On the Hannibal and St. Joseph 64 170 " North Missouri 75 168.75 " St. L. and I. M. 46 86.50 " Pacific 132 163.00 " Pacific (S. W. B.) 19.00 " Cairo and Fulton 7.00 Total 317 614.25 I06 STATE AID TO RAILWAYS IN MISSOURI opposition to the recommendations of the minority of the Internal Improvement committees of the House and Senate, who objected to the present plan of granting aid and recommended that the state ought not to depart from the original terms and con- ditions of granting aid — that is, one dollar of aid for one of private funds spent.' This act granted in all the further sum of 5.7 million dollars, = to six companies ; in it the plan of granting two dollars of aid for one dollar of private funds spent — a plan which had not been followed since December 10, 1855 — '^^s, with certain exceptions, continued. Exceptions were made in favor of the Pacific, the South West Branch, the St. Louis and Iron Mountain, and the North Missouri Railroads. Of the 1.3 million dollars, yet due to the Pacific by virtue of the act of December 1855, the company was allowed to draw one million dollars on proof of having expended $500, 000 west of Jefferson City, although a part of this expenditure had come from the proceeds of state bonds. The 1.5 million dollars granted by this act of the North Missouri Company for the purpose of completing their road to the junction with the Hannibal and St. Joseph was to be granted in blocks of g200,ooo each, a block to be made over as often as the company spent, not from private funds but from all funds, the sum of ^200, 000 in the construction of their road. As the state bonds were now selling at about 15 per cent, discount the company would be under obligations to raise only about i 5 per cent, of their expenditures in order to draw the bonds of the state. Similar privileges were granted the St. Louis and Iron Mountain concerning the expenditures necessary to extend the road to Pilot Knob. South of Pilot Knob, however, the addi- ' House Journal, i8j6-y, Appendix, p. 360. = To the Pacific |!l, 000,000 " Soutii West Brancli 1,500,000 ■ " North Missouri 1,500,000 St. L. and I. M. 600,000 Platte County 700,000 " Cairo and Fulton 400,000 $5,700,000 EXECUTION OF THE POLICY OF STATE AID 10/ tional grant of S6oo,000 was to be issued only upon proof of the expenditure of half that amount in the private funds of the company. Furthermore the governor was to issue bonds to the Pacific (including the South West Branch) , the St. Louis and Iron Mountain and the North Missouri Companies, to any amount within the limit of the various grants, if the companies deemed it desirable in order "to take advantage of a favorable money market." At this time the Platte County a-nd the Cairo and Fulton Railroad Companies received their first and only grants of aid, the former $700,000 and the latter $400,000. The terms of these grants were "two dollars of aid to one of private funds spent." In addition to the concessions made to most of the companies in the matter of drawing the bonds of the state, this act contains further evidence that the finances of the companies were inade- quate to their various needs. The sinking fund provision of the act of December 10, 1855 was suspended till the first of January 1859. The act also provided that in case any of the companies failed to pay any part of the interest or principal of any of the bonds granted to them they could not receive any further issue of bonds. Taking into consideration the exceptions made to the policy of granting two dollars of aid for one of private funds spent, the low price of the state bonds, the slow progress of the com- panies, and the greatly increased cost of the roads, the act of March 3, 1857 can be regarded only as a phenomenon of the speculative intoxication of the times. § II. All industrial enterprises in Missouri of course suffered like those of the country in general in 1857. Very little progress was made during this year on any of the railways which had recently been so greatly favored by the state. Up to November of this year only 3 1 7 miles of track were laid,' making only a little more than 100 miles for this year. The bonds of the state had fallen rapidly during the year; in March they sold in New York 'See above, note (5) p. 105. I08 STATE AID TO RAILWAYS IN MISSOURI at 83, and before the close of the year they sold as low as 65.' During the year ending November 1857, $6,347,000 in bonds had been issued to the companies and most of them had been disposed of at these ruinous rates. ^ Such was of course the legit- imate result of the policy followed by the state in granting aid when the railroad companies possessed so little private capital to serve as security. However, in Missouri at this time, it was thought that one of the chief causes of the crisis of 1857 was the unsound banking system of the country. But in this connec- tion it should also be observed that Missouri was to some extent responsible for the existence of this system. § 12. So great was the effect of the revulsion of 1857 upon the railroad enterprises of the state and so keenly did the people of Missouri feel the deterioration of the credit of the state that the governor called an extra session of the legislature to meet in October. In the mind of the governor, three duties confronted this legislature : ( i) to take such judicious and decisive measures as would secure beyond all question the honor and credit of the state ; (2) to devise such means of assisting the railways as would enable the companies to secure what had been accomplished and ultimately to complete the roads ; and (3) to place such addi- tional guards upon the banking system as would confine it within legitimate limits and tend to expel from the state all depreciated paper. 3 The urgency of the situation was appreciated by all and in a short time an act was passed (November 19, 1857) restricting the issues of state bonds and making provisions for an interest fund by a light tax levy and by other means. At the beginning of this session (October 1857) there were yet "' The lowest rates at which bonds have been sold . . . are bg^ by the Iron Mountain Company, 67^ by the North Missouri Company, 65 by the Pacific, and 80 by the Cairo and Fulton." — Report of Board of Public Works, House Journal, Adjotirned Session, i8s7. Appendix, p. 3. ''See Auditor's Report, October I, 1856, Senate Journal 1836-7 ; Senate Journal /Sjd-j, Appendix, p. 30, and House Journal, Adjourned Session, 1837, Appendix, pp. 3 and 7. '^ House Journal, Adjourned Session, 1857, p. 7. EXECUTION OF THE POLICY OF STATE AID ICQ g8, 940, 000 in the bonds of the state to be issued to the railway companies." By the act of November 19, all further issues of bonds were suspended till March i, 1859, with the exception of g2, 776, 000;^ in case the bonds of the state rose to ninety cents on the dollar the governor might make further issues. The most drastic feature of the law of November 19 was that requiring the Board of Public Works to attend the monthly meetings of the directors of all the railroad companies which had received aid or were to receive aid from the state ; the board was also authorized to examine the ofificers of the com- panies under oath, and to send for persons and papers. However, in accordance with ancient practices the legislature could not help granting some favors. The Pacific Railroad Company had found the 7 per cent, bonds of the South West Branch, "guaranteed" [endorsed] by the state, very hard to dispose of. In accordance with the request of the company^ the legislature granted it the right to exchange all of the bonds heretofore guaranteed (4.5 million dollars)^ for the 6 per cent, bonds of the state called direct bonds. That many of the companies would soon default in the pay- ment of interest on the bonds granted was now almost a foregone conclusion. In his message the governor held that the levying of a tax to provide for the payment of the interest on the state bonds issued to the companies was absolutely indispensable to protect the credit of the state, no matter what might be the future policy of the state and the companies in the prosecution of their work.= Accordingly, for the purpose of augmenting the interest fund, a tax of one-tenth of i per cent, was levied on all ^ House Journal, Adjourned Session, /8j7, p. 3. " To the Pacific ^400,000 " South West Branch 200,000 " North Missouri 1,000,000 St. L. and I. M. 476,000 Platte County 700,000 $2,776,000 J House Journal, Adjourned Session, iSjy, Appendix, p. 7. ■'Ibid., p. 23. ^Ibid., p. 9. no STATE AID TO RAILWAYS IN MISSOURI property taxable by law ; the tax was to begin in 1859 and to be discontinued at the pleasure of the legislature after 1862. The interest fund was also to receive the difference of the i per cent, saved to the Pacific Railroad Company through the exchange of the "guaranteed" 7's of the company for the " direct " 6's of the state. And further, a commissioner was to be appointed to settle the claims to public lands falling to Missouri under the congressional act of March 3, 1857, and pay all receipts into the state interest fund. As a final safeguard, in case any of the companies defaulted in the January or July interest of 1858, or in the January interest of 1859, any and all moneys in the Treas- ury of the state, except the School Fund, the Road and Canal Fund, and the Internal Improvement Fund, were to be devoted to the payment of such interest ; and in case then of an insuf- ficiency of funds for this purpose, the state was to issue bonds to be called "Revenue bonds" of ;^I000 each, bearing not more than 10 per cent, interest, to an amount necessary to pay all arrearages in interest dues. Although adverse fortune awaited all the companies except one in the near future, the date was somewhat further removed than was generally suspected in November 1857. No company defaulted before January i, 1859, and two held out till July i, 1 86 1. During this period, moreover, no small amount of work was accomplished by the several companies. During the years immediately following 1857 there came the natural though only partial recovery of prices and the remaining bonds of the state were disposed of by the companies at from seventy-eight to ninety cents on the dollar.' § 1 3. The influence of better times is also seen in the fact that during the year 1858 the companies pushed the work of grading with more than usual vigor and laid more track than in all the years preceding. At the close of this year 614 miles of track had been laid, at the close of 1859, 715 miles, = The Hannibal '■House Journal, 1 8s S-Q, Appendix, pp. 158, igo, and 257. ^See below, p. 139. EXECUTION OF THE POLICY OF STATE AID I I I and St. Joseph Company on the 13th of February, 1859, com- pleted its road to the Missouri River. The North Missouri effected a junction with the Hannibal and St. Joseph early in the year, and before December the St. Louis and Iron Mountain had reached Pilot Knob. "The importance of opening in season for the spring business" lead the Hannibal and St. Joseph Company to lay the last sixty miles of track in "mud and frost and on a roadbed very imperfectly graded, with little or no ditching and without ballast." Notwithstanding the unsound character of the road "a very considerable traffic" began to pass over it at once. Although three of the railways aided were longer than the Hannibal and St. Joseph, none of them had yet completed so many miles. The reason for this rapid progress is very obvious. The work of construction was not begun on a scale too great for the funds on hand, and after it was begun the main effort for a time, between 1855 ^^'^ 1857, was directed to secur- ing additional funds. A dona ^a^^ subscription, 81,402,700, to the capital stock of the company at the beginning, which bore a greater proportion to the estimated cost of the road than was secured by any other company except the St. Louis and Iron Mountain, the first, second and third mortgage bonds on the lands of the company to the extent of eight million dollars, though sold at very heavy discounts, and the state grant of three million dollars, though also sold at a heavy discount, furnished means for the construction and equipment of the line.' All of the state bonds and four million dollars of the first-mortgage bonds on the lands of the company, were disposed of, we have seen, in 1856; the remainder were disposed of before November 1857.^ These funds enabled the company to carry on the work of con- struction vigorously after it was begun. Up to September 1857, as has been seen, the company had only sixty-four miles of track laid ; much grading was, however, under headway at this time. And about eighteen months later, February 1859, by the hasty '^ Senate Journal, i8bo-i. Appendix, pp. 337 and 387. '^ House Journal, {S56-7, Appendix, p. 311 ; also Senate Jour>iiil, Adjourned Ses- sion, i8s7. Appendix, p. 40. 112 STATE AID TO RAILWAYS IN MISSOURI construction of the last sixty miles, the road was completed to its western terminus, the length of the whole line being 206.8 miles. The total gross cost of the road was gi 1,974,750, or ^57, 905 per mile ; however, the whole expenditure for interest, discount, exchange and commissions, amounted to 1^5,295,072, making the cash cost of the road ^25,624 per mile.' The completion of the North Missouri Railroad to the Junc- tion with the Hannibal and St. Joseph was regarded by the com- pany as insuring the success of the road ; whether or not this idea was welL founded will be seen later. The road had cost, including interest and discount, $5,866,677, or $34,700 per mile. Deducting the $1,280,075 of discounts and interest, the net cash cost of the road becomes $27,120 per mile.^ The only other road that had reached the point from which it expected to secure a trafific sufificient to pay interest and divi- dends was the St. Louis and Iron Mountain. The total cost of this road was $5,200,058, or $60,110 per mile; if the interest and discount charges of $1,154,313 be deducted, the net cash cost of the road becomes $45,600 permile.3 The remaining companies were progressing very slowly at the close of 1859 as compared with what they had hoped to accomplish. The Pacific company had extended its road to Syracuse, 168 miles from St. Louis, a distance just equal to the length of the North Missouri as far as completed. The cost of the Pacific road was $7,356,159, or $43,786 per mile, "exclusive of rolling stock and general expenses, interest, exchange and discounts."' On the remaining roads, the South West Branch, the Cairo and Fulton, and the Platte County, so little had been accomplished, that it is impossible to say anything definite con- cerning the actual or prospective cost of these roads. The grading and masonry on the South West Branch was completed for 61 miles. To assist in the construction of the Cairo and Fulton, several counties along the line had subscribed in all 514,500 acres of land, estimated at one dollar per acre.' And ^ Senate Journal, 1860-1, Appendix, pp. 337 and 389. '^ House Journal, fSjS-g, Appendix. ^/did., p. 239. '/did., /8sg~6o, p. 48. ^Ibid., 1858-g, pp. 11 and 199. EXECUTION OF THE POLICY OF STATE AID II 3 the government lands falling to this company by virtue of the act of February 9, 1853, already mentioned,' were now definitely located, and amounted to 57,007 acres.^ The Platte County Railroad Company had just begun the work of construction. ^ § 14. The $5,894,000 of state aid, the issuing of which had been postponed by the act of November 19, 1857, fell due March I, 1859; in a short time it was issued to the companies with the exception of $1,150,000, due the North Missouri, $99,000 due the St. Louis and Iron Mountain, and $600,000 due the South West Branch.t The first two amounts were forfeited by the respective companies because of failing to pay their semi-annual interest dues, January i, 1859. §15. It has been mentioned that the act of December 7, 1855, creating a fund for the payment of interest on bonds in case any of the companies defaulted in such payments, was in itself proof, at that early date, that the people of the state were not confident of the final success of the companies. The act of November 17, 1857, suspending until March i, 1859, the issue of a large part of the excessive grant of December 10, 1855, for the purpose of protecting the credit of the state, was also direct evidence that confidence in the success of the railway enterprises was declining. Only about one year later, December, 1858, the legislature, fearing lest the spirit of speculation might get the upper hand and place burdens upon the state credit too great to be borne, proposed an amendment, which was later added to the constitution of the state, to the effect that "the public debt of the state created by the issue of bonds or other state securi- ties .... for the prosecution of internal improvements, or for any other purpose" .... except to repel invasion or to sup- press civil war, should "never exceed the sum of thirty millions of dollars. "5 During this session (1858-9) numerous attempts were made to grant further aid to several of the companies to 'See above p. 74. '^ Ibid., p. 14. * Ibid., 1S60-1, p. 29. ' House Journal, 1858-g, Appendix, p. 199. ^ Laws of Missouri, i8j8-g, p. 3. 114 STATE AID TO RAILWAYS IN MISSOURI the extent of the margin yet remaining under the amendment just proposed. None of these attempts, however, succeeded. All such measures were voted down by large majorities." This refusal of the legislature to grant aid was decidedly repugnant to Governor Stewart who gave himself the credit of "having originated the railroad system of the state." ^ Consequently early in i860 (January 16) the governor issued a proclamation convening the legislature in a special session. 3 At this session, however, the friends of the aiding policy met a most determined opposition in the majority of the internal improvement committee of the House. ■♦ Notwithstanding this opposition a bill was passed to aid several of the companies. But the governor, not- withstanding the fact that he was a stanch supporter of the aid- ing policy, felt compelled to veto this measure, because it left the "state without any control in the premises," and gave the railway companies unqualified power in the management of the railway enterprises, and because it released the lien which the state had, "for her own protection under all former laws pre- served. "= This was on the 29th of March and the legislature adjourned sine die on the following day without further consid- ering the bill.^ This was the last attempt in Missouri to grant aid to railway companies. We have seen already that two of the companies being aided by the state failed to meet their interest dues January i, 1859. Beginning with January i, i860, further failures of a similar nature are to be chronicled. Indeed, from this time on to the close of the notable month of March 1868, when the state re- leased her lien on the various roads for a mere pittance, the career of every company, except the Hannibal and St. Joseph, was unfortunate and through her connection with them the state was forced into a most unenviable position. ^ House and Senate Journals, Called Session, /S6o, pp. 27-33. ' House Journal, Called Session, 1S60, p. 146. ^ Senate Journal, Called Session, iS6o,\>. 3. * House and Senate Journals, rS6o, Appendix, pp. 27-33. ^ House Journal, Called Session, i8bo, p. 154. "Ibid., p. 158. CHAPTER IV. PROGRESS AND DRIFT OF THE AIDED RAILWAY ENTER- PRISES DURING THE WAR. 1860-1866. § I. There is no doubt that the opposition of the House Com- mittee on Internal Improvements to the giving of further aid dis- played'at the called session of i860, as well as the failure of both Houses to reconsider the bill vetoed by the governor, March 29, i860, was in a large measure due to the fact that the majority of the companies aided had already defaulted in their interest pay- ments. Following the default of the North Missouri Company and of the St. Louis and Iron Mountain Company, January i, 1859, the Pacific, and the Cairo and Fulton Railroads defaulted January i, i860. § 2. Although it was at first believed that the default of all these companies was temporary,' the generally depressed con- dition of trade, due largely to the disturbed state of political affairs which gave no evidence of early settlement, did not give any real ground for such an opinion. Notwithstanding the fact that the financial market had experienced a rebound since 1857, the bonds of the state rising from 65 to 90 cents on the dollar, the price now fell again, some of the bonds selling as low as 48 cents.'' The banks of Missouri, compelled in 1857 to suspend specie pay- ments, had to resort again (November 1859) to the same extraor- dinary means of defense. 3 Although the sentiment of the people was in favor of a speedy completion of the defaulting railways in order that their earnings might enable them to meet interest charges, it was clearly perceived that to throw more bonds on 'Governor's Message, House Journal, 18^8-q, p. 18. " House Journal, J 862-3, Appendix, p. 67. 'Governor's Message, Senate Journal, j 860-1, p. 36. "5 Il6 STATE AID TO RAILWAYS IN MISSOURI the market at this time (i860) would be only to increase the future burdens of the state. Such being the general financial and political condition of the country, the inevitable result seemed to be that the remaining companies would default at an early date ; consequently there was no occasion for surprise when the South West Branch and the Platte County Railroads failed to meet their interest dues, July i, 186 1. Only one com- pany, the Hannibal and St. Joseph, weathered all the storms between i860 and 1865, proving able at all times to meet its interest dues. § 3. It is of course true that the war and the depressed money market operated greatly to the disadvantage of these companies ; but, with the exception of the crisis of 1857 and that general feeling of uneasiness and distrust, which always precedes a great social eruption like the Civil War, these causes did not begin to operate until most of the companies had already defaulted. The real cause of their default was lack of traffic ; they could not earn enough to pay operating expenses and inter- est charges, to say nothing of dividends. A few details regard- ing the traffic at this time as shown by the earnings of the roads will demonstrate very clearly that this was the main cause of the default, and will indicate to some extent what were the possi- bilities of the future. At the close of the year 1862 the business of the Pacific Railroad was reported to be " fair." During the preceding four years the total earnings of the road had been $2,682,000, and the net earnings, $1,188,946.' And although the annual net earnings of the road had increased during these four years from $259,611 to $365,319, the amount was not yet sufficient to meet the interest dues of the company which on the state bonds Gross eaming^s ' 1859 - ^ ^630,839 i860 648,113 1861 - 683,749 1862 719,298 — See House Journal, 1863-3, Appendix, p. 66. Total Net expenses earnings 8371,227 8259,612 361,832 286,281 406,015 277,734 353,97s 365,320 PROGRESS AND DRIFT OF AIDED RAILWAY ENTERPRISES 11/ alone were $420,000 annually. Considering the rate of increase in the net earnings, this company was in a measure justified in believing that the road when completed would "pay fair divi- dends."^ The net earnings of the North Missouri for the year ending April i, 1862, were $178,000, and for the first seven months of 1863, $66,000, but its annual interest dues to the state were $261,000. Indeed, although the railway presidents of the state were usually quite optimistic concerning the future earnings of the railways, the most favorable estimate which the president of the North Missouri could make at this time was that the net earnings of this road "within one year's time after the close of the war .... would reach $200,000 . . . which would enable the company to come within $61,000 of paying the interest due to the state." ^ On the St. Louis and Iron Mountain road there was an increase of traffic between i860 and 1863, but the increase in expenses went on at almost as rapid a rate as did the increase in earnings. Moreover, the president of the company stated that it was not probable that these expenses would be diminished in the future ; on the other hand they would most likely increase because of the " natural decay " of bridges and of the "worn condition" of the rails, both of which would "soon require large outlays for renewals. "3 The South West Branch Company, between i860 and 1863, made some expenditures in construc- tion, repairs and in purchase of rolling stock. But the road was earning practically nothing and could, therefore, pay nothing on its interest account. 1 The Platte County Railroad Company with only 51 J^ miles of road completed, was earning little above expenses. Notwithstanding the fact that the greater part of this road was south of St. Joseph connecting St. Joseph and Atchison (Kansas) and the assurance of the president of the company in April 1 860 that the business of this part during the limited period since it had been opened demonstrated that its net earnings would alone be "more than sufficient to pay the interest upon the entire appro- priation of state credit," 5 the company defaulted within about ^ House Journal, 1862-3, Appendix, p. 67. ^/6ii/.,p. 198. ^liid., p. 64. 3/^2a'., p. 215. i/iid., i8bo-r, p. 360. Il8 STATE AID TO RAILWAYS IN MISSOURI one year from this time.' To make this a paying road it would have to be extended to Kansas City ; but there was much work yet to be done before reaching that point. The Hannibal and St. Joseph which, with the exception of a short period in January 1862, had always met its interest charges,' was able as usual to report a far more favorable condition of affairs. The gross earnings of the road in i860 were more than one million dollars.3 This one line, the Hannibal and St. Joseph, which we have seen to be the most prosperous of all, was the only line completed ; and we may reason from this that had the other roads been completed their net earnings would have been more nearly equal to the demands made upon them. The Pacific Company had completed about three-fourths of its line, and was second in the scale of prosperity. The lines of the remaining roads were not half completed, therefore the earning capacity of these roads was greatly limited. A further reason for lack of funds on the part of some of the companies was the unproductiveness of the land grants. At the time of its default the Pacific Railroad Company had disposed of only about half (78,000 acres) of its grant for gi30,ooo.'' Of the 1,040,000 acres belonging to the South West Branch, 5 only 7000 had been sold, the price averaging about S2.50 per acre. The Cairo and Fulton had hypoth- ecated a large amount of bonds upon its lands,* but the proceeds of the bonds were to be used in liquidating debts already contracted in the construction of less than one-half of the road. The proceeds from land actually sold by the com- pany amounted practically to nothing. The land sales of only one road, the Hannibal and St. Joseph, had amounted to enough to be of real service in construction or in payment of interest. ' Senate Journal, 1 860-1, Appendix, p. 360 ; also House Journal, 1862-3, Appendix, p. 319. ■' House Journal, 1862-3, Appendix, p. 312. 3 /«(/., p. 313. * Senate Journal, /<5'6o-7, Appendix, p. 399. ^Ibid., p. 451. '' Senate Journal, 1862-3, Appendix, p. 349. PROGRESS AND DRIFT OF AIDED RAILWAY ENTERPRISES IIQ These sales amounted to 33,000 acres, at an average of nearly $1 1 per acre.' The amount of interest due the state depended of course upon the amount of aid granted. The state in making the grants being, as has been seen, very confident of the ultimate success of the companies, had shown ,so many favors to them that they came to depend too much upon the state. If the state had demanded a larger expenditure of private funds, the earn- ings of the roads would of course at all times have borne a much greater relative proportion to the interest amounts due to the state. Original number of Acres Average price County acres granted sold per acre " Marion. i,757-o8 85- $21. 17 Lewis 769.19 80. 5.00 Ralls 4,822.20 1,380.14 8-43 Pike 1,525-45 40. 7.00 Monroe 9,217.56 200. 14.00 Shelby 27,025.06 251. 8.96 Knox 960.00 Macon 117,789.45 4,091.18 8.18 Randolph 6,230.60 302.90 7.16 Chariton 28,062.77 240. 10.56 Lynn 72,340.00 5,136.84 9.20 Grundy 9,078.86 226.74 11.25 Livingstone 75,291-53 2,809.71 10.21 Carroll 22,008.98 282.75 7.29 Caldwell 83,271-85 5,744-69 12.91 Daviess 38,316.28 7,965-74 11-43 De Kalb 54,035-38 1,649.22 10.23 Clinton 43,759-48 1,368.99 13.61 Andrew 3,204-15 882.20 11.03 Buchanan 1,853-55 720. 9.50 601,329.39 33,177-10 j!io.6i Inside six-mile limit 229,603.62 18,664.78 II. 91 Outside " " 371,725-77 14,522.32 8.93 Description : Pre-emption sales 1,889.64 $ 2.50 Cash sales other than pre-emption 10,322.60 12.16 Short credit sales 1,461-53 12.10 Long credit sales 19,513-33 10.44 {Senate Journal, 1860-1 , Appendix, p. 399). 120 STATE AID TO RAILWAYS IN MISSOURI • § 4. In Missouri, as elsewhere, inexperience in construction was one great cause of the increased cost, and ultimately, there- fore, of the failure of many of the railway enterprises. The report of the committee of 1855 upon this point has been referred to.' In 1859 the Board of Public Works stated that "much of the embarrassment which now surrounds the system is no doubt attributable to inexperience and erroneous ideas in regard to locations and contracts. A large amount of money has been absorbed in these errors, probably a sum sufficient to open several of the roads to a point where they are intended to terminate." ° By comparing the cost per mile in Missouri with that in other states for the same period it will appear that inex- perience or some other cause resulted in a greatly increased cost in Missouri. There are, however, many factors to be taken into account in such a comparison. In the first place the topography of the states compared must not be overlooked. Moreover, in the West from 1850 to i860, labor of a given grade invariably cost more than it did in the East. And again, contracts might be in force at a given time upon a given road so that a rise or fall in the cost of material or labor would not upon this road appear in a greater or less cost per mile ; the contractor might reap all the gain or bear all the loss, as the case might be. At all events, from the tables 3 given, it appears that Missouri compares unfavorably with all other western states. And • See above, p. 92. ''House Journal, iSjS-Q, Appendix, p. 148. 3 The cost o£ the roads built in the following states between 1850 and i860 was : State Maine Massachusetts New York Pennsylvania Alabama Georgia Ohio Illinois Iowa Missouri — See Eighth Census of the United States, Miles Cost per mile 472 *3S>ooo 1274 47,000 2701 48,000 2542 56,000 743 22,000 1404 20,000 2299 37,000 2867 36,000 679 28,000 817 51,000 'ates, " Miscellaneous,'' p. 331, .PROGRESS AND DRIFT OF AIDED RAILWAY ENTERPRISES 121 although the surface of the state south of the Missouri River, the section in which four of the roads were situated, resembled that of the eastern states in unevenness, yet this should not have increased the cost of the whole system so as to make it greater than that of roads in New York and Massachusetts. The average cost of 11,212 miles of railway, built in nine inte- rior states between 1850 and i860, was ^37,900. From this it appears that the ^50,000 average cost in Missouri was necessarily far above the average in other states. Even if the total sum (?3, 108,723)' lost in discounts on the state's bonds be deducted this would not bring the average cost of the Missouri railways under §46,000 per mile. Now it may not be exactly fair to take these figures too literally and say that during the decade between 1850 and i860 the railways built in Missouri cost exactly S 12,000 per mile more than the railways built in the surrounding states, yet it is very evident that they cost a great deal more than in the neighboring states, and a great deal more than they should have cost. The question as to a culpable misuse of the state funds granted to the companies was raised as early as 1855. And although the investigating committee as already seen made that year a very thorough investigation,^ reviewing every phase of the situation of the railways of the state, it found nothing to warrant the opinion that the affairs of the several companies " had been Railroads built in Missouri between 1850 and i860 and tlieir cost per mile : Road Miles Cost per mile Pacific Railroad 189 ?53.7oo Hannibal and St. Joseph 206 58,129 Cairo and Fulton 26 33.000 Platte County Road 44 30,000 South West Branch 77 56,833 North Missouri 168 41,000 St. Louis and Iron Mountain 86 62,000 Total 796 Average ^50,000 — See tables. Appendix i. Also, Eighth Census of the United States, "Miscellaneous," p. 331. ' See tables, Appendix i. 'See above, pp. 91-93. 122 STATE AID TO RAILWAYS IN MISSOURI unfaithfully administered or their funds improperly or wastefullj' expended." There is indeed little evidence of corruption in the management of the railway enterprises of the state before the war, yet there is evidence of ekceedingly loose management and of some extravagance. In May i860 the Board of Public Works recommended a suspension of further issues of bonds to the Platte County Railroad Company until it would make "a com- plete and satisfactory exposition of its financial and general management." ' At the close of the same year the Board was "forced to the conclusion that the law granting aid to the Platte County Railroad Company had not been complied with in draw- ing the bonds of the state." ^ Yet the expenditures of the com- pany at this time amounted to only gl, 445, 159,3 and this sum since it included but ^700, 000 of the state bonds would be at the rate of one dollar of private funds for every dollar of aid, a ratio in accordance with the special provision concerning this road contained in the act of March 3, 1857.'' At most, therefore, the only violation of law that could be charged against this company was that between May and December of i860 the company drew 8500,000 of its grant at a more rapid rate than was justified by law ; however, in December, the total expenditures, we have just seen, bore the required proportion to the amount of state bonds issued. On the other hand, the criticism made by the Board of Public Works against the Cairo and Fulton Company, that "a very large portion of the bonds" granted for the use of this company been drawn "in palpable violation of law," ^ was well founded. The total grant of state bonds, 8650,000, had been received and expended by the company, and yet the total expendi- tures of the company, exclusive of interest, discount, and the like, was only 8703,863.5 Consequently the company had not spent one dollar of private funds for every two dollars in state bonds received. The loosest management and the most patent waste of ^ Senate Journal, 1 860-1, Appendix, p. 355. 'Ibid., p. 336. '^ Ibid., p. 375. * Compilation of the Laws in Reference to such Railroads as have received Aid from the State, p. 94. ^ Senate Journal, i86o~j, Appendix, p. 334. PROGRESS AND DRIFT OF AIDED RAILWAY ENTERPRISES 1 23 funds took place in connection with the South West Branch. At the close of i860, $3,922,000 of direct and guaranteed bonds of the state had been received; deducting the discount, $653,272, the remainder $3,268,727, had been spent on the road, and yet the total expenditure of all funds amounted to only $3,900,450." There was no law to justify such a large issue of bonds where so small an amount of private funds had been raised. It is true that the law of March 3, 1857, provided that the governor could issue bonds in a greater proportion to private funds than two to one, if the companies deemed it advisable in order "to take advantage of a favorable money market."^ The later law of November 17, 1857,^ temporarily interrupted these provisions as far as the South West branch was concerned. This law provided that no more bonds should be issued to this company with the exception of $500,000 worth in case they could be sold at ninety cents on the dollar ; but this suspension expired by limitation, January i, 1859, and the law of March 3, 1857, was thereafter again in force. However, discounts to the extent of $653,272, on $3,922,000 does not indicate that a favorable money market had been found. In fact the exact state of the market is to be seen in the fact that the $1,087,000 in the bonds of the company guaranteed by the state and sold between November 21, i860, and November 28, 1861, brought only $688,771, or an average of about sixty-four cents on the dollar. "t In both of the laws just referred to it was provided that in case of a default of the com- pany no more bonds should be issued. On December 29, i860, there remained but $400,000 due to the South West Branch in bonds "guaranteed" by the state. ^ This amount (which com- pleted the whole issue [4.5 million dollars] to this road) was issued between December 29, i860, and February 4, 1861, only five or six months prior to the default of the company on July i, ^ Senate Journal, /860-1, Appendix, pp. 340, 341 and 443. ' Act of March 3, 1857, sec. 12. Compilation of the Laws in Reference to such Railroads etc., p. 89. ^ Ibid., p. 95. ^ House Journal, 1863-3, Appendix, p. 207. ^Senate Journal, i86o-r. Appendix, p. 441. 124 STATE AID TO RAILWAYS IN MISSOURI of the latter year.' From what has been said it is very clear that almost the whole cost of the South West Branch to the close of 1862 is to be accounted for out of state grants. This cost was ;^4,895,5ii, of which 4.5 million dollars were either "direct" bonds of the state or bonds "guaranteed" by the state. As this great sum was spent in constructing only seventy-seven miles of railway it seems evident that no small amount of it was squan- dered. This sum indeed would make the average cost $63,580 per mile ; and yet the company, notwithstanding their great expen- diture, had the boldness to represent to the governor that they could complete the remainder of the road, 210 miles, to be sure extending through a somewhat less uneven country than that through which the first seventy-seven miles extended, at an average cost of 819,211 per mile." Well might the Board of Public Works in 1861 say of the South West Branch: "This road is costing a large amount of money per mile. The expen- ditures indicate heavy profits in its construction and make man- ifest the difficulty of completing the road without a change in its policy ; " 3 and " It will be difficult if not impossible to perfect and sustain the railroad system in this state unless a radical change is introduced in regard to its construction and manage- ment." However, at this time no amount of retrenchment in expenses or care in construction could have saved many of the companies from bankruptcy in the course of the next few years. The interruption caused by the war was sufficient to diminish further the rate of increase in the net earnings which, we have seen, were already too small to meet operating expenses and interest charges. The financial condition and prospects of the several companies at the close of the war will be taken up later. §5. It has been seen already that the state began as early as December 1855 to lay the foundations of a state interest fund in order that it might be prepared for emergencies ; that in ^ Senate Journal, Adjourned Session, 1863—4, Appendix, p. 718. '' House Journal, 1862-3, Appendix, p. 195. 'i Senate Journal, 1860-1, Appendix, p. 340. PROGRESS AND DRIFT OF AIDED RAILWAY ENTERPRISES 1 25 November 1857 very important additions had been made to this fund ; and that at this time also authority was given to the gov- ernor to issue "Revenue" bonds for the purpose of paying inter- est, in case such a course should prove necessary. Even before the breaking out of the war all of these sources had been brought into requisition ; and very soon after the war began, all of them proved inadequate to sustain the credit of the state. In June 1859 2400,000 in the bonds of the state, called "Revenue" bonds, running for two years and drawing 6 per cent, inter- est, had been issued and disposed of to meet the accruing interest of defaulting railway companies.' In June 1861, accord- ingly, the state found itself involved on account of interest pay- ments for defaulting railway companies to the amount of $911,- 051.'' To meet these demands the state possessed special funds available to the extent of only $419,066, leaving a deficit of ;S49i,985 which would have to be made up from general revenue. The state was not able to make up this sum, and consequently failed to meet the interest falling due at this time. The last coupons paid till after the close of the war were those of Jan- uary 1 86 1. Although the state interest fund had been consti- tuted for paying the interest on the railway debt, the state had not been able, during her "struggle for existence as a member of the union," to provide any income for this fund. 3 Not only could the state not meet the interest due on railway bonds, but she had to issue in 1861 and 1864, for war purposes, "Defense Warrants" to the amount of $1,476,575, and, in 1863, 1865 and 1866, "Union Military Bonds" to the amount of 6.4 million dol- lars. These "Warrants" and Bonds forming the war debt of the state to the amount of $7,876,575 were issued in accordance with the ordinances of October 18, 1861, and June 13, 1862, passed by the people of Missouri, " in convention assembled."'' It was ^Auditor's Report, 1883-4, part. z. p. 102. ^ Senate Journal, 7560-/, Appendix, p. 35. 3 Governor's Message, House Journal, 1862-3, p. 20, and Auditor's Report, Senate Journal, 1867, Appendix, pp. 118 and 119. ■•See Ordinances in Laws oj Missouri, 1864, pp. 683, 685, 693, and 694; also Senate Journal, 1867, Appendix, p. 117. 126 STATE AID TO RAILWAYS IN MISSOURI also found necessary soon after the beginning of the war to increase the rate of taxation. For 1863 a revenue tax of 32 cents and a military tax of 20 cents replaced revenue and inter- est taxes of 30 cents on the 100 dollars valuation of property; also a "revenue" poll tax of one dollar and a "military" poll tax of two dollars were imposed. Again, persons who did not wish to serve in the army could purchase exemptions from such duties for the sum of thirty dollars each and a tax of I per cent, upon the assessed valuation of their property.' However, a small reduction of the former amount of taxes was made at this time in the discontinuation of the 1.6 per cent, tax for asylum pur- poses. § 6. The progress of the railways during the war was exceed- ingly slow. In addition to the depressed condition of trade in general, interruptions to traffic took place at the most unexpected moments. Such interruptions occurred to the business of nearly all the railways, and especially to the Pacific and the North Mis- souri. "In May 1861, by orders of Governor Jackson, the Osage and Gasconade bridges [on the Pacific] were partially destroyed, and those over Gray's Creek and the Lamine [River] near Otter- ville, entirely so;" and such was the condition of the company that the bridges "could not be repaired and the road opened to trade until the ensuing November."^ In June, July, and Decem- ber 1 86 1 the North Missouri Railroad sustained damages to the extent of 886,310, the result of an order given by Governor Jackson and Major General Price to destroy the road. 3 In October 1864 the North Missouri Company sustained a loss estimated at $100,000 and the Pacific a loss in the destruc- tion of a great number of bridges, stations, and the like, as the result of a raid by General Price.* Such interruption of course greatly reduced the income of the roads. Whether '^ Auditor's Report, 1883-4, P^r' 2. p. 312. ^ Senate Journal, 1863-3, Appendix, p. 189. ^ House Journal, 1 86^, Appendix, p. 648. ''Ibid., p. 652; also Senate Journal, iSby, Appendix, p. 878. PROGRESS AND DRIFT OF AIDED RAILWAY ENTERPRISES 12/ or not the Federal Government made good these damages of 1 86 1 cannot be determined from the records ; there is evidence that it did and that it did not.' Although trade during these years was not of such magnitude as it would have been in the absence of war, there was a steady increase in the earnings of the rail- ways from the ordinary traffic and from the transportation of munitions of war for the United States. These earnings served the purpose of keeping the railways in repair if they did not furnish any large sums for extension.^ During the period from i860 to 1865 the two roads which naturally demanded and received the most attention were the Pacific and the North Missouri ; the great question being how to get funds to extend and complete them. It has been seen that the veto by Governor Stewart in March i860 of a bill granting further aid to the Pacific deprived this company of the expected aid. Failing in getting this aid the company was compelled to suspend the work of construction almost entirely for two years. The company succeeded, however, in opening the road to Sedalia in February 1861, and in beginning the work of construction westward from this place. However, " the road stopped [here] for nearly two years and the disturbed condition of the country operated to stop all work on construc- ' The president of the company says, " With the view of disabusing the minds of those impressed with the idea that the Federal Government had rebuilt the bridges destroyed and repaired the rolling stock partially broken up and lost to the company as well as track torn up and rails broken, I beg to say such was not the fact ; and fur- ther . . had the company received the usual and uniform rates paid to the roads east of the Mississippi and to the Iron Mountain and North Missouri in our own state, its receipts would have been largely increased . and sliown a large amount applicable to the extension of the road, or to the payment of its indebtedness to the state." — Senate Journal, 1862-3, Appendix, p. 189. The governor, in his inaugural address to the session of the legislature of 1862-3, says, " Although persons engaged in rebellion have upon several occasions interrupted for short periods the travel and transportation upon the several roads, yet the impor- tance of the roads in military movements within the state has been such that the gov- ernment has rapidly repaired the damage when it has occurred, and thus very mate- rially aided the roads. At the same time the transportation of troops and military stores produced a large revenue to the several roads." — Senate Journal, 1862-3, p. 21. "See House Journal, 1865, Appendix, pp. 647 and 653. 128 STATE AID TO RAILWAYS IN MISSOURI tion."' At the beginning of 1863 "iron was being laid west of Sedalia " and the grading of the roadbed was progressing towards Warrensburg. The payment for this grading was made "half in Johnson county bonds and half in cash." ^ Funds for the further prosecution of the work were not in sight at this time. The remainder of the road would cost much less per mile than any part already completed, because this, the unfinished portion, would extend through a comparatively level prairie country, whereas the greater part of the finished portion extended through a rough country, demanding a great amount of excavation of "rock and hard-pan." The portion between Sedalia and Syracuse, a distance of twenty-one miles, requiring the excavation of some rock and hard-pan, had been built for 818,850 per mile; and the estimate for the remaining ninety-four miles was only ;gi8,223 per mile, or ^i, 713, 000 in all. 3 This was the amount of funds needed by the company for the completion of the road. The North Missouri Company during these years was not able to extend its road beyond the junction with the Hannibal and St. Joseph. In fact the road south of the Hannibal and St. Joseph was not yet in a fully completed condition, being deficient in depot buildings, water stations, rolling stock and " many other things." The company estimated, however, that "with a sum of one million dollars of first-mortgage bonds and the surplus earnings of the roads for two years, the road could be completed and equipped with rolling stock to Iowa," and needed improvements be made on the road "south of its junc- tion with the Hannibal and St, Joseph."'' The company now also contemplated the addition of an extensive branch to leave the main line at Moberly in Randolph County, to pass through Randolph and Chariton counties to Brunswick and thence on through Carroll, Ray, Clay, Platte and Buchanan counties to St. Joseph, a distance of about 160 miles.-" The right to issue first- mortgage bonds would, however, necessitate on the part of the ^ Senate Journal, i86y. Appendix, p. 877. '' House Journal, 1862-3, Appendix, p. 190. ^ Ibid, pp. 191 and 195. '■Ibid,, p. 63. PROGRESS AND DRIFT OF AIDED RAILWAY ENTERPRISES 1 29 state the releasing of her first lien and the acceptance of a second. Some two years prior to this time the city and county of St. Louis had granted the company a permanent release from the payment of interest on the gi, 250, coo formerly sub- scribed to the stock of the company, upon the condition that the legislature of the state would enact such measures as would enable the company to extend the road to the Iowa line and to construct the branch road to St. Joseph as con- templated.^ The company therefore at this time along with the Pacific, importuned the state for aid in some form to enable it to extend its road to the Iowa line. The company added as a reason for asking aid that a road had been chartered in Iowa to extend from Des Moines to the state line of Missouri, where the North Missouri Railroad would cross the line. The importunities of these companies for aid touched the pride of the state, and aid was granted in what may be called a negative form by the act of February 10, 1864.° The state by this act gave both companies the right to issue their own first mortgage bonds to given amounts and allow her first lien to become a second lien to the amount of the bonds issued. The Pacific Company was granted the privilege of issuing $1,500,000 of first mortgage bonds on that part of its road west of Dresden in Pettis county, the state taking a second lien on only this part of the road, but reserving the first lien on the remainder. The North Missouri obtained the privilege of issuing two million dollars of bonds, to be applied to three distinct objects : (i) one million dollars to that part of the road north of the Hanni- bal and St. Joseph ; (2) ^700,000, to the extension of the pro- posed branch ; and (3) $300,000 to the erection of abridge over the Missouri River at St. Charles. Both companies were granted the right to issue bonds to the amount of the state bonds granted to them for the purpose of exchanging them for the bonds of the state. Whenever any of the state bonds should be returned to the state by this exchange, they were to be can- ^ House Journal, 7862-3, Appendix, p. 63. ^ Laws of Missouri, Adjourned Session, 1863-4, p. 50. 130 STATE AID TO RAILWAYS IN MISSOURI celed ; and to the amount of state bonds thus returned and canceled, the state was to release her first lien on the railways in favor of the holders of the bonds of the respective com- panies. The proposed branch road of the North Missouri con- sisted, in the beginning, of two short roads already partially constructed by two separate companies, the Chariton and Ran- dolph, and the Missouri Valley, both operating independently of state aid. The act of February 10 provided for the transfer of the stock of these two companies to the North Missouri Rail- road Company. This act also provided that all the net earnings of the Pacific, of the North Missouri, and of the South West Branch should be applied respectively to the extension of the separate roads. The Pacific Railroad Company was to sell the lands of the South West Branch as speedily as possible and apply the proceeds to the extension of that road. The obliga- tion was laid upon the company to complete the branch between Rolla and the mouth of the Little Piney, twelve miles, within fourteen months from the passing of the act. The ofifice of Fund Commissioner, the duties of which were in some respects the same as those of the former Board of Pub- lic Works, was also established by the act of February 10, 1864. The report of the Board of Public Works at the close of i860 seems to have been its last. Why the board was discontinued cannot be learned ; and it is especially difficult to understand why it should have been discontinued just at the time when its members were beginning to acquire really valuable experience and when a serious crisis had arisen in the progress of the railway experiment. It is certain that the ofifice did not expire by statu- tory limitation or by the repeal of the provision of the act of 1855 creating it. This act provided for the election of a new board every four years ;' none was elected, however, and the Fund Commissioners when appointed were appointed for only two roads, the Pacific and the North Missouri. In addition to the duty of examining the "books, papers, and accounts" of these two companies, the Fund Commissioners were also to ^Compilation of the Laws in Reference to such Railroads ^to.., p. 77. PROGRESS AND DRIFT OF AIDED RAILWAY ENTERPRISES I3I report annually to the governor the condition of the roads, and to call the attention of the governor at anytime to any "irregu- larities" in the operations of the companies.' But the work of o-verseeing was not the chief work of the Fund Commissioner. It was made his duty to negotiate the special issues of bonds authorized b"y the act and to receive the funds for them. He was even made in all essential respects the treasurer of the railway company with which he had to deal. He was to receive all gross earnings of the roads "daily," to have "control" of all revenues arising from "all other sources," and to deposit the same in a bank named for the purpose ; and to complete the duties of the de jure treasurer thus imposed upon the railways by the state it was made his duty to pay out, upon proper vouchers, the funds which had come into his possession for the construction, extension, equipment and operation of'the railway for which he was appointed. Inasmuch as the duty of the Fund Com- missioners in guarding the interests of the state through the right of general supervision and report did not extend to any of the railways in the state except the Pacific and the North Mis- souri, all the other companies aided by the state, since the Board of Public Works had now fallen into disuse, were bound only by the general corporation law, which required all railway corporations to make annual reports. Such reports were either not always made, or they were not published as was formerly the custom ; accordingly the information to be got from reports published between 1861 and 1868 is decidedly scrappy. The Pacific Railroad Company, as we have seen, obtained the right in February 1864 to issue its first-mortgage bonds on that portion of its road between Dresden (Pettis county) and Kansas City.= In December of the same year 1.3 million dol- lars of such bonds had been negotiated at par and the company was proceeding " in a most satisfactory manner to the comple- tion of the road" when General Price destroyed "all the large bridges" of the road, and thus for the time being "put an end '^Laws of Missouri, 1863 (act of February 10, sees. 7 and 8), p. 50. ^See above, p. 129. 132 STATE AID TO RAILWAYS IN MISSOURI . . . . to all further prosecution of the work."' Moreover, at this time the treasury of the company was empty and the direc- tors "were despairing."^ Funds must be found for the comple- tion of the last division of the road, which would establish rail- way connection between St. Louis and Kansas City. There seemed to be only one or two sources from which help could be • expected. St. Louis, city and county, had already extended aid to the various railway companies to the amount of ;S5,450,- 000,3 exclusive of amounts subscribed by individuals in the city and county, which in 1863 were estimated at hundreds of thou- sands of dollars. It might be recalled here that 1.2 million dol- lars subscribed to the Pacific Railroad Company at one time by the county cobrt of St. Louis county was made in the summer of 1854 when the company was in very great need. Moreover the city had also shown its appreciation of the facilities to be afforded by the completion of the St. Louis and Iron Mountain Railroad to Pilot Knob in releasing that road from the further payment of interest upon its completion April 1858.'* And again, it was about the time that the roads were beginning to default in their interest payments that the resolution, already mentioned, was passed by the city and county of St. Louis to release the North Missouri Railroad from all further pay- ments of interest in case the state would pass such legislation as would enable the company to extend its road to the Iowa " Message of retiring governor, December 1864, House Journal, t86j, p. 25. ^Senate Journal, i86y. Appendix, p. 878. By the county By the city 3 To the Pacific R. R. Company 8500,000 JS500,000 " Pacific R. R. Company 1,200,000 " North Missouri R. R. Co. 500,000 500,000 " North Missouri R. R. Co. 750,000 St. L. and I. M. R. R. Co. 500,000 ," St. L. and I. M. R. R. Co. 500,000 500,000 $3,950,000 81,500,000 85,450,000 See Senate Journal, Adjourned Session, 1863-4, Appendix, p. 697 ; House Jour- nal, Adjourned Session, 18^6-7, Appendix, pp. 256 and 301. ' House Journal, /S60-1, Appendix, p. 486. PROGRESS AND DRIFT OF AIDED RAILWAY ENTERPRISES 1 33 line.' And now once again at this time of need the county of St. Louis, anxious to have the Pacific Railroad completed to the western boundary of the state, came to the rescue by grant- ing the company a further issue of bonds to the amount of 3700,000. This amount made in all g6, 150,000 contributed by the city and county of St. Louis to the railway enterprises of Missouri. ° By the help of this assistance the Pacific Company was enabled to begin work again in March 1865 and to make steady progress during the summer, reaching Independence on the 19th of September. The road from Kansas City to Inde- pendence had already been in operation for some months. On the following day, September 20, 1865, "the first passenger train passed over the whole line of the road, leaving Kansas City at 3 A.M. and getting to St. Louis at 5 p.m. of the same day." 3 The whole line of the South West Branch, from Franklin to RoUa (seventy-seven miles), was completed December 22, i860,'' or before the breaking out of the war. From this time up to November 1865 very little work was done ; a section of twelve miles west of Rolla had been graded, a further portion of twenty miles partially graded, and two tunnels had been partly cut ; the cost of the whole aggregating $546,852.5 The North Missouri was not able to negotiate at par any of its first-mortgage bonds (two million dollars) authorized by the ,act of February 10, 1864, "and the governor would not consent to their negotiation at a less rate." This being the case, the company asked the state, December 1864, to allow the bonds to be canceled, and to give the company the right to issue a larger amount, that thereby it might get funds to complete the main line of the road and the branch already mentioned.^ The truth was that the company had done practically nothing in the ^ Senate Journal, 1863-4, Appendix, p. 63. ^Ibid., i86t, p. 878, and House and Senate Journals, 1S68, Appendix, p. 220. ^ Senate Journal, 1867, Appendix, p. 878. "House Journal, i86o-t. Appendix, p. 444. 5 Governor's Message, Senate Journal, Adjourned Session, 186^-6, p. 12. 'Governor's Message, House Journal, 1865, p. 25 and Appendix, p. 6x2. 134 STATE AID TO RAILWAYS IN MISSOURI way of extending its road since 1859. In 1865 it reported that twelve and three-quarter miles were graded north of the junction with the Hannibal and St. Joseph, that surveys had been made to the Iowa line, and that a good deal of the right of way was already obtained. The only resources for the construction of this part of the road were the subscriptions of $3 5,000 in each of the two counties of Schuyler and Adair, which the counties were " ready to pay " whenever the work of construction should be begun.' Nor were funds more plentiful for the construction of the west branch. Should this branch be extended from Moberly, on the main line, to St. Joseph, by way of Richmond (Ray county) and Plattsburg (Clinton county), its length would be 150 miles, or if it should be extended from Richmond to a point on the Missouri River, opposite Leavenworth, and thence to Weston (Platte county), where connection would be made with the Platte Country = Railroad, running to St. Joseph, the length would be about 150 miles. However, the distance from Weston to St. Joseph was thirty-seven miles ; and therefore by this route the distance from Moberly to St. Joseph would be 187 miles. Even if the shortest route for the west branch were selected, this with the sixty miles of the main line to be built would make 210 miles of railway yet to be constructed by the North Missouri Company. The resources for both of the pro- posed routes for the west branch being of an almost wholly pro- spective nature,3 as were indeed those for the unfinished portion 'House Journal, i86j. Appendix, p. 612. ' " County " changed to " country " by special act. Laws of Missouri, 1863, p. 107. 3The estimated cost of the 150 miles of railway by either route was 4.5 million dollars, or ^30,000 per mile. The available and prospective funds for the route by Plattsburg, are given below ; those of the longer route, by Richmond and Weston, were only slightly larger than these. The available founds and resources were : 25,000 acres of land in Chariton county, Si per acre $ 25,000 Fifteen miles of grading done, valued at 75,000 Subscription in Carroll county 175,000 Subscription in Ray county 200,000 The prospective funds consisted of possible subscriptions in Clinton and Buchanan counties and in the city of St. Joseph, aggre- gating 400,000 — See House Journal, iSbj, Appendix, p. 614. PROGRESS AND DRIFT OF AIDED RAILWAY ENTERPRISES 1 35 of the main line, the company thought that the state should grant $3,575,000 of aid to it; and, to be on the safe side, decided to ask the state to furnish a round four million dollars.' The company again brought forward as an argument for aid the fact that the people of Iowa were greatly interested in a road to be built from Ottumwa, Iowa, to the state line of Missouri, at the point where the North Missouri Railway would cross the line. About this time, in fact, the people of this section of Iowa sent a deputation to visit the chamber of commerce in St. Louis, and also the legislature of the state, in order to arouse the people of Missouri to the realization of the necessity of completing the North Missouri Railway. = Again the company urged that the West Branch ought to be completed so as to act as a competitor with the Hannibal and St. Joseph Railroad between St. Louis and the western part of the state. As matters then stood, the North Missouri was not only not capable of competing with the Han- nibal and St. Joseph, but it could not demand what it regarded as its just rights. And if the rates given by the North Missouri company were the rates actually charged by the North Missouri and the Hannibal and St. Joseph at this time,3 it seems that the latter made good use of the monopoly privileges which it cer- tainly possessed. However, the trouble arising between the Hannibal and St. Joseph and the North Missouri, was not always so much a question of cut-throat competition as one of the incapacity of the Hannibal and St. Joseph to do all the business offered to it. In arguing for further aid, January 1865, the North Missouri Company states that "the past two seasons ^ House Journal, 1863, Appendix, p. 614. '^ Ibid., p. 629. 3 It will be recalled that the acts granting land to railway companies in the state contained the condition that the railways thus aided should carry troops and property for the United States free of any toll whatever as a consideration for the land grant. However, when the war broke out the companies found that such an arrangement would soon render them bankrupt ; so they sent a deputation to Washington {House Journal, 1863, Appendix, p. 622J, which prevailed upon Congress to pass a resolution allowing them to charge such rates upon government freight as the companies in con- junction with the secretary of war might deem just and reasonable. {House Journal of Missouri, 1863, Appendix, p. 647.) It will also be recalled that the North Missouri 136 STATE AID TO RAILWAYS IN MISSOURI show that one road is wholly incapable of accommodating the business flowing to and from points to be reached by the West Branch." Great loss to stock men in hogs had "occurred on this account during the past two seasons. And private [as dis- tinguished from government] freight from St. Louis by the North Missouri route and thence by the Hannibal and St. Joseph road could not be taken with any reasonable dispatch " that winter. For a considerable time private freight from the North was not one of the railways to which land was granted. The following is a connpari- son of rates charged on the North Missouri, Hannibal and St. Joseph and the Pacific : (i) Rates per car per mile : Hannibal and St. Joseph (between Hannibal & St. J.) Hannibal & St. Joseph (between Hannibal & Macon) North Missouri (between St. Louis and Macon) ". At the rate of $T$ for 170 miles the charge for 135 miles on the North Missouri would be a M s 0. 206 $90 135 80 170 75 60 ■« E.S V act- °- «' SII4-75 61.20 31-50 25 u a c X S < S24.7S o u g sa 18.80 43-50 35 ^SK (2) Rates per 100 pounds : Cents By river, St. Joseph to Hannibal 22 By Hannibal and St. Joseph, from Hannibal to St. Joseph 6324 Total rate by this combination river and rail route, St. Louis to St. Joseph By the North Missouri, St. Louis to Macon 35 By the North Missouri (if built), Macon to St. Joseph, at same rate 34 Total rate by this route, only partially constructed, however Difference in favor of the North Missouri, for cheapness (3) Rates on different classes of goods per 100 pounds : ist class On the South West Branch (B. R. R.), St. Louis to cents Rolla, 113 miles 47 On the North Missouri, for the same distance, at rates in notes (i) and (2) above 22.6 On the Hannibal and St. Joseph 34 — See House Journal, /56j, Appendix, pp. 617 et seq. 69 16^ 2d class cents 3d class cents 35 25 22.6 22.6 34 34 PROGRESS AND DRIFT OF AIDED RAILWAY ENTERPRISES I 37 Missouri at Macon (the point of junction with the Hannibal and St. Joseph) was refused by the Hannibal and St. Joseph, and this of course compelled the North Missouri to decline taking it at St. Louis. The North Missouri, though thus handicapped, was able to do its government and other business with "a toler- ably reasonable dispatch," whilst the Hannibal and St. Joseph road, possessing more than double the number of the cars and engines, found itself entirely unable to do the business offered to it.' Although the North Missouri Company had not been able to negotiate any of the two million dollars of bonds authorized by the act of February lo, 1864, it now asked of the state the priv- ilege of issuing six million dollars of first-mortgage bonds, and that the state should take a second lien on the road for the amount which the company owed the state. The president of the com- pany regarded this as the only means by which the funds could be raised.^ The state again yielded; the act of February 16, 1865, was passed, giving the company the right to issue six million dollars of first- mortgage bonds bearing 7 per cent, inter- est and running thirty years.3 Although these bonds did not meet with a ready market the company was able during the ensuing summer to have a portion of the West Branch of the road between Moberly and Brunswick (forty miles) " in course of active construction,"* and also to begin the building of the bridge across the Missouri at St. Charles. ' In answer to the rumor that the refusal of the Hannibal and St. Joseph to take the private freight of the North Missouri was due to the fact that the government was giving the North Missouri a larger amount of shipments than the proportions formerly granted to it and to the Hannibal and St. Joseph, the general freight agent of the North Missouri says : "Colonel Hayward [superintendent of the Hannibal and St. Joseph] assured me such was not the fact, and that it was simply because of the total inability to accommodate the business offered this road," and appends the following communication from the superintendent : • " We shall give freight from your road as good a ' show ' as [freight] from Chi- cago. We have freight from .there waiting shipments six months now and they have stopped shipments there entirely for near (sic) a month. Yours truly, J. T. K. Hayward." — See House Journal, 1S65, Appendix, p. 617. ^ House Journal, 1865, Appendix, p. 631. ' Laws of Missouri, /86s, P- 9i- ■•Message of retiring governor, House Journal, i86s, p. 25, 138 STATE AID TO RAILWAYS IN MISSOURI The work of construction on the Platte Country Raihoad' was begun in 1859, and at the close of the war fifty-one and a half miles had been built, connecting Savannah and Weston.' There thus remained about 115 miles to be built in order to establish connection between the northern boundary of the state and Kansas City. On this remaining part the grading and masonry were nearly completed between Savannah and Forest City, a distance of twenty-two and a half miles. By purchasing the right of way of two smaller railway companies, the Weston and Atchison and the Atchison and St. Joseph, whose roads would form portions of the general route of the Platte Country Railroad, and upon which some grading had been done prior to 1859,3 the Platte Country Railroad Company had gained some time. However, the construction of only fifty-one and a half miles on this road between 1859 and 1866, through territory which offered very few obstacles to rapid construction, if onl}- proper management were brought to bear upon the work, indi- cated that the road would be a long time in building, and that the debt ($700,000) incurred by the state to assist the com- pany was in danger of not being repaid. Concerning the management of the road, and particularly of that portion south of St. Joseph, whose earnings were said to be "very large,"'' more will be said in the future. s On the Cairo and Fulton practically no work had been done since the beginning of the war. On December 12, i860, there were in operation twenty-six and a half miles of this road ; on an additional nine miles " about two-thirds of the work had been done" to prepare it for the cars, and on eighteen miles more some "clearing had been done ; " ^ in 1866, however, only thirty-seven miles were in operation.' No extension had been made of the St. Louis and Iron Mountain since 1859. ■ " County" changed to " country " by special act. Laws of Missouri, 1863, p. 107. "^ Ibid., p. 26. 3 Message of retiring governor, House Journal, i86j, p. 25. ^Ibid. 5 See below, chapter v. '' House Journal, 1 860-1, Appendix, p. 347. T Senate Journal, i86j. Appendix, p. 882. PROGRESS AND DRIFT OF AIDED RAILWAY ENTERPRISES 1 39 To sum up, it appears that, since the breaking out of the Civil War, only 112 miles of railway had been built, of which amount ninety-four miles were on the Pacific, eleven and a half miles on the Cairo and Fulton, and seven and a half on the Platte Country.' § 7. The state now had 914.2 miles of railway for which she had contracted a debt of $23,701,000, upon which both the rail- way companies and the state had failed to pay interest, barring some small amounts, since January 1861. Adding to this amount the interest which had accrued between this time and January i, 1867, and the "Revenue" bonds issued to secure funds for paying interest on the railway bonds, we find the total debt of the state January i, -1867, to be $31,855,940. If to this sum the amount of interest already paid by the state be added, the total cost of the railways amounts to $33,417,887. However, this large amount, it must be understood, contains nothing for expenses for administration on the part of the state, such as salaries for members of the Board of Public Works, for inves- tigating committees, and the like. Not including these amounts, the cost of the railways to the state in cash actually paid out and in bonds issued amounted to $36,340 per mile. For the payment of this debt, however, there existed at this time a joint respon- sibility in which the railway companies were the principals and the state the endorser. Name of railway Points connected in 1866 ^ Pacific (St. Louis and Kansas City) South West Branch (Franlclin and Rolla) Hannibal and St. Joseph (Hannibal and St. Joseph) - North Missouri (St. Louis and Macon, ferry at St. Charles) St. Louis and Iron Mountain (St. Louis and Pilot Knob, with Potosi branch) Cairo and Fulton (Bird's Point and Buffington) Platte Country (Savannah and Weston, via St. Joseph) - 694.7 802.2 914.2 See House and Senate Journals, Adjourned Session, 1859-60, Appendix, pp. 5-14; iSbo-i, pp. 332-343; and Senate Journal, 1867, Appendix, p. 882. Miles in 1859 i860 1866 168 189 283 47 77 77 206.8 206.8 206.8 168.75 168.75 168.75 90.15 90.15 90.15 25 26.5 37 7 44 51-5 CHAPTER V. THE CONCLUSION OF THE EXPERIMENT OF STATE AID. 1 866-1 868. § I. After the close of the war it was natural to suppose that through the revival of trade some of the railway companies in default would be enabled to resume the payment of their interest dues. Just a short time prior to the close of the war Governor Fletcher, upon assuming his office, declared that the railways were "ample security for the amounts advanced to them respectively." He further said : "If . . . we cannot com- mand the means for the completion of the roads, and .... if they cannot be made to yield at least a portion of the accruing interest on the bonds loaned to them respectively with reasonable prospects of their completion or [of] increased earnings enabling them to meet the whole interest, then it will be our duty in order to restore the credit of the state and to save the people from burdensome taxation to foreclose our first mortgage liens on them and by their sale reduce the debt to a sum within our easy control;" and if private enterprise fails " to furnish the means for their completion," we must trust to our "future prosperity" [as a state] to do so.' It will be seen later that some of the roads after the close of the war gave sufficient evidence in the form of net earnings that they could meet the whole of their interest dues, but that the companies did not choose to use their net earnings for this purpose. The important fact is that all of the companies aided by the state, except, of course, the Hannibal and St. Joseph, which had never been in default, remained in default after the revival of trade, which followed the close of the war. Consequently the state authorities took action looking to a reduction of 4he state indebtedness by a disposal of the railways. ^ House Journal, i86s, p. 53- ■ 140 CONXLUSION OF THE EXPERIMENT OF STATE AID I4I § 2. Already at the adjourned session of the legislature of 1863-4, the first of the preliminary attempts to dispose of some of the railways, and thus to reduce the indebtedness of the state, had been made. The only measure passed at this session, how- ever, was that to secure the completion of the Pacific, the North Missouri, and the South West Branch. This has already been considered.' There was some opposition, however, to the feeling then becoming quite general that the roads should be sold. The citizens of Chariton county passed a resolution in a memorial to the general assembly that that body should "oppose any and all sell-out policy." ° The St. Louis common council passed res- olutions addressed to the legislature of the state, protesting against all propositions for the sale of the Pacific, the North Missouri, and the Iron Mountain. 3 On the other hand, 1665 citizens of St. Louis county sent up a memorial "in favor of the sale of the railroads of the state."'' At this time also memorials came in from several other counties favoring the pas- sage of such legislation as would secure the completion of the railways ; on this latter point all parties were agreed'; the lines should be finished. = The effect of the opposition to an outright sale of the railways to the highest bidder is seen in the act of February 12, 1864, " ordering the sale of the Platte Country Rail- road,"* in the fact that it was provided that if the road could not be sold for the amount of bonds and interest owing by the com- pany to the state, the governor was to purchase the road and appoint agents to operate it. This was the first of the acts passed by the legislature to rid the state of her unprofitable railway enterprises. The Platte Country road was duly advertised and sold at auction September 5, 1864, in St. Joseph, and the state became the purchaser for the sum of §847,000, an amount about equal to the bonds loaned and interest due on them.^ It will be recalled that this road was built in part upon the routes of two ' See above, chapter iv. " Senate Journal, Adjourned Session, 1S63-4, Appendix, p. 128. ^Ibid., p. 707. ^Ibid., p. 706. s/6id.,pp. 27, 29, 30, 125, and 126. "Laws of Missouri, 1863-4, p. 58. ' ■'Auditor's Report, 1883-4, Part 2. p. 91. 142 STATE AID TO RAILWAYS IN MISSOURI shorter railways. About thirty days prior to the time of the sale just mentioned, the directors of the company "discovered" that the deed of transfer by which the Platte Country Railroad in 1859 got control of the two shorter roads, the Weston and Atchi- son and the Atchison and St. Joseph, was not of the required legal form. As this fact in the eyes of the directors rendered the transfer null and void, arid thereby established the ownership of the road in the two former companies, they retransferred this road to the two older companies, notwithstanding the fact that three and a half miles of the road between Atchison (Kansas) and St. Joseph had never belonged to the Atchison and St. Joseph Railroad Company which now acquired possessiqn of it.' On this account the state was left with only that portion of the road north of St. Joseph — the part which yielded no revenue.'' The management which now controlled that part of the road south of St. Joseph was of a blood-sucking character, and under such management the road was not likely to earn anything for the payment of interest ; by virtue of trying to keep up the show of two companies this portion of the road, only thirty-seven miles in length, supported a double set of superior officers, draw- ing salaries annually amounting to $21,800.3 Further attempts at a settlement between the companies and the state were made. The act of February 18, 1865, was passed as a compromise for the purpose of effecting a settlement ; by the terms of this act the state would yield all claims to the road in case the com- ■ Message of retiring governor. House Journal, 1 86s, p. 26. ''Ibid., p. 25. 3 Jas. A. Burns, Pres. W. and A. R. R. Co. $3,000 Geo. W. Belt, Secretary 1,000 D. D. Burns, Treas. 1,000 John Donophan, Attorney 1,000 B. F. Stringfellow, Pres. A. and St. J. R. R. Co. 3,000 A. G. Otis, Treas. 1,000 J. M. Price, Attorney 1,000 D. Carpenter, Jr., Supt. A. and St. J. and W. and A. R. R. companies 6,000 D. Kellogg, Gen'l Fr't Agent 3,000 Sam. W. Clapp (office not given) 1,800 21,800 -See message of retiring governor, House Journal, rS&j, p. 27. CONCLUSION OF THE EXPERIMENT OF STATE AID 1 43 panics would pay into the treasury of tlie state the sum of S434,000 in four installments at different periods between January i, 1866, and January i, 1875, and a further like sum in two installments in a shorter period.' The sum ($868,000) thus asked for the road was equal to the bonds loaned ($700,- 000) and simple interest on the same at 6 per cent, for the time that had elapsed since January i, 1861, the date of the last payment of interest. The companies accepted the offer, but failing to meet the first installment January i, 1866,^ the Platte Country Railroad was included among the railways to be sold by the act of February ig, 1866, the first comprehensive act passed for the purpose of disposing of a number of defaulting railways. 3 §3. By the act of February 19 the legislature did not, however, succeed in securing a final settlement in the case of any one of the roads with which it dealt. The aim of the act was to secure the early completion of the Platte Country, the South West Branch, the St. Louis and Iron Mountain, and the Cairo and Fulton. To attain this end the lien of the state was to be foreclosed and the sale of the roads provided for. The sale of the four railways just mentioned was to be effected through a board of three com- missioners appointed for each railway by the governor of the state. The commissioners after advertising the railways for a specified length of time were to attend the sales and dispose of the railways to the "highest and best bidders," or to bid them in for the use and benefit of the state for an amount not exceeding the respective liens. If the commissioners bought in any of the roads they were to manage and operate them and make further attempts at a final disposition. In case of the South West Branch and of the St. Louis and Iron Mountain the purchasers, if other than the commissioners of the state, would be under obligations to expend annually $500, 000 in the extension of " Laws of Missouri, i86j, p. 98. -Auditor's Report, 1883-4, Part 2. p. 93. ^ Laws of Missouri, 1865-6, p. 107. 144 STATE AID TO RAILWAYS IN MISSOURI each till completed. A limit to the time in which the railways were to be completed was also set ; the South West Branch was to be extended to a point near Lebanon in Laclede county in three years, to Springfield in four years, and to the western boundary of the state in five years from the date of sale. The Iron Mountain was to be extended to the Cairo and Fulton south of Pilot Knob in three years and to the Mississippi, opposite or below Columbus, Kentucky, within five years from the date of sale. On the extension of the Cairo and Fulton no defi- nite amount of annual expenditure was stipulated, but the time to effect a junction with the St. Louis and Iron Mountain was limited to three years. On the extension of the Platte Country Railway the purchasers would be required to expend $250,000 annually until it was completed, to finish the portion of the road between Kansas City and Weston (Platte county), from Savan- nah (Andrew county) to Forest City (Holt county) within two years, and from Forest City to the Iowa state line in three years frorn the date of sale. The state by this act gave to the pro- spective purchasers the right to issue any amount of bonds neces- sary to secure the needed funds, but did not yield her first lien in behalf of these bonds ; and the endorsement which the state promised for these bonds was only for the purpose of showing that they were legally issued and that they were secured by mortgage on the railways. The payments of purchase money on the several roads was to be made in the following way : one- fourth upon closing the contract, and the remaining three-fourths in five annual installments with interest at 6 per cent. The option of paying in full at any time all amounts due was also given ; and it was provided that the failure to meet regular pay- ments would nullify the terms of the sale and forfeit the sums already paid. §4. In accordance with the provisions of this act the state authorities proceeded to dispose of the four railways concerned, the Platte Country, the South West Branch, the St. Louis and Iron Mountain, and the Cairo and Fulton. The Platte Country CONCLUSION OF THE EXPERIMENT OF STATE AID 1 45 was advertised to be sold April 21, 1866 ;' a short time prior tg this date the Atchison and St. Joseph and the Weston and Atchison companies paid $iOO,ooo,nhe amount of the first install- ment and the accrued interest due January i, 1861, in state bonds and coupons into the treasury of the state. This being done the sale was postponed and, excepting the changing of the name of the company, nothing further of note transpired between the company and the state till the act of March 17, 1868, releas- ing the state's lien. The name of the Atchison and St. Joseph Railroad Company was changed to Missouri Valley Railroad Company, and the Weston and Atchison was merged into the latter by the act of March 8, 1867.'= The South West Branch was disposed of the first time under the act of February 19, 1866, but the account of this sale will be included with that of the final disposition of the road. 3 §5. The sales of the St. Louis and Iron Mountain and Cairo and Fulton, under the act of February 19, 1866, were of much greater importance than that of any other road disposed of under the act because these railways were more valuable than any of the others. It was on this account that more interest was taken in the sale of the St. Louis and Iron Mountain than in any of the others ; even the Cairo and Fulton was regarded as being worth but little, and that only as a prospective feeder to the St. Louis and Iron Mountain. It was, however, a foregone conclusion that the road could not be sold for anything like its cost to the state. The commissioners -t appointed to dispose of these railways sold the St. Louis and Iron Mountain at the court house in St. Louis, September 27, 1866, and the Cairo and Fulton at the court house in Charleston, October i, 1866. As no one bid enough to cover the state indebtedness, the commissioners bought the railways in for the state, and set to work to effect a sale to private ^Auditor's Report, 1883-4, Part 2. p. 93 ; also House Journal, i86s-6, p. 293. 'Auditor''s Report, 1883-4, Part 2. p. 93. 3 See below p. 168 et seq. < The commissioners were Messrs. R. A. Watt, Bernard G. Farrar and Chas. S. Rankin. 146 STATE AID TO RAILWAYS IN MISSOURI parties.' The roads were advertised for sale and the eighth of November 1866 was set for the receiving of bids; on that day bids were received till 5:30 p.m.'' The bids for the two rail- ways which had together cost the state ;?4, 2 50,000, exclusive of interest, varied from ;g75o,000 to $925,000; for the Iron Mountain alone there were two bids, one of one million dol- lars and one of $1,027,000.3 The commissioners were not able to make an award till the fourteenth of the month and then the award was not unanimous, one party dissenting from the decis- ion. The award as made was to McKay, Read, et al., the lowest bidders for the St. Louis and Iron Mountain, the more valuable road, and the highest bidders for the Cairo and Fulton, the less valuable one. The act of the commissioners had to be approved by the governor, but he was not able to come to a conclusion in the matter till December 8,* 1866, or nearly one month after the award had been made. The action of the commissioners and of the governor raised a storm of indignation, not only from the conservative (democratic) press, but from no small contingency of the radical (republican) press of the state. In a short time the clamor resulted in the appointment by the state of a com- mittee to investigate the awards made bv the commissioners. The investigating committee says that during the time in which the governor was considering the matter of approving the award, many interested parties visited him and implored him to sanction it, and for a time indeed that "a regular raid was made on the gubernatorial mansion." After a thorough investigation of the manner in which the awards were made the committee came to ^ Missouri Republican, March Ii and April 3, 1867. -Ibid., April 3, 1867. 3 The several bids : 1. By the Southeast Missouri R. R. Co., represented by Mr. Thos. Allen 2. By Sumner & Co. 3. By McKay, Read & Co. 4. By John C. Fremont 5. By Dinsmore & Co. — See Appendix, h "St. Louis Democrat, December 11, 1866. For St. L. and I. M. R. R. For C. and F. Railroad Total S6oo,ooo ^150,000 $750,000 750,000 175,000 925,000 550,000 350,000 900,000 1,000,000 1,000,000 1,027,000 1,027,000 'ouse and Se7iate Journals, i 86S, p. 148. CON'CLUSION OF THE EXPERIIIENT OF STATE AID 1 47 the conclusion that the commissioners had acted without investi- gating the capacity of all bidders to pay for the railways, that the successful purchasers were indeed a "ring" bidding high for the Cairo and Fulton, the almost worthless road, that they might drop it and make a large profit out of the Iron Mountain by selling it at an advance over their very low bid for it ; and also that there was collusion between the commissioners and the "ring." The committee exonerated the governor, however, from all charges of corruption.' ' The committee in its report says, in substance, the Dinsmore and Fremont bids, the highest on the list, were set aside by the commissioners because of a suspected collusion between the bidders. Upon trial, both of the parties bidding testified that there was no understanding between them ; and Dinsmore testified that the commis- sioners were so informed {Missouri Republican, April 9, 1867). Fremont's bid was objected to because he was then trying to build the South West Branch of the Pacific, and one of the commissioners thought that that was enough for one man ; this com- missioner had also heard from the governor that Fremont was not complying with the contract he then had. The bid of the South East Missouri Railroad Company was set aside by the commissioners because the company as such could not legally purchase a rail- road. But the commissioners did not inquire into the ability of the individual parties in this company to pay for a railroad. The evidence taken by the committee shows that Mr. Thomas Allen, a member of the company, had state bonds on hand already sufficient to make the first payment. The bid of J. A. Sumner was assumed by Mr. Allen before the award was made but that did not strengthen the bid, because the commissioners regarded the corporation as existing only upon paper. Concerning the bid of A. J. McKay ei al., the committee says that so far as the com- missioners could see it was evidently one of the lowest and worst ones of the lot ; for there was no evidence that McKay was a man of any considerable means, but rather a stranger almost without property in this state, when he put in a bid signed by himself and " others " who might be anybody at all, and yet the award was made to him . . . we find the commissioners inquired as to who the associates of McKay were, and we cannot understand why they did not make similar inquiries of Fremont and Dinsmore. It will be recalled that there were three bids for the Cairo and Fulton, McKay and Company bidding the highest for this road. The investigating committee says, from the facts mentioned concerning the bids for this road, your committee " cannot escape the conclusion that the ring put in this bid for so much more than the road was worth for the purpose of swelling the aggregate amount bid for both roads to about the sum t)id by others, that the commissioners might be justified in making this award to them; and that they intended to drop the Cairo and Fulton Railroad so as to have a wide margin for the contemplated speculation in the Iron Mountain without that of the Cairo and Fulton." Concerning the matter of collusion between the commissioners and the so-called " ring " the committee says it appears by the testimony of McKay that John O'Farrar, brother of one of the commissioners, was interested in the enter- 148 STATE AID TO RAILWAYS IN MISSOURI Whether or not there were other bids higher and just as responsible as those which were accepted by the commissioners, is, of course, well-nigh impossible at this late day to determine. It appears, however, from the testimony* taken by the investi- gating committee that Charles P. Chouteau, a member of a wealthy mercantile firm in St. Louis, made a private offer to the governor some four or five days before the approval of the awards of the commissioners of $1,280,500 for both roads.^ The ability of Chouteau to pay for the railways no one questioned ; later he was one of the purchasers of the South West Branch. Again Mr. Thomas Allen, president of the South East Missouri prise at the time the bids were made ; also that Commissioner Farrar promised McKay to vote for the award to him (McKay). Concerning the approval of the award by the governor the committee sfeys in sub- stance that this seems to have been a matter of great solicitude on the part of the pur- chasers and deliberation on the part of the governor, that the governor was importuned by Bernard G. Farrar, one of the commissioners, to approve of the award, and that he (Farrar) carried a letter representing that all the commissioners had signed the award. As this did not succeed, one or two agents were procured and a regular raid was made upon the gubernatorial mansion by those who were interested in the parties to whom the commissioners had awarded the roads. Commissioner Farrar represented that Judge Rankin, one of the commissioners, had agreed to the award, but had not signed it. The committee says Judge Rankin, it seems, was the person in whom the governor most confided, and that this perhaps more than anything else prevented a prompt rejection of the award by the governor. The committee states further that the governor in the kindness of his heart allowed everybody to talk to him, and, by his own statements, suffered himself to be troubled in mind about it, and finally to be reasoned and persuaded from his first conclusion as to what was best to be done. On this account the committee says that however much his judgment may have been at fault in the matter, there is no evidence or reason to suspect corrupt action on his part. There seems, says the committee, to have been a so-called " slush fund" of 850,000, or S6o,ooo, but they add that they failed to find that any part of it was used for purposes of corruption. What has just been given is the substance of the majority report made by Major J. C. McGinnis and James S. Rollins of the investigating committee, the former a radical and the latter a conservative. Following the majority report there is a minority report by a Dr. Smythe, the remaining member of the committee, a conservative. Of the minority report, it will suffice to say that it goes much further in condemning the action of the commissioners in making the award to McKay and Company. — See report of committees, House Journal, March 12, 1867. ^ Missouri Republican, April 21, 1867. " For the St. L. and I. M. j!i,020,5oo " " C. and F. 260,000 CONCLUSION OF THE EXPERIMENT OF STATE AID 1 49 Railway Company, wrote an earnest letter to the governor Decem- ber 7, 1866,' in which he stated that two bids one of which at least was higher than any received by the commissioners were sent to the commissioners on November 8, but did not arrive within the time set for receiving bids ; the delay, however, he said was owing to the understanding of the bidders that bids would be received till midnight of the eighth. Mr. Allen further states that if he were given an opportunity he would give g8oo,- 000 for the Iron Mountain alone. Mention of another bid (1.9 million dollars), twice as large as the one accepted, is also ' This letter says in part that the award was agreed to on November 14, 1866, by Watt and Farrar, Rankin dissenting, and continues, "The award has been lying before you (governor) unapproved up to this time. The commissioners did not choose to inquire into the responsibility of the South East Missouri Railroad Company, but the merits and ability of McKay and Company seemed to have been readily conceded. The South East Missouri Railroad Company have ample means to complete the road. Who are McKay and Company ? They may be very wealthy and competent gentlemen who have served their country as quartermasters or commissaries for aught I know. But I am unable to answer who they are except from a species of evidence which is not held to be competent. "Now, sir, if the South East Missouri Railroad Company are as competent a party from aggregate capital and railroad experience as McKay and Company, why should ^200,000 of the state's money be thrown away to favor the latter ? Why should you give this road away for ^550,000 (ten cents on the dollar of its cost) when a num- ber of parties offer hundreds of thousands more ? Why should you forego the oppor- tunity of saving to the state a half million of dollars ? Why disregard the remon- strances of our leading merchants and capitalists and citizens of all parties ? The commission has of course made the award and is defunct. The road cannot be again advertised, and for that reason we cannot bid again, because it is evident that it is not the highest and best bid that gets the award. But let the legislature confirm the road to the highest and best bidders or pass a new law regulating the sale of the road, so as to prevent fraud and connivance. If offered at public auction to the highest bidder at the court house door at St. Louis, I am perfectly confident the state would be gainer to the extent of half a million dollars at least. For I hereby pledge myself that if the Iron Mountain Railroad will be offered in open market I will start the bidding with the offer of S8oo,ooo, and if no one bids higher will pay the purchase money before receiving the deed. After McKay and Company pay the first installment, the other can be paid out of net earnings of the road, because the net earnings for Octo- ber last were given as over ^20,000. . . If you can sanction such a sale as that [the award to McKay] you will certainly make it questionable whether you are not a better soldier than salesman. Very respectfully, Thomas Allen." "St. Louis, December 7, 1866." — Missouri Republican, December 9, 1866. 150 STATE AID TO RAILWAYS IN MISSOURI made in which J. W. Parish and Co. of the Baltimore and Poto- mac Railroad Company and a number of iron manufacturers of Pennsylvania were interested." With these last mentioned bids were associated the names of parties who had a much greater reputation for wealth and business capacity than those to whom the railways were awarded. In such times as these it is indeed quite common for political animosity to show itself to the detri- ment of the economic interests of the community ; and in connec- tion with these sales political animosity appears when the governor says in a communication to the commissioners regarding the sale that one consideration with him would be the giving of the road to "men who belong to the progressive party of the state," and who were " thereby in sympathy with " and had the " capital of the country."^ Indeed the parties to whom the railways were awarded, it seems, had very little capital and certainly did not finish the railways ; in a few weeks they sold out to one of their competitors of November 8 for an advance of $275,000 in cash and g 1 00,000 in the stock of the company.^ Because of this transfer of the railways to Mr. Allen for so great an advance in so short a time, many people thought that the railways had not brought, under the award of November 8, their full value. The feeling against the commissioners, because of this sale, grew so rapidly that early in the spring of 1867 the attorney-general of the state filed a petition for an injunction against Mr. Thomas Allen to recover for the state a portion of what had been lost.4 The attorney-general asked for the injunction to restrain the company from enjoying the usufruct of the railway because it had been (November 8) ' J. W. Parish and Company of the Baltimore and Potomac Railroad Company, in conjunction with several iron manufacturers of Pennsylvania who represented an ^ggrsgate capital of from five to ten millions, made a bid largely exceeding any other yet reported, having offered l.g million dollars. They had been assured by the attorney for the commissioners that all bids received before midnight on the day of the sale (8th instant) would be considered. — See an editorial in the Washington Chronicle (Forney's paper) in Missouri Republican, December i, 1866. ' House and Senate Journals, Adjourned Session, 1868, Appendix, p. 160. ^ Ibid., p. 157. ^Missouri Republican, April l8, 1867. CONCLUSION OF THE EXPERIMENT OF STATE AID I5I awarded to the "lowest and worst bidders ; " that the purchasers could not complete the railways, and that Mr. Allen had joined with the purchasers in urging the governor to approve the sale with the understanding that he should have a controlling interest and have the railways transferred to him for a bonus of ^375,- 000. Although it is also stated in the petition that a fund of 865,000 or ;g70,ooo was raised in order to "mollify" public opinion, public opinion was really divided as to the expediency of urging this suit. Many, indeed, thought a great wrong had been committed against the state, and wanted it ferreted out;' others, admitting that a wrong had been committed, urged that the suit be withdrawn, because the prosecution of it would hinder the extension of the railway, and thereby cause a greater loss by retarding the development of the state than could be gained by the suit.^ Immediately upon the opening of the adjourned session of the legislature, January 1868, Mr. Allen appeared before the legislature with a petition asking that the suit be withdrawn and his title be confirmed. 3 The matter was referred to committees by both the house and senate. However, before these commit- tees, acting jointly, could complete their task the governor seized the St. Louis and Iron Mountain Railroad.* The special mes- sage of the governor concerning the seizure of the road was referred by the senate to the select committee already appointed and by the house to a new committee. The results of these various investigations were laid before the senate January 25, '" We trust that the attorney-general will push the investigation to a successful termination, that the people may fully understand who it is that have so wantonly betrayed them. In filing this bill the attorney will be sustained by the Radi- cal party of the state, the majority of whom are unanimous in their opinion that a great outrage has been perpetrated, and they are unwilling to shoulder the iniquity for the purpose of screening any man or set of men." — See editorial from Booneville Eagle (Radical paper) in Missouri Republican, May 8, 1867. = See resolution adopted by a "Railroad" meeting at Ironton, Iron county, signed by D. A.' V\'ilson, Missouri Republican, April ig, 1867. ^Senate Journal, Adjoitrned Session, 1S68, p. 5. ■•See governor's special message, January 17, 1868, Senate Journal, Adjourned Ses - sii>/i, 1868, p. 74 ; also House and Senate Journals, Adjourned Session, 1868, p. 166. 152 STATE AID TO RAILWAYS IN MISSOURI and before the house February 27 (1868).' The report before the senate was made in two parts, (i) the results of the joint investigation with the house committee and (2) the results of further work of a special senate committee. The first portion of the report was that made by the committee known as the Evans committee. This report held that the investigating com- mittee of an early date, known as the McGinnis committee, whose work has already been considered, in taking testimony regarding the award of November 8, 1 866, had proceeded in what the committee called an ex parte'^ way, and that on this account the whole ground must be gone over again. The results of the first investigating committee were almost if not wholly reversed by the Evans committee, this portion of the committee going so far as to dig up the tax receipts of some of the unsuccessful competitors for the railways on the memorable November 8 to prove that they were not able to pay for a railway. 3 The second portion of the report found that the required sum of $500,000 had been spent on the St. Louis and Iron Mountain Railroad between March 12, 1867, and the present date, and on this account and for reasons of expediency recommended the with- drawal of the suit and the confirmation of Mr. Allen's title.'' The majority report in the house was in accord with the first portion of the senate report as given above, but the minority report was much less severe on the former investigating committee. = In the complaint filed by the attorney-general and in the • Senate Journal, Adjourned Session, 1868, p. 74, and House Journal, Adjourned Session, 1868, pp. 92 and 131. -House and Senate Journals, Adjourned Session, 186S, Appendix, pp. 156 and 162. ^ Ibid., p. 183. * Ibid., pp. 185-194. 5 This was, however, not the end of investigation concerning this matter. The minority of the committee just referred to held that the investigation had not been completed, and that their report must " justly be considered premature " [House Jour- nal, Adjourned Session, 1868, pp. 115-176). Because of the odium which the major- ity report cast upon the work of the McGinnis committee, especially in regard to "doctoring" the testimony, Mr. McGinnis on the following day, January 28, intro- duced a resolution for the appointment of a committee of three to examine the manuscript and printed reports of the testimony taken by the committee of which he had been chairman. The committee was appointed, spent two weeks in taking testi- CONCLUSION OF THE EXPERIMENT OF STATE AID I 53 reports of investigating and reinvestigating committees the value and condition of the St. Louis and Iron Mountain and Cairo and Fulton railways are in a measure brought out. The attorney- general states that the Iron Mountain road was considered to be worth two million dollars, and that the gross earnings were con- sidered to be worth about ^40,000 monthly ; neither statement is, however, authenticated. Mr. Allen, in giving evidence before the Evans committee, says, "The track and rolling stock when I took possession of the road were very much worn and run down. In many cases the track had become dangerous, and the ties were rotten and useless in large numbers — and that the amount expended on such repairs in the preceding eleven months amounted to $236,289." Again he declares that the actual value of the Cairo and Fulton Railroad did not at the time of the sale exceed $150,000 to $175,000. The track was over- grown with trees and shrubs, the trestle-work and ties decaying, the embankments injured by floods, the iron rusted, and, in fact, the principal, if not the only value, consisted in about 2000 tons of rails not worth over $70 to $75 per ton. The value of ,9000 or 10,000 acres of refuse land remaining, belonging to the road, did not exceed $5000 to $7000."' mony in St. Louis and New Yorl: city, and reported to the liouse February 13, 1868. Tliis committee was also divided. Tiie majority report says tliat witli sligiit but immaterial differences, there was " no discrepancy between the written and printed evidence " as reported by the McGinnis committee. The minority report says that, with certam slight exceptions, "The investigation of the McGinnis committee" was *' fair and impartial, and the testimony published as taken {House Journal^ /868, Adjourned Session, pp. 315-317). The special house committee of nine appointed to consider the special message of the governor of January 17, 1868, reported February 21 (House Journal, Adjourned Session, 1868, pp. 374-381). Both majority and minority agree that the amount ($500,000) stipulated by the act of February jg, 1866, as the amount to be expended annually by the purchaser of this road, had not been expended, and consequently the governor was justified in seizing the road. However, both also agree that as great an amount and even more than j!5oo,ooo had been expended, although not exactly in conformity with the requirements of the act of February 19, 1866, and that for this reason the state should restore the road to Mr. Allen free of all incumbrances. The differences between the reports of the majority and minority portions of the committee were immaterial. ^ House and Senate Journals. Adjourned Session, 1868, Appendix, pp. 164-165. 154 STATE AID TO RAILWAYS, IN MISSOURI In weighing the testimony of Mr. Allen it must be remem- bered that he was now in possession of the railways, and there- fore had an economic motive in speaking only of expenses and not of net earnings. Still the condition of the Cairo and Fulton could hardly have been other than stated by Mr. Allen, as it was a very short road and made no valuable connections whatever. The St. Louis and Iron Mountain, however, had during the war earned more than enough to pay operating expenses and to keep the road in moderate repair. The net earnings of this railway, we have seen, had gradually increased from 1859 to 1862 and in 1863 there was a great jump from ^65,258 to ^161,223, the latter sum representing about 2.8 per cent, interest on the whole investment of ^5,760,000.' For the year ending October 1865 the net earnings were still greater, amounting to 3.2 per cent, on the entire investment.' In 1863 the company was able to pay and did pay g6o,000 on its delinquent interest account.^ Again, it must be recalled that Mr. Allen himself stated, in the letter of December 7, 1866, to Governor Fletcher, that the net earnings for the month of October preceding were said to be ^20,000, and further that after the purchasers had paid the first installment of the purchase price, they would be enabled to complete the pay- ment for the road out of the net earnings.^ If net earnings were approaching $20,000 a month or 8240,000 a year, the value of the road capitalized at 6 per cent., an average rate for those times, would be four million dollars. Taking the amount of net earnings for 1865, $199,600, as given by the president of the company for the basis of computation,'' the value of the road capitalized at 6 per cent, would be $3,326,666. And although for a part of the time during the war as much as nearly one- fourth of the receipts for transportation arose from government business which would fall off after the close of the struggle, it must be taken into account that trade in general revived after ' See Table V. Appendix i. " House Journal, iSdj, Appendix, p. 6; also Auditor's Report, 1883—4, Pi''t 2, P- 99- 3 See above, note (') p. 149. ^See Table V. Appendix i.; also Senate Journal, i86y. Appendix, p. 880. CONCLUSION OF THE EXPERIMENT OF STATE AID I 55 the close of the war. And the statement of Mr. Allen in 1866, referred to above, concerning the net earnings of the road seems to indicate that the increase due to the general revival of trade more than balanced all decrease that took place from the falling off of government business. This being the case, it must be held that the real value of the St. Louis and Iron Mountain Railway awarded on November 8, 1866, to McKay, Reed, et al., for 8900,000, estimating the Cairo and Fulton as worth nothing, was somewhere in the neighborhood of three million dollars. The presumption that the two railways did not bring what they were worth by the awa,rd of the commissioners as already considered is strengthened by the statement of Governor Fletcher that, in his opinion, these roads should have brought a larger amount. The governor held, however, that the para- mount want of the Southeast, of St. Louis and of the state, was the completed railroad, and not the contingenc)- of a few thousand dollars more for it in the sale, which, if obtained, would be no adequate compensation for delay, or even the risk of delay, in this long deferred enterprise. The speedy completion of the railroads was indeed a matter to be obtained even at the cost of several thousand dollars. And on the ground that Mr. Allen was proceeding in accordance with the conditions of the law of February 19, 1866, in extending the Iron Mountain Railway, and that further litigation would retard the development of the southeastern part of the state and defer railway connection with the South, the legislature passed an act, March 17, 1868, which confirmed the title held by Mr. Allen or by the New St. Louis and Iron Mountain Railroad Company incorporated July 29, 1867, and represented by him. The same act appropriated certain funds for the building of a railway from Pilot Knob to the state line of Arkansas. The act required the purchaser to complete the St. Louis and Iron Mountain to the junction of the Cairo and Fulton in two years and to Belmont (Mississippi county) in three years. The state reserved the right to institute a suit at any time to recover any money of which the state may have been defrauded in the sale of the St. 156 STATE AID TO RAILWAYS IN MISSOURI Louis and Iron Mountain and Cairo and Fulton railways, pro- vided that this proceeding affected in no wise the title of Mr. Allen. The new company was to assume the payment of: the amount yet due on the Cairo and Fulton. However the funds appropriated in the act of March 17, 1868, for building a railway from Pilot Knob to the state line of Arkansas wfere defined in the later act of March 23, 1868, as the amount ($664,300) yet remaining due on both of the railways. This amount was released to the company at the rate of $15,000 per mile for every new mile of railway built. Including all of the partial payments made by the owners and different purchasers of the St. Louis and Iron Mountain and Cairo and Fulton railways the state received in all $391,616 for railway prbperty which had cost the state in bonds and interest $6,478,070, and which all the evidence accessible seems to indicate was worth, if net earnings be taken as a basis, about three million dollars. However, as no one offered this amount, it may with great propriety be said that the roads were not worth so much. In the case as it actually pre- sented itself to the state at this time there were two courses for the state to pursue, (i) to sell the railways for what they would bring, or (2) to operate them as state railways. These alterna- tives will be hastily considered later. ° § 6. That the disposal of the St. Louis and Iron Mountain and Cairo and Fulton railways at such a nominal sum should have resulted in legislative investigation and reinvestigation such as we have seen took place was quite natural. And one is not a little surprised to find that the various individual parties con- cerned indulged afterwards in making charges and counter- charges of corruption against each other, that they published "Cards" of vindication which were responded to in a vigorous manner, and indulged so freely in vituperation that each seems to have regarded the other as the very incarnation of scoundrel- ism. The bringing to light of this and like evidence of cor- ruption yet to follow gives us a conception of the public morality ' See below, chapter vii. CONCLUSION OF THE EXPERIMENT OF STATE AID I 57 of the state at this time.' It may be of service to us in rendering a final decision as to the possibility of the control of the railways by the state as an alternative to disposing of them to private parties.'' § 7. The act confirming Mr. Allen's title to the St. Louis and Iron Mountain Railway, and the appropriation of the unpaid balance on the former sale of the two railways to assist the com- pany in building the St. Louis and Iron Mountain from Pilot Knob to the Arkansas state line, is the first of the many acts of this nature which were enacted. Two other railways were dis- posed of in practically the same manner on the same day, one on the following day, and the remaining road in default on the last day of the month. The next railway to be aided in the manner in which the St. Louis and Iron Mountain was aided was the Missouri Valley, as the former Platte Country Railroad was now called. There were, indeed, special reasons for adopting a liberal policy towards this railway, if such a policy would lead to its completion. We have seen that during the war practicaHy no progress was made in the extension of this line and that the pur- chasers of it in 1866, as they were not able to comply with, or at ' See in addition to references already given a speech by Hon. James J. MacBride, in the House of Representatives, January 28, 1868, following the report of the Evans committee on the 27th — Missouri Republican, l^nvLaTy 2(), 1868; also speech of Hon. Eugene Williams — Missouri Republican, February 20, 1868. See also statement that one of the commissioners, R. A. Watt, solicited the appointment as commissioner — Missouri Republican, March 21, 1S67. See "Democrat and Slush Fund" in Missouri Republican, April 16, 1867, and "Once More " — Ibid., April 17, 1867, and correspond- ence from Jefferson City, Ibid., March 13, 1867. See Farrar's "Vindication" — Missouri Republican, yia.rch 15, 1867, also Watt's "Card," Ibid., March 16, 1867, denying that he ever told Farrar that he (Watts) was offered bribes; also "Card" by D. W. Dreyer, denying that he offered anyone ;Jio,ooo as a bribe, as stated by Farrar as having come from Watt, Ibid.; see Farrar's "Vindi- cation," answered by " Radical," Ibid. Farrar attacks McGinnis's (Chairman of Investigating Committee) private record. Democrat, March 15, 1867; McGinnis replies. Democrat, March 21, 1867. Farrar charges collusion between Dinsmore and Fremont, two of the bidders ; Dinsmore denies any such collusion, Missouri Repub- lican, March 25, 1867 ; Fremont also denies it in testimony before investigating com- mittee — House and Senate Journals, Adjourned Session, i8b8. Appendix, p. 181. 'See below, p. 226 et seq. 158 STATE AID TO RAILWAYS IN MISSOURI least did not comply with, the terms of their contract with the state, had become involved in litigation and on this account had not been able to push the road to completion. The purchasers early in 1867 asserted, however, if newspaper correspondence can be trusted, that they could and would pay the amount owed to the state, but that they preferred to pay it in the form of a completed railway, and offered to the state the choice of the alternatives of compelling them to pay the debt or of releasing the lien and thus enabling them to complete it.' The completion of the road would afford railway connection between Kansas City and the Northwest. Moreover, this part of the state now stood in special need of a railway. The Mis- souri River, so long regarded and even at this time spoken of as the "inherited" channel, was proving totally inadequate to the demands of trade. Shippers in the Northwest during the winter months preferred to have freight sent by way of Chicago on rail- ways in Illinois and Iowa, than to wait till the "inherited" chan- nel thawed out.'' And, further, the extension of the Missouri Valley Railway would help to accomplish the end sought for in the beginning of the railway experiment, which was the drawing of the trade of the Northwest to the city of St. Louis. As railways leading to Chicago had already penetrated this region it was high time for the people of Missouri and especially of St. Louis to see to the completion of the Missouri Valley Railway.^ " " The company do not refuse to pay the lien ; on the contrary they declare their determination to pay it. They say, however, that unless they can work it out no new road can be built. They can pay their debt to the state with the earnings of the road, and will do as the state directs. The only question then is, will the state have the road completed immediately or will she collect her lien on the unfinished road." — Corre- spondence from Jefferson City, Democrat, February 14, 1867. 'See article by "Legion" in Democral,']a.nw3xj 17, 1867. The writer relates that a St. Louis merchant when ready to return a quantity of sacks to Omaha, where he had bought grain, found that the "inherited" channel was blocked with ice. The St. Louis merchant, being ordered by the owner of the sacks to ship them back by way of Chicago on railroads through Illinois and Iowa, proved " too plucky " to be found shipping by way of Chicago, and preferred to suffer the extra cost of sending the sacks liack by the Merchants' Union Express in stages on dirt roads along the valley of the Missouri River. 3 See editorial in St. Joseph U>iion, quoted in Missouri Republican, January 23, CONCLUSION OF THE EXPERIMENT OF STATE AID I 59 And again the state funds and accrued interest, ^994,000, owing by this company, were very small compared with the amount ($6,478,070) formerly owed to the state by the St. Louis and Iron Mountain and Cairo and Fulton railways. Although the two latter railways, with the extensions required by the recent acts releasing the state's lien, would give the state a little less than 300 miles of railway, the Missouri Valley, when completed, would give the state about half as many miles, extending through a more fertile part of the state and ultimately making quite as valuable external connections. Of the two propositions which the Missouri Valley Railroad Company made to the state, namely (i) of paying the amount due on the road, or (2) extending the road to the Iowa line on condition that the lien be released, the state chose the latter. The lien was released on condition that the company pay into the treasury of the state $334,000 in state bonds, $334,000 in the bonds of the company, and $i 00,000 in certificates of stock of the company.' Then for every mile of railway completed the state was to return $5000 of the state bonds received, $7000 of the company's bonds, and upon the completion of the road to the Iowa line cancel the $100,000 of stock deposited by the company. The railway was to be extended up the valley of the One-Hundred-and-Two River to the Iowa line by December i, 1869, or the privileges of the company would be forfeited. § 8. While the St. Louis and Iron Mountain, the Cairo and Fulton and the Missouri Valley railroads were being disposed 1867. "While St. Louis and St. Joseph have been sleeping and dreaming as if in security, Chicago has been awake, and by the opening of spring a line of continuous railroad will be opened from the very foot of the Rocky Mountains, by Omaha, across Iowa to Chicago, and on to the Atlantic." Many other facts concerning the general situation as to railway connections are mentioned, which indicate that traffic was about to be deflected from Missouri lines. It is urged, however, that this can i)e averted by a speedy completion of the Platte Country Railroad, and that for this pur- pose St. Joseph, St. Louis, and all the state should assist in the work, and the legis- lature should also grant further aid. In the same article it is argued that the Hannibal and St. Joseph, greatly aided by the state, carries trade from St. Louis, while the Platte Country, with no aid to speak of, would carry trade to the state. ' Laws of Missouri, Adjourned Session, 1868, p. 107. l60 STATE AID TO RAILWAYS IN MISSOURI of, attempts were also being made to dispose of the North Mis- souri. Like some of our trans-continental lines, in seeking at an early date to get released from the lien held by the general government for amounts advanced to them, this road, as we have seen already, had sought release from the lien held by the state. Though other roads in connection with this one were unsuc- cessful in their first attempts at securing a release, this company, as has been noted, succeeded February lo, 1864, in obtaining a release to the extent of two million dollars ; and later, February 16, 1865, secured another to the extent of six million dollars. Consequently in 1867—8 this company could come forward and ask for a release not from a first lien but only from a second,' which they thought was not asking for so very much after all. An examination of the condition and earning capacity of the North Missouri Railway will enable us to form an estimate of the value of the property upon which the state held a lien for six million dollars. Of course, during the war the road was operated in the face of many hindrances. However, the president says in a report^ to the governor, January 1865, "Notwithstanding the many disadvantages under which we have labored during the war, the loss of rolling stock which was not sufificient for the wants of the company if none had been destroyed, and the fact that the products of the country were consumed by trciops " instead of being shipped out of the country so as to increase the business of the railway, "our earnings have been steadily increasing." 3 It must also be taken into account that the earn- ings ($911,286) for 1864 are smaller than they would have been, had it not been for the destruction of the road by one " Bill " Anderson by order of the Confederate General Price in September of this year.'* In explaining why the earnings were ^Democrat, St. Louis, March 2, 1867. '* ° House Journal, 1863, Appendix, p. 627. 3 Gross earnings in 1862 $438,434 " 1863 636,24s " 1864 911,286 — See House Journal, iS6s, Appendix, p. 652. * Ibid., pp. 626-627. CONCLUSION OF THE EXPERIMENT OF STATE AID l6l small for October and the expenses large, the company reports that " this was the month after Anderson's destruction of our road. . . . Our hands had to be kept under pay ready for use or we should lose them, and when wanted could not regain them. This alone cost the company $40,000." ' Taking this in connection with the loss of trafific estimated at S6o,ooo by the company' as a result of the disturbances of September 1864, the earnings 8911,286 for the year were necessarily gioo,ooo below the amount normally to be expected. Indeed the pres- ident says, " Our total interest [due the state] is only ^261,000 per year and if the portion of the road now built was fully com- pleted and properly equipped with rolling stock it would earn the interest on the bonds due the state ;" 3 however, he further says the " net earnings must be applied for some time to come to increasing the engines and cars."'' Thus the same disposition of the net earnings was to be made in 1865 as had been made in 1863 ; 5 interest due the state was not to be paid but the capac- ' House Journal, 186^, Appendix, p. 661. 'Ibid., p. 652. ^ Ibid., p. 627. ' Ibid., p. 627. s The following is a letter from the president of the Company to Hon. L. C. Marvin, Speaker of the House of Representatives, in response to a resolution of the House inquiring into the financial condition of the railway companies. " Office North Missouri Railway Company, St. Louis, Feb. 11, 1863. It should be stated that a good many of our cars were burnt by rebels [1861]. We had not before the burning took place over about half enough cars to do the business offered to the road. We lost much business this fall and winter by want of cars. Feeling this, we have ordered 100 cars to be built and four locomotives; and the iron to be purchased to lay the 12^ miles of track that is graded north of the Hannibal and St. Joseph Road. If the moneys here reported were withdrawn, we could not pay for the cars, locomotives or iron. 1 think this should be known to you, to enable you to act understandingly. With great respect, your obedient servant, Isaac H. Sturgeon, President and Superintendent North Missouri Railroad Co. P.'S.— Cost of cars, locomotives and iron. 100 freight cars, ^750 $ 75.000 4 first-class freight engines, delivered in St. Louis, $13,000 each 52,000 15,000 tons iron, at S70 per ton, delivered on the road above Macon 105,000 Total $232,000 l62 STATE AID TO RAILWAYS IN MISSOURI ities of the road were to be enlarged. Out of ^285,433 of net earnings which we shall see the company had for 1864, it could have paid one year's interest, and had ;^24,433 remaining. ' A certain part of the outlay during these years was of course necessary for repairs ; indeed not all of it was made to enlarge the facilities and thereby to increase the earning capacity of the road. Although in 1865 the track was "in very fair condition" it needed "a large number of new ties — at least fifty thousand ;" and a large number of rails also would have to be replaced dur- ing the coming year. The engineer was "taking rails from the side-track to repair damaged ones in the main track." The fencing along the road in many places needed " a large amount of repairs " and some trestle work would have to be rebuilt at once. The cost of rolling stock and of repairs on rolling stock required at once (January 1865) would amount to S39 1,650,^ and the cost of road repairing and bridge building would amount to $102, 500 more, making in all a necessary immediate outlay of $494,150.2 It would not, however, have been a difficult matter to provide these funds in the short space of not more than two years if the amount of net earnings of the road during nine months of 1864'' were any criterion of what they would be in the future. Of $469,390 consumed in operating expenses and repairs, $168,583 fell to repairs; and of the $238,465 net earnings for these nine The net earnings, with what cash we now have on hand, will enable us to pay for the above, and do other necessary work, which will be more fully set out in a report to tlie legislature, which will be laid before it in a day or two. I. H. S." — See House Journal, Adjourned Session, 1863-4, part 2, p. 757. ' See below, p. 31. ^ 6 locomotives jSi 50,000 80 combination cars 128,000 28 platform cars 22,400 8 passenger cars 40,000 2 mail cars 8,000 2 baggage cars 5,000 3 caboose cars 9,000 For reconstruction of rolling stock 29,250 — See House Journal, i86j, Appendix, p. 656. ^Iliid. i Ibid., p. 653. CONCLUSION OF THE EXPERIMENT OF STATE AID 163 months, $152,551 were expended in making the kind of improve- ments above spoken of, leaving cash, materials and government vouchers on hand in excess of the amount at the beginning of me nine months to the extent of $85,914/ The net earnings for these months were at the rate of $26,495 P^r nionth, which was below the normal rate because of Anderson's raid. If addi- tional proof were needed to show that the North Missouri about the time of the close of the war was becoming to be a very prosperous road, reference might be made to the report of the chief engineer, January 1865, to the effect that the road during at least a part of the year was offered double the amount of business it was capable of doing/ If the business of the road was in an advancing state, then the capitalized value of the road, which the net earnings would give at the current rate of interest, cannot be regarded as too large. In 1864 the net earnings, $285, 433, ^ if capitalized at 7 per cent., the rate of inter- est on the first-mortgage bonds of the company issued under the act of February 16, 1865,* would make the value of the '^ House Journal, iS6s, Appendix, p. 654. °"For the last three months a constant daily demand for cars for transportation of live stock and merchandise has been made by shippers, which the company has been utterly unable to supply, causing much complaint and dissatisfaction among the patrons of the road. We have not been able to bring to market even the hogs that have been offered for shipment, to say nothing of pound freight, and the consequence is that they have sought other markets by thousands. As our trains have been loaded with hogs, which cannot be driven any great distance, cattle have kept away from our road, and were driven rather than wait for us to bring them to market. I think there is no exaggeration in the statement that we have not done more than one-half of the business offered for the past three months and this will happen every winter until the road is fully equipped." — House Journal, i86j. Appendix, p. 655; see also letter from the president of the road (February 1863) to very much the same effect, above p. 28. 3 This amount is, if anything, smaller than the actual amount. The gross earn- ings for the whole year and for a given nine months appear in the report, but expenses are given for only the nine months. The gross earnings for the whole year do not keep up at the rate for the nine months. However, we have computed the expenses for the whole year at the rate for the nine months, and have taken the difference between this amount and the actual earnings for the whole year. The net earnings thus computed, barring extraordinary causes for increase in expenses, and none such are reported, cannot be too large. See House Journal, 1865, Appendix, pp. 652-654. *Laws of Missouri, i86s, p. 90. 164 STATE AID TO RAILWAYS IN MISSOURI North Missouri Railway $4,077,6 14. The net earnings for this year amounted to 3.8 per cent, on the whole amount ($7,456,744, principal and interest) invested in the railway.' In 1866 the rate of net earnings was not quite so large as in 1864, being only 3.2 per cent, on the investment.^ The value of the railway, if based on the net earnings, $272,884, in 1866, capitalized at 7 per cent, would have been $3,898,342. However the question which concerned both the state and the railways at this time was not, it seems, what the railways were worth, but how to sever the connection of the state with enterprises which had never been anything but a source of trouble and of financial loss, and thus to prepare the way for the extension of the long delayed railways under private manage- ment. To be sure, if there was anything to be gained by a release from the state lien, the North Missouri Company would be just as quick to see it as would any other company. Of the five million dollars ^ of first-mortgage bonds issued under the act of February 16, 1865, the company had sold only a small part, but had arranged with the contractors of that part of the road north of the Hannibal and St. Joseph to take bonds at the rate of eighty-five cents on the dollar.'' Although only a small part of the bonds issued had been sold even by April 1867, the company earlier in the year had expected that the sale of the whole would be completed by midsummer, and that the proceeds would be expended without completing the railway .5 It was at this time ( March 1867) that the company purposed to become fully released from the burden of even a second lien in the hands of the state. Inasmuch as only a small part of the five million dollars issue of bonds had been disposed of attention must be again called to the financial problem in connection with this railway which confronted the state. The engineer stated in a published report" that the interest on the first-mortgage bonds, when all were " See Table IV. Appendix i. ''Ibid. » '^Democrat, St. Louis, March 2, 1867. '■ Missouri Republican, April 6, 1867. ^Democrat, St. Louis, March 2, 1867. '•Ibid. CONCLUSION OF THE EXPERIMENT OF STATE AID 165 issued, would be 8420,000, that the net earnings of the road at that time ($35,000 annually) would not pay one-fourth of this amount, and if the company were dependent upon this source it would default in interest the following July, and there would be consequently a sale of the road under the first mortgage of five million dollars, and that the sale would cut the state out of every dollar, because she had only a second mortgage. The company proposed, said the engineer, to pay $200,000 into the treasury, and agreed to furnish money enough to complete the road in a reasonable time. The engineer estimated that it would require $1,518,000 to complete and equip the main road and branch, and said that this money could not be raised with the second mortgage hanging over the road. To be sure the net earnings of the road would be only $35,000 if the amounts expended for construction should be included under operating expenses and repairs.' And even reckoning the amounts expended for these matters in 1867 as chargeable to the expenses of that year, the net earnings of the road would then be, accord- ing to a published report,'' $67,801, which capitalized at 7 per cent, would make the railway worth nearly one milHon dollars. Moreover the roadbed and rolling stock in the early part of 1867 were in good order. As the company was at this time pleading with St. Louis capitalists to take two million dollars of its bonds,' a party of business men from St. Louis made a trip, April 30, over the railway as far as Moberly, for the purpose of inspecting it.* The party says : " The condition of the road as far as passed over was found to be most excellent, as was that of the engines, rolling stock, and the like seen by the party;" and "as a result of this cursory survey all agreed that the North Mis- souri Railway was one of the most valuable in the state for assisting in developing its agricultural and other interests." Although at the time these statements were made concerning ■See Senate Journal, 1867, Appendix, p. 881 ; also Table IV, Appendix I. ' Senate Journal, 1867, Appendix, p. 881. ^Missouri Republican, April 6, 1867. ■I See article, "Trip over the North Missouri Railroad," Ibid., May 3, 1867. 1 66 STATE AID TO RAILWAYS IN MISSOURI the North Missouri the public mind was considerably agitated because of the scandalous reports regarding the sale of the St. Louis and Iron Mountain and Cairo and Fulton railways, nothing had as yet transpired in relation to the North Missouri to lead men to distort facts concerning it. The most weighty argument in proving that this road was in a growing condition and that it would soon be able to meet its interest dues, is that the company was constantly required to add rolling stock in order to be able to do the business offered to the road. In 1867 the amount of rolling stock owned by the company was much greater than in 1865,' and although the gross earnings in 1867 were slightly smaller than in 1865, the greater amount of rolling stock would indicate that the normal condition of affairs was that of "an increasing traiific. To sum up, it appears that the North Missouri Railway Company as early as 1865, barring expenses for further con- struction, could have paid the whole of the annual interest due to the state for that year and have had a surplus of $24,000 remaining.^ Although it was in accordance with sound busi- ness methods to apply net earnings to the development of the earning capacity of the railway, 3 yet the cost of such improvements could not properly be charged to any given year's income ; and the demand for such an increase was the very best indication that sooner or later the company would be able to meet all interest charges against it. The case seemed to be just this. The company had the right to issue six million dollars of first-mortgage bonds, and it owed the state just about six million dollars. The interest on the first-mortgage bonds when all sold would be, at the rate of I Rolling stock on Jaand Engines Passenger cars Baggage, mail, and express cars Freight and other cars See Senate Journal, 1867, Appendix, p. 881 ; also House Journal, 186s, Appen- dix, pp. 657-658. ''See above, p. 162. ^ House Journal, i86s. Appendix, p. 654. 1865 1867 20 26 13 27 6 9 211 375 CONCLUSION OF THE EXPERIMENT OF STATE AID 1 67 7 per cent., ;g420,ooo ; the interest due on the state bonds then outstanding would be only about ^360, 000, counting interest on accrued interest. The company wanted to apply the net earnings of the road to the further extension of the railway instead of being obliged to use up their income in pay- ing interest on the six million dollars of state bonds. The net earnings of the railway, however, just as it was, without further extension, would very soon have paid all the interest due the state ; and a capable and determined state administration could have enforced in the course of time the payment of the entire obligation due the state ; at least so it seems to the writer from a study of the capacity of the road as given in the pre- ceding pages. This being the case, there were two courses open to the state: either (i) to apply pressure to the com- pany and force the payment of the debt, or (2) to release the lien in order to help the company to extend the main line to the northern boundary of the state and the West Branch to the western boundary. The latter course would free the state from its connection with the road, and secure to the community about two hundred miles of additional railway ; but it would at the same time throw a debt of more than six million dollars upon the state. Notwithstanding this fact the state adopted this course, and released the second lien of $6,960,000 for the nominal sum of $200, 000,' a sum, as we have seen, proposed by the company itself.'' The conditions upon which the lien was released were (i) the completion of the main line to the nor- thern boundary of the state in nine months, (2) the extension of the West Branch to the western boundary of the state in eighteen months, and (3) the erection of a bridge over the Mis- souri River at St. Charles within three years from the date of the release (March 17, 1868). Whether or not the state selected the better of the two possible courses in dealing with the North Missouri Railway may be decided on the same general prin- ciples as those upon which the larger question of the continued ^ Laws of Missouri, Adjourned Session, 1868, p. 112. "See above, p. 165. 1 68 STATE AID TO RAILWAYS IN MISSOURI connection of the state with railway enterprises after the close of the war is decided.' The South West Branch of the Pacific, as we have seen, was first disposed of May 12, 1866, in accordance with the act of February 19, preceding; General John C. Fremont purchased the road for the sum of 1.3 million dollars.^ Some months later General Fremont attempted to float two million dollars of bonds for the purpose of further extending the railway. In advertising the railway and the lands belonging to it he certainly gave extraordinary values to both ; he placed the value of the railway when completed at 12 million dollars, and the 1,036,000 acres of land belonging to the company at ten million dollars, mak- ing a grand total of 22 million dollars.' That there could not be such a grand total of wealth represented by the railway and its lands it is needless to say all capitalists would plainly see. The seventy-seven miles of railway completed represented a certain sum, say 1.3 million dollars, the purchase price. The funds for the completion of the remaining part of the road had to be obtained by mortgaging the lands and the portion of the road already built. Thus the value of the completed railway would continue the same as that of the lands and the portion already ' See below, pp. 226 et seq. '^ Auditor's Report, 1883-4, P^""' 2, p. 97. 3 The advertisement {Daily Missouri Democrat, St. Louis, December 17, 1866, and January 18, 1867) reads as follows : 77 miles completed road now in operation to Rolla, cost 84,500,000 13 miles graded with material on hand at a cost of . 500,000 Together with 260,000 acres of land now being disposed of at a minimum of $5 per ^cre (maximum ^40) 1,300,000 86,300,000 When completed it will present a road of 310 miles in length costing about 812,000,000 With 1,036,000 acres of land valued at 10,000,000 Showing a total value of 822,000,000 [Signed] Ward and Company, Bankers, No. 54 Wall street. New York. The advertisement further states that this road connects with eastern railways and runs through "the most attractive parts of the state of Missouri." COK'CLUSION OF THE EXPERIMENT OF STATE AID 1 69 completed. Therefore to count the finished road and the lands as each forming a part of the total value of the property of the company, was a misrepresentation too transparent to deceive any one. The advertisement was not successful, though continued for a month or more, and no large amount of bonds was sold.' As the road and lands were not wanted at a high price by capi- talists, the favorable statements of the papers^ and of the enthusi- astic friends 3 of the railway and the state were of no avail. Such means could not replace capital and brains as the necessary fac- tors in the construction of a railway. Even during the time of the advertisement in the Democrat, General Fremont became convinced that he could never pay out and therefore sold the property for just what he had paid for it. The new owners of the road, becoming convinced in a short time that their bargain was a bad one, proceeded to Jefferson City, the Mecca of all distressed railway builders in Missouri in these times, to ask that the time for the cornpletion of the road be extended."* The members of the legislature from the south- western part of the state, because of great demand in the south- west for a railway, offered to exert themselves to secure further aid for the company when it proceeded to the construction of the railway, but refused to help secure an extension of time. Matters went from bad to worse till June 15, 1867, when the company failed to meet the second annual installment. ' Gover- nor Fletcher then took possession of the road and appointed ^Missouri Republican, April 26, 1867. -Democrat, St. Louis, January 23, 1867. » 3 In an article on " Fremont and tlie South West Branch " in Missouri Republican, April 26, 1867, " An Absent Taxpayer of Missouri " values the railway and its lands at 1 1 million dollars. * The Jefferson City correspondent to the Democrat, St. Louis, January 9, 1867, says: " General Pile is here on business for the South Pacific Railroad Company of whose road he is superintendent. The company thinlv that they paid too much for the road, in view of their obligation to complete it, though it was transferred to them by Fremont for the sum at which it was bought by him, he, it is declared, receiving only Sioo for the transfer. The transfer was contemplated when he became pur- chaser." Then follows a plea for aid. ^Democrat, St. Louis, June 24, 1867. 170 .STATE AID TO RAILWAYS IN MISSOURI General Clinton B. Fisk to operate it till it could be sold. Following the failure of the company to build the railway, the southwestern part of the state demanded very earnestly that the legislature take some active steps which would lead to the con- struction of the much needed railway.' The road continued to be operated by the agent of the state while further efforts were made to dispose of it. The receipts of the South West Branch under the management of the state agent were little more than sufficient to cover the expenses and the cost of repairs. However no small part of this expense was incurred in making extensive repairs on the rolling stock and in placing the track in "most excellent condition."' It is not necessary to trace the course of all the measures introduced into the legislature during the winter of 1868 to dis- pose of the South West Branch. There were various projects put on foot by separate individuals or bodies of men to get control of the railway. The two chief competitors for the railway seem to have been the representatives of Chouteau, Harrison and ^ Tee letter concerning the needed road in /?£'OT(7£r/-a/, June 27, 1867; proceedings of a railroad meeting in Springfield, July 8, 1867, Democrat, July 16, 1867 ; also senti- ment of the papers in the southwest which earnestly ask for an extra session of the legislature to enable the road to be placed as soon as possible in the hands of reliable men. — Democrat, July 9, 1867 ; and an account of a mass meeting in Springfield, July 17, 1867, attended by Governor Fletcher and Colonels Baker, Oilman and Grosvenor, Democrat, July 18, 1867. 'The following report of the management of the road of the South West Branch by the state agent covers only the time between June 15, 1867, and January 4, 1868, the date of the report. Nothing further is to be learned of the earning capacity of the road, as it was turned over to a private company on the i8th of March following, and this company was under no obligation to make such reports as had been heretofore made and if any were made they were not published. Aggregate receipts (June 15, 1867-Jan. 4, 1S68) ^118,970.83 Expenses: (i) running expenses, balance S5422 due the Pacific Railroad, repairs and materials purchased 93,471.09 (2) back pay due employees when road fell into hands of the state 18,535.29 Total expenses gi 12,006.38 Balance g 6,964.45 The company also owed the balance (not stated) due the Pacific Railroad for freights in November and December, 1867. — See House and Senate Journals, Adjourtied Session, 1S68, Appendix, p. 143. CONXLUSION OF THE EXPERIMENT OF STATE AID I71 Valle, a St. Louis mercantile firm, and those of Fox, Baker and Company, whose standing has not been determined. There were, however, other bidders for the road. Capitalists from Boston and New York became interested and two gentlemen from Boston visited the state on this account. These gentlemen were reported to have raised a cash subscription of two million dollars for the purchase of the railway.^ And the great publicity given to the propositions of the Boston gentlemen, which were so much better than those made by some of the other competitors for the property, "led to propositions from other quarters" raising the amount offered for the railway according to the terms of the Senate bill then being discussed.' Although the offer of the capitalists from Boston added interest to the matter of disposing of the road, possibly leading the former competitors^ to bid in a little more lively fashion, no one of the competitors was suc- cessful in securing the award of the property. It seems that all finally agreed to form a single company, and to purchase the railway and lands. The second section of the act disposing of the railway contains among others the names of almost all of the individuals competing for the railway even to the name of one of the gentlemen from Boston. t Among the grantees of this 'See editorial in Democrat, Si. Louis, February 15, 1868, which says in part: Andrew Pierce and Francis B. Hayes of Boston arrived in our city yesterday. These gentlemen are reported to be looking after the South West Branch Railroad, and it is said they have raised a cash subscription of two million dollars for purchasing the road. We have no specific information " as to the kind of proposition which these gentlemen, with their associates, Messrs. Kidder, Peabody and Co., bankers, and Mr. Benjamin Bates, President of the Bank of America in Boston," are able to make, but if they are pre- pared to do what it is claimed they can do, the General Assembly should not act hastily in disposing of the road. Another and separate offer of one million five hundred thousand dollars for the road seems to have been provisionally made by parties in New York. — Democrat, February 18, 1868. = Correspondence from Jefferson City in Democrat, St. Louis, February 20, 1868. ?" South West Branch Railroad matters are demoralized by the arrival of a delegation in the interest of the Chouteau, Harrison and Vall^ projects. The Fox- Baker project is not now considered so sure of success as it was recently." — Cor- respondence from Jefferson City, Democrat, St. Louis, February 29, 1868. ■•The grantees were : A. C. Kingsland and Son, G. D. Craigin, Freeman Clarke, A. S. Diven, Ben. HoUaday, E. H. Greene, N. Randall, W, H. Coffin, Lewis Seyle, 172 STATE AID TO RAILWAYS IN MISSOURI railway were A. S. Diven, a former contractor on the South West Branch, General C. B. Fisk, formerly the state agent operating the railway, and others prominent in politics at the time. The act disposing of the South West Branch became a law on the 17th of March, 1868,' the day on which we have seen the legislature finally disposed of the St. Louis and Iron Mountain, the Cairo and Fulton, the Platte Country, and the North Missouri rail- roads. The act granted the road and lands in fee simple to a company to be organized for the purpose of extending the rail- way to the western boundary of the state. The purchasers or grantees of the South West Branch were to organize themselves into a new company to be known as the South Pacific Railroad Company. This company was required to expend in extending the railway the sum of ^500,000 within one year after accepting the terms of the act.'' The railway was to be completed to the town of Lebanon, Laclede county (in two years) to Springfield in three and one-half years, from the date of the act, and to the western boundary of the state in Newton county by June 10, 1872.3 As a guarantee that the railway would be extended A. C. Wilder, T. C. Bates, J. B. Gray, G. V. Fox, C. B. Fisk, D. A. January, James J. O'Fallon, Charles M. Elleard, Charles P. Chouteau, James Harrison, Erastus Wells, E. S. Rowse, M. D. Reese, Andrew Pierce, Jr., J. J. Dixwell, Thomas W. Peirce, Dwight Durkee, Louis G. Fisher and James B. Hodgskin. — See Laws of Missouri. Adjourned Session^ /86Sy p. Il8. ^ Laws of Missouri, Adjourned Session, 1868, p. 126. ° The amount of ^60,000, which the company would have to pay for the settlement of claims not paid by Fremont for work done and materials furnished on the railway west of Rolla, when the railway was in his control, was to be counted as forming part of the necessary expenditure of S500,ooo for the first year. This amount of $60,000 would come, however, out of the settlement of balances due by purchasers of lands from General Fremont. The amount of land sold to settlers or donated for school purposes by General Fremont was reserved by the state and not granted to the new company. This amount located between the line which divides sections four and five of townships in range two west of the fifth principal meridian, and a point one hundred miles from the town of Franklin on the line of the South West Branch would, however, not be allowed to exceed 18,479 acres. The sums remaining unpaid on these lands were to be paid to a commissioner appointed by the governor, and then by him paid into the treasury of the state. The treasurer was then to transmit these funds to the South Pacific Railroad Company to reimburse the company for the payment of the S6o,ooo in balances unpaid by General Fremont. 3 In case Congress could be prevailed upon to extend the time of the land grant CONCLUSION OF THE EXPERIMENT OF STATE AID 1 73 in accordance with the terms of the act, the company was required to deposit with the treasurer of the state in a bank named for the purpose the sum of 1.5 million dollars in the bonds of the United States or of the state of Missouri. This sum could be withdrawn in blocks of g 100,000 each, but only to be expended in the extension of the railway ; and of the amount, the sum of $250,000 was to be retained to aid in the construci tion of that portion of the road west of Springfield. This com- pany was also to file a bond in the sum of one million dollars with the state, the amount of which could be collected in case the company failed to comply with the terms of the act. The only direct and tangible return for the railway required by the act was that the company should pay to the treasurer of the state for the state interest fund the sum of 1^300,000 in three annual installments, beginning June i, 1874. To secure funds for the extension of the road the company was granted the right to issue $7, 250, 000 in bonds, based upon the road and lands as security. The company could sell any of the lands granted to it only upon condition that it would apply the funds to the extension of the railway. Up to this time this railway had been a branch road leaving the main line of the Pacific at Franklin (now called Pacific City) thirty-seven miles from St. Louis. The act of March 18, 1868, gave the new company the right to construct a railway commencing at or near the intersection of Washington and Grand Avenues in the city of St. Louis, running westward through the county of St. Louis and connecting with the eastern terminus of the former South West Branch at Pacific City. § 10. During the time in which the disposition of all the rail- ways, as discussed in the preceding pages, engaged the attention of the legislature, efforts were being made to secure a release of the lien held by the state on the Pacific Railroad. During the regular session of 1867 bills had been introduced which seemed to indicate that the legislature would dispose of the Pacific Rail- for one year or more, the company should then have five years in which to complete the road to the western boundary of the state. — See sec. 4, act of March 17, 1S6S, Laws of Afissouri, Adjmirned Session, 1868, p. 1 18. 174 STATE AID TO RAILWAYS IN MISSOURI road for the sum of four million dollars.' This fact proved later to be of great interest to the owners of the railway because it led them to believe that for a sum of about this amount they could secure a release from the lien held by the state. To understand the situation of the Pacific Railway, it is necessary, as in the case of those already considered, to arrive as nearly as possible at the value of the road. It seems that that during the winter of 1867 its value was put somewhere between four million dollars ' and a little more than ten million dollars. In a letter speaking of the offer of ^10,450,0003 for the railway by the Union Pacific Railway Company, Mr. Branscomb, the chairman of the House committee on Internal Improvements offers some good reasons why the state should sell. Indeed, in case the state could sell for such a price, the only possible argument for not selling would be that possibly the state could operate the road as a state enterprise so as to make more out ■The Democrat, February 4, 1867, says editorially concerning the bill before the legislature relating to the Pacific Railroad that, if it contains features such as our cor- respondent refers to, it cannot meet the approval of the legislature. " The Radical members at least will not be ready to forget that provision of the nevif constitution which declares that no more of the property of the state shall be relinquished by the legislature without being fairly and honestly paid for in money. The sooner the legis- lature makes known its determination to abide by this provision, the better it will be for the credit of the state both financially and morally; " see also concerning Valle'.s bill in which the price is put at four million dollars. — Democrat, March II, 1867. = See estimate of William McPherson, Democrat, March 11, 1867, putting the value at four million dollars. It seems according to newspaper correspondence that the Union Pacific Railroad Company made two widely varying offers for the road. In the Democrat, March 9, 1867, it is stated that Mr. Perry, the president of the Union Pacific Railroad, General Palmer, the treasurer, and others, offered to pay four million dollars to the state, 15700,000 to St. Louis county, and to assume 1.5 million dollars of Dresden bonds, making in all 6.2 million dollars. 3 According to this letter the Union Pacific offered to pay the following amounts : First-mortgage bonds gl, 500, 000 To the state of Missouri 4,000,000 For repairs 1,500,000 Debt of St. Louis county 700.000 To stockholders at 50 per cent, on their stock in U. P. stock 1,750,000 Total 10,450,000 — See Democrat, St. Louis, March 23, 1867. CONCLUSION OF THE EXPERIMENT OF STATE AID 1 75 of it both for the treasury of the state and for the community at large than by selling it. However, no evidence that such an alternative was for a moment discussed has been found. It was during the time that the above offers were being made that the stockholders of the company became greatly alarmed lest the road would be sold to capitalists foreign to the state' and they thus be left holding an empty bag. And when the bill for the sale of the road was introduced at the adjourned session of 1 868 the stockholders exhibited again the same anxiety concerning the taking over of the road by foreign capital.^ If the road was to be sold at a bargain the stockholders felt as if they ought to have the first chance at it. Notwithstanding some real and worthy offers for the Pacific Railroad, the regular session of 1867 adjourned without effecting a sale. However, the idea that the state should release herself from all her railway enterprises was in the air ; it had been seen how busy the adjourned session of 1868 was with the disposition of the other railways upon which the state held a lien. That the Pacific Railroad also would be disposed of at this session was almost a foregone conclusion. Consequently, very soon after the opening of the adjourned session, a committee was appointed to investigate the books and accounts of the Company, so as to find out what the value of the road was.^ This committee went very thoroughly into the matter and from the very elaborate report"' made, the value of the road, if based upon its earning capacity, exceeded by far the four million dollars asked for it by 'See letter signed by "P," Republican, March 25, iSiby, asking a full attendance at a stockholders' meeting to discuss the sale of tt.eroad and to prevent foreign capital from getting control of it. The letter also says that the state ought to give the stock- holders a better shovif than foreign capitalists. See also article by "G," Democrat, March 30, 1867, in which it is argued that if the state releases her lien the stockholders should have the advantage. '^See communication by "Justice," Republican, February 8, 1868, saying the state should sell to the stockholders ; see also letter from the stockholders in Democrat, February 8, 1868, in which the outlook for the stockholders is regarded as very gloomy. ^Senate Journal, Adjourned Sessioit, J 868, p. 34 and House Journal, Adjourned Session, 1868, p. 44. " House and Senate Journals, Adjourned Session, 1S68, Appendix, pp. 211-251. 176 STATE AID TO RAILWAYS IN MISSOURI the Valle Bill of the regular session of 1867.' The total debt against the company was now ^14, 383, 493.'' To pay interest upon such a debt the company had, according to the report of the committee, net earnings in 1866 to the amount of $698,826, and in 1867 to the amount of $850,789.3 Of the debt only a small part bore 7 per cent, interest ; the remainder bore only 6 per cent. Reckoned at this latter rate, the net earnings ($850,789) for 1867 would have paid interest on $14,179,816, or on almost the entire debt. Even if there were no further evidence of the capacity of the Pacific Railroad Company to meet all of its obligations, what is given above would be enough to prove it, when taken in connection with the fact that the business of this railway now connecting the second greatest commercial center in the Mississippi Valley with a fast developing center on the western boundary of the state was rapidly growing. The business of the Pacific Railway had steadily grown from the very beginning, and of recent years, after completion to Kansas City in Septem- ber 1865, it had made gigantic strides.* There was, however, " See above, p. 171. = (i) Debt due the state: For principal of bone s loaned to the company $ 7,000,000 For interest from July i, 1859, to January i, 1868 3,780,000 For tax under ordinance of April 8, 1865, for 1867 253,644.50 (2) Debt due other parties $ 3,349,848.60 '4,383,493-10 — See Hoiisi and Senate Journals, Adjourned Session, 1868 Appendix, p. 220 ^Ibtd., p. 215. * Gross earnings of P acific Railroad: For year ending December 31, 1852 " 1853 February 28, 1855 $ 108 41,323 97,176 It ,( " 1856 330,222 " ** " 1857 426,285 (( « " 1858 668,346 « ti " 1859 674,248 tt t( " i860 648,600 *< ' " 1861 683,644 " K " 1862 457,183 CONCLUSION OF THE EXPERIMENT OF STATE AID 1 77 one item of expense which this company must incur ; the gauge of the road must be changed. The investigating committee estimated, however, by comparing the work to be done here with that already done on the North Missouri Railroad, that this change could be made for §390,000. That the company had great faith in the future of its enter- prise is seen in the fact that in addition to the amount spent in repairs of roadbed and rolling stock, it spent the sum of S 1, 476, 469 in the construction of rolling stock and in making such other additions to the road as generally come under the head of " construction." Of this sum the company had to raise a ' large part by loans which appear in the accounts published in the report of the committee as "bills payable."" In concluding its report the investigating committee referred to above says : " Making a liberal allowance for change of gauge and other expenses to place the road in good condition, your committee is of the opinion that eight million dollars is the minimum sum for which the state ought to dispose of its interest in the Pacific Railroad." = There is, however, yet further unimpeachable evidence con- cerning the earning capacity and the value of the Pacific Railway. The earning capacity of the railway may be gleaned from a reports to the stockholders April 10, 1867, by a committee appointed by them for the purpose of ascertaining what that For year ending February 28, 1863 679,956 " 1864 906,745 " 1865 1,007,763 " 1866 1,794,356 December i, 1866 2,615,915 " 1867 2,807,992 See Senate Journal, 1867, Appendix, p. 879 and Hoztse and Senate Journals, Adjourned Session, 7868, Appendix, p. 2I5. '^ House and Senate Journals, Adjourned Session, 1868, Appendix, pp. 228 and 229. 'Ibid., p. 224. 3 The following is an abstract of the report : The committee find that the money due and to become due during the year 1867, over and above the expenses of operating the road and interest, consists according to the report of the directory of (i) The floating debt Si, 230,239 178 STATE AID TO RAILWAYS IN MISSOURI capacity was. This report estimated that because of the increas- ing productions of the country, there would be an annual increase of 10 per cent, in the gross earnings of the road for the next few years. Furthermore, the committee thought that expenses would not increase in the same proportion. Therefore, setting off the necessary increase in the number of brakemen and laborers against an almost certain decline in wages from the present high standard the committee estimated that the operating expenses for the next few years would remain practically unchanged. This being the case the earnings of the railway in the next three years would pay "the present floating debt," put new rails on the road where needed, " pay off the bonds maturing in those years and leave a surplus of ^870,358," which "would pay all interest [excepting that due the state, of course] and leave a surplus of about a quarter of a million of dollars applicable towards changing the gauge of the road between St. Louis and Kansas City." The committee then states that the estimates of (2) The amount necessary to relay track between Labadie and Jefferson City 245,000 Making $1,475,239 In 1868 bonds falling due $500,000 " 1869 " " " 500,000 " 1870 " " " 500,000 Total $2,975,239 In view of the fact that the gross earnings of the road the first year after the suppression of the Rebellion, when the lands were comparatively uncultivated, amounted to $2,669,586 we think the increase and increasing productions of the country fully authorize us to estimate our annual increase of 10 per cent, in the gross earnings of the road for the next few years. If this is true, and we think the future will prove it to be an underestimate, the gross receipts for Fiscal year 1867 will be $2,936,545 " " 1868 " 3,230,200 " 1869 3,553,221 Making gross receipts for three years $9,719,966 We understand this increased business can be done by the road without any other additional operating expenses than the cost a few brakemen and laborers, if the present rate of wages continue -, but as it is probable, rates will decline from the present high standard, we think the operating expenses of the road for the next three years will not average more than the last, which was $1,958,123, and making for the three years. CONCLUSION OF THE EXPERIMENT OF STATE AID 1 79 the engineer and superintendent of the road for the next three years exceeds the one it has made. Again, as to the value of the railway President Taylor of the company stated as early as March 1867, in a report filed in the Auditor's office as required by law within two years after the completion of the road, that the value of the road was " 7.4 million dollars and that it was completed to the state line April 6, 1866."" It might also be added here that at this time, just after the close of the regular session of 1867, the president, in answer to the assertions of certain individuals that the Pacific Railroad was in an unsafe condition, states that the condition of the road although many repairs are needed is not "unsafe." ^ ®5>874,36g, showing a net profit of $3,845,397. On the business of the three years which will pay the present floating debt, re-iron the road now requiring it, pay off the bonds maturing in three years, and leave a surplus of ^870,358, which will pay all interest and leave a surplus of about a quarter of a million of dollars applicable towards the changing of the gauge of the road between St. IjOuis and jSansas City if the interest of the road shall then require the change. Since writing the foregoing we have obtained from Mr. McKissock the engineer and superintendent of the road his estimate of the gross earnings of the road for the next three years. The total as given by the committee for the engineer was |Sio,53i,5i9. The engineer also estimated the expenses lower than those of the preceding year on an average. The report con- tinues, "we think Mr. McKissock's estimate is entitled to more credit than our own (our desire being to be certainly inside the truth) and if so there will be a clear profit in the next three years of 84,637,150 over operating expenses. "Mr. McKissock assures us also that when the track between Labadie and Jef- ferson City is relaid, the road will be in as good condition as any road in the country. [Signed] Robert S. Barnes, D. H. Armstrong, ]. T. SWEARINGEN, M. J. Payne, F. W. Cornenbald." — Missouri Republican, April 14, 1867. ' Correspondence from Jefferson City, Democrat, St. Louis, March 5, 1867. ^ "Now that the legislature has adjourned and that the Pacific Railroad is not to be sold, allow me to counteract one representation of ' lobbyists.' Our road between I^abadie and Jefferson City undoubtedly needs repairs, and these are being continually made, but as for the road being unsafe, I deny {sic). F " From an editorial copied from the Kansas State Journal of March 10, 1867, President Taylor shows that this " is an excellent road," and is highly complimented in its management and the like. — Democrat, March 15, 1867. See also President Taylor's "card" on the condition of the road in Republican, March 15, 1867. l80 STATE AID TO RAILWAYS IN MISSOURI And further, as might indeed have been expected, there was early in 1868 some opposition to the sale of the Pacific Railroad, and the parties gave as their reason that the road would necessarily increase in value as time went on/ The same sentiment is also voiced in an editorial in the Democrat of March 3, 1868 ; the editor estimates the value of the Pacific Railroad to be 'j.'j million dollars and says : " Seven millions is not what the railroad is worth, but on account of certain embarrassments the state should sell at so much if it desires to sell at all at this session." However, as has been said, the disposition of this railway at this session was almost a foregone conclusion. Early in the ses- sion the House and Senate passed concurrent resolutions for the seizure and sale of the Pacific Railroad;'' preliminary acts were introduced in the House in January and in the Senate early in February for disposing of the road ; and the House Bill (No. 214) which eventually became a law was introduced February 3.2 ' See communication by "S," Democrat, March 5, 1868. Among other things the writer says we can get at what the state should do by asking what a sensible business man would do in the premises. Such a man would find out first the value of the property ; and in finding its value he would hardly go to his debtor and listen to a long harangue as to the unprofitableness of the property, the cost of keeping it in repair, the many legal obstacles in the way of enforcing his lien, which invariably ended in an offer to take it off his hands at one-third its cost. The correspondent further says that the creditors were not pressing a sale, but that the parties who wanted a sale were the debtors. And again there is no pressing necessity for a sale. Any one who has any faith in the future growth and prosperity of Missouri cannot fail to see that this road will rapidly increase in value with every suceeding year for many years to come. °See below, note 3. 3 I. Resolutions. January 17, 1868. — Concurrent resolution in the Senate for the sale of the Pacific Railroad ; referred to Committee on Internal Improvements and fifty copies ordered to be printed. February 4, '68. — Concurrent resolution in House for the seizure and sale of the Pacific Railroad. Read first, second, and third time and referred to the Committee on the Judiciary. II. Preliminary Bills. January 24, '68. — Bill introduced in the House for the sale of the Pacific Railroad. January 30, '68. — New bill introduced. CONCLUSION OF THE EXPERIMENT OF STATE AID l8l The House Bill was introduced and championed by Mr. Fink- elnburg, the chairman of the committee appointed to investigate February 3, '68. — Bill No. 325 to dispose of the Pacific Railroad introduced in the Senate, read the first and second time, referred to the Committee on Internal Improvements and 200 copies ordered to be printed. February 25, '68. — New bill introduced. March II, '68. — Other bills, Nos. 346 and 355 mentioned. See Senate Journal, p. 392. III. Course of House Bill No. 214 which became law. February 3, '68. — Introduced in the House by Mr. Finkelnburg, chairman of the committee appointed to investigate the books and accounts of the Pacific Railroad Company ; bill read a first and second time, referred to a select committee on the Pacific Railroad and 200 copies ordered to be printed. February 20, '68. — (Morning session). Bill reported back by majority of special committee, recommending, among other amendments, an amendment to section 5 that the price of six million dollars be asked for the road. February 20, '68. — (Afternoon session). Report by minority of the special com- mittee recommending sale for five million dollars to the present company. February 21, '68. — (Morning session). Substitute bill submitted by Mr. Leder- gerber; tabled by vote of 65 to 50. February 21, '68. — (Afternoon session). Donophan's amendment : Price to remain at six million dollars, but four millions to be paid down and two millions to be paid in annual installments of Sioo, 000 each. February 25, '68. — Donophan's amendment tabled. Owens' amendment : Portion of purchase money to be paid down to be changed from ^350,000 to $1,350,000. February 26, '68. — (Morning session). Owens presents the following resolution : "that the interest of the state demands that this General Assembly should pass, at as early a day as possible, an act providing for the sale of the Pacific Railroad, and that the minimum price should not be less than eight millions of dollars, and that the pur- chaser or purchasers should be bound to change the gauge of the road to the same gauge as that of the eastern division of the Union Pacific within two years from the day of purchase, and that they shall be bound to pay the Dresden mortgage bonds and also ^700,000 loaned by St. Louis County;" resolution tabled by a vote of 54 to 51. February 26, '68. — (Morning session). Owens' amendment called up but passed over; (afternoon session) amendment lost by a vote of 62 to 51. February 27, '68. — Amendments. February 28, '68. — A further amendment voted down. March 3, '68. — Further amendments. Amendment offered in form of a substitute bill. March 4, '68. — Further amendments voted down, March 5, '68. — Substitute bill lost by a vote of 76 to 24. March 5, '68.— Bill passed bya vote of 74 to 26. Ayes. — Messrs. Akard, Alexander, Applegate, Baldwin, Beal, Bennett, Blodgett, Bogy, Branscomb, Britton, Brock, Brown of Dallas, Brown of Daviess, Bulkley, Burch of Jasper, Buzick, Childress, Cole, Coleman, Cosgrove, Dallmeyer, Downey, Doniphan 162 STATE AID TO RAILWAYS IN MISSOURI the books and accounts of the Pacific Railroad and whose report we have considered, on the same day and immediately after the Eagle, Ellison, Estep, Ewing, Ferrell, Finkelnburg, Fletcher, Fourt, Fox, Goodson, Griffin, Haekleman, Harper, Hewitt, Hickman, Hoffmeister, Hornbeak, Hoskinson, Howard, Jaquith, Jerome, Jewett, Kelley, Key, Kidwell, Kuhl, Laughlin, Lawson, Long, McElhinney, McFarland, McGinnis, Mullings of Grene, Orrick, Pond, Proffer, Pyle, Quinn, Requa, Rice, Riggs, Robertson, Rollins, Rountree, Schulmburg, Scott, Shafer, Smelser, Smythe, Stafford, Thompson, Van Wagoner, Wade, Walker, Waters, Weinrich, Whittaker, Wilkinson, Wolbrecht, Wyatt, and Mr. Speaker (Harlan). — 84. Noes. — Messrs. Betz, Birch of Scotland, Boon, Cannon, Cartmel, Drum, Hathawav, Howe, Jones, Leaming, Ledergerber, Legg, Linder, Mitchell, Monks, MuUins of Linn, Neville, Owens, Payne, Rinker, Ryland, Schneider, Steele, Taylor, White of Cole, and Zevely. — 26. Absent on leave. — Messrs. Caldwell, Cockerill, Deland, Drummond, Eppstein, Eubanks, Forgey, Freeman, Howell, Lyman, McMillen, Ritchie, Smith, Woods. — 14. Absent. — Messrs. McBride and Stanton. — 2. Sick. — Messrs. Alley, Ellis, Farrar, Jennings, Silman, Vall^, and White of Ran- dolph. — 7. March 5, '68. — Mr. Owens moved the following amendment to the title of the bill : " An act to sell the Pacific Railroad and to give away two millions of dollars to the present company " (House Journal, Adjourned Session, 1868, p. 481); amendment tabled. March 9, '68. — Bill sent to the Senate, taken up by Senate, read a first and second time, amended, referred to the Committee on Ways and Means, and fifty copies ordered to be printed. March 18, '68. — Reported back to the Senate with amendments and its passage unanimously recommended. March 19, '68. — Discussed and amended. March 20, '68. — Amendment by the Senate to change four million dollars to six million dollars, lost by vote of 20 to 10. Amendment to change " four millions in all " to " four millions five hundred thousand in all " (that is, |S500,000 more for the road) carried ; further amended ; read third time and passed by a vote of 21 to 7. Ayes. — Boardman, Bonham, Clark, Deal, Ellis, Evans, Essex, Fisher, Graham, Headlee, ITuman, King, Morse, Park, Rea, Reed, Ridgley, Spaunhorst, Townsley, Winters, and Woerner. — 21. Noes. — Adams, Bruere, Conrad, Dodson, Goebel, Hubbard, and Shelton. — 7. Absent on leave. — Elwell, Harbine, and Holland. — 3. Absent. — Cavender and Williams. — 2. Excused from voting. — Filler. — i. March 20, '68. — Bill returned to the House and concurrence in amendments requested. March 24, '68. — Senate amendments discussed in House but not all agreed to. Committee appointed to confer with a like committee of the Senate concerning amend- ments not agreed upon. Conference committee appointed by the Senate. March 25, '68. — Senate and House came to an agreement. March 31, '68. — Bill signed by governor. For bill see Laws of Missouri, Adjourned Session, 1868, p. 1 14. CONCLUSION OF THE EXPERIMENT OF STATE AID 1 83 report of his committee, was laid before the House.' Exactly how much was asked for the railway in the original draft of the bill does not appear. However, it developed in a short time that in the opinion of the House the Pacific Railroad was worth about six million dollars. In the Senate the estimates hovered around four million or 4.5 million dollars. The discussion dragged on for weeks and the railway company sent its ablest lobbyists to the legislature.^ In a short time it was discovered that there were cer- tain legal obstacles in the way of any act of seizure on the part of the state at this time. These obstacles formed the burden of the report of Mr. Scott, the minority portion of the select committee of the House to which was referred the bill (No. 214) for dis- posing of the railway. Mr. Scott's argument was that under act of February 10, granting the company the privilege to issue first-mortgage bonds on the road west of Dresden to the amount of 1.5 million dollars, known as Dresden bonds, the state had given the company the privilege to devote all the earnings of the road to the extension of that part of the road, and to paying off the first-mortgage bonds till they were all canceled. The last of these bonds would not fall due till 1871. Therefore it was argued that the state could not gain access to the income of the road till the Dresden bonds were paid off, even if she should foreclose her lien on the portion of the road east of Dres- den. The minority portion of the committee was "not willing to see the road fall into the hands of strangers for a less amount than that fixed by the committee — §8,350,000," but favored the sale of the road on the best terms possible to "the present company." ^ The friends of the road obtained the opin- ion of legal men of high standing to prove that the state could not take control of the railway or make a deed to it to other persons than the present company before 1871.'' ^ House Journal, Adjourned Session, j868, p. 225. ° See Appendix ii. ^ House Journal, Adjourned Session, jS68, pp. ^69-370. *"The friends of tlie road had fortified themselves with legal opinions from Knox and Smith, Senator Drake, S. T. Glover, C. C. Whittelsey, W. B. Napton, and others, to the effect that the legislature cannot dispossess the company from the road 1 84 STATE AID TO RAILWAYS IN MISSOURI Notwithstanding these facts, and there is no doubt as to the conditions of the act of February lo, 1864, the state had the right, which no one questioned, to continue in possession of the lien on the road. And here again, as in the case of the North Missouri RailrOad, a vigorous and' determined state government, backed up by the capable and honorable legislature, might have made a stand for the public against the representatives of the company and have saved millions to the state treasury. How- ever, from the day (February 3, 1868) of the introduction of the House bill No. 214, the feeling that the lien must be released grew apace. We have seen that the value of the road was put at some six million dollars by the House and four million dollars by the Senate. That both House and Senate should have put the estimate so low after the joint committee, as we have seen, had said in its report that $8,350,000 was the "minimum sum for which the state ought to dispose of its interests in the Pacific Railroad,"^ cannot be explained in any way except by the fact that the legislature was under the influence of King Boodle, who was present at Jefferson City at this time in the form of a special committee sent thither by the directors of the Pacific Railroad.'' The bill disposing of this road, introduced February 3, 1868, became a law March 31. While making a provision that the road, if sold according to the act of February 22, 185 i (the act granting the first aid to the Pacific and Hannibal and St. Joseph railroads), should not be sold for less than $8,350,000, the act provided for the sale of the road directly to the Pacific Railroad Company for the sum of five million dollars in cash or in Mis- souri state bonds, on condition that the company would pay $350,000 into the treasury within ninety days, and the remainder within ninety days thereafter.^ This is the only provision of the act that need concern us. By it the state released the Pacific until 1870 under the Dresden mortgage act, and also that the convention act " of 1865 was a clear infraction of the United States Constitution." — Democrat, February 8, 1868 ; also Republican, February 15, 1868. ' See above, p. 183. = For names of committee, see Appendix ii. ^ Laws of Missouri, Adjourned Session, 1868, p. 114. CONCLUSION OF THE EXPERIMENT OF STATE AID 1 85 Railroad Company from indebtedness to the amount of ;?5ii,- 033.644-' The course of the House bill No. 214, already given at length in a note,'' need not detain us. It may, however, be added that the printed record does not usually throw much light on the modus operandi of anxious promoters in putting such a bill through a legislature. If the star-chamber reports of the pro- ceedings of such committees as that sent by the directors of the Pacific Railroad to Jefferson City could be unearthed, interesting and valuable information of the manner of securing the passage of such bills might be given to the public ; as it happens, in this case such a report can be unearthed. It may be found in full in Appendix II. In this report the special committee representing the directors of the Pacific Railroad state that the first important step taken by them was to secure a favorable consideration of their " scheme by the 'St. Louis Press,'" and that "after many conferences, much delay and anxiety, this was effected." The "next move" of the committee was to engage or "employ" in their interests persons of such "political affinities, standing and power, with the dominant party in the legislature, as would soften or remove the Copperhead character" attributed to the Board of Directors of the company, so that they could "go before the party endorsed by some high in the faith." The committee then devoted itself to the work of preventing the legislature from seizing the Pacific Railroad as the Iron Moun- tain had been seized. After effecting an abatement of the "seizing fever," the next effort of the committee was to "impress upon the minds of the legislators the crippled condi- tion of the company, dilapidated condition of the road," and 'The statement o£ Hon. Geo. C. Pratt {Kansas City Review of Science and Indus- try, vol. vi., p. 167) to the effect that the loss sustained by the state in consequence of this act was two million dollars is misleading. The principal of the debt was seven million dollars, so two million dollars were lost on the principal. By tlae act of March 31, 1868, the Pacific Railroad Company got a release from 810,780,000 (not including delinquent taxes) for the sum of five million dollars. — See report of the committee appointed to examine the books and accounts of the Pacific Railroad Company, in Appendix to House and Senate Journals, 1868, pp. 211-251. ^See above, note (3) p. 180. 1 86 STATE AID TO RAILWAYS IN MISSOURI their "inability to remedy either." This they were able to accomplish "by much figuring," showing "enormous amounts of cash demanded for instant use." The progress of the committee was now "very slow," and at times "terribly discouraging," but "persevering from 9 a. m. till past midnight week after week, ably assisted by numerous parties engaged for the purpose," they at last succeeded, but not without adopting the "usual mode, as understood and practiced by many." Concerning method the committee concludes ; " It was terribly costly for an ordinary job, but as we were going for the millions and every one off counted well, we determined, after serious consultation with discreet friends, not to fail — leaving the morality of such proceedings to those who have inaugurated the system and divided its gains." Again, they say "The bill was obtained through our exertions and appliances at a cost to the company or stockholders of 857,313.60 already paid and 8134,865 to be paid, the whole aggregating 8193,648.60." However, with a pang of remorse the committee says in conclusion, after lamenting the large "cost in dollars," that the work "cost this committee an amount of anxious labor, pain, mortification, and, we may safel)- add, degradation, that they will never again willingly undergo, and which this or any other company can never adequately compen- sate." The special friends of the committee in the legislature as stated in the report were Senators George H. Rea, Ridgley, Woerner, and Spaunhorst, and Representatives Van Wagoner, Branscomb, Smythe, and Colman.' No further proof need be sought for to enable us to answer the question how the Pacific Railroad bill of March 31, 1868, was passed and to answer finally whether or not the company- was able to discharge its obligations to the state. The passage of the bill releasing the lien of the state was secured by a falsif3dng, mercenary committee from legislators the majority of whom were as venal as the committee was mer- cenary. It seems that for a given price the legislators were willing at the behest of boodlers to mount into the vehicle ot ■ See Appendix ii. CONCLUSION OF THE EXPERIMENT OF STATE AID 1 8/ dishonor and be driven unheedingly over the prostrate but now reviving form of State Credit. Such being the character of the trusted representati\-es of the people, the alternative of state control of the railways for a longer or a shorter time in prefer- ence to disposing of them for even a pittance, becomes a most questionable one. In passing judgment upon the experiment as a whole in the closing chapter of this study, this point will be given its proper consideration. § II. The railways were now disposed of. The purposes in disposing of them were, as has been seen : (i) to reduce the in- debtedness of the state, and (2) to secure as far as possible the extension of the railways to their completion. The first object, the reduction of the state indebtedness, was effected in only a slight degree. The total railway indebtedness of the state January I, 1868, was, in bonds and interest due, ^31, 735, 840.' Including ' The following table shows the principal of the bonds loaned each railroad company and the interest accumulated thereon up to date of sale or the time when the state released the liens held in the various roads. To the Pacific Railroad, direct sixes S7.ooo,ooo Interest on same from July I, 1859 to July I, 1868, about which time the road was sold to the P. R. R. Co. under the act of March 31, 1868 3,780,000 Total ^10,780,000 To the South West Branch, direct sixes ^2,589,000 " " " " "guaranteed" sevens 1,911,000 Interest on same from January i, 1861, to January i, 1868, a short time after which the property was conveyed to A. C. Kingsland and his associates under act of March 17, 1868 2,023,770 Total ^6,523,770 To the North Missouri Railroad, direct sixes $4,350,000 Interest on same from July I, 1858, to July i, 1868, at which time Henry T. Blow and his associates purchased the road under the act of March 17, 1868 2,610,000 Total - $6,960,000 To the St. Louis and Iron Mountain Railroad, direct sixes - $3,501,000 Interest on same from July i, 1858, to January i, i868,ashort time after which the title to the road was confirmed to Thomas Allen and associates under act of March 17, 1868 1,995,570 Total $5,496,570 1 88 STATE AID TO RAILWAYS IN MISSOURI various small amounts of interest paid by different companies since the first defaults, even before any act was passed looking to a sale of the railways and thereby a reduction of the state indebtedness, and $25,000 recovered in 1869 from the first pur- chasers of the St. Louis and Iron Mountain and Cairo and Ful- ton railroads, the total amount realized from the sale of the railroads to offset the indebtedness of $31,735,840 was the small sum of $6,131,496,' leaving the state to bear alone the burden of To the Cairo and Fulton Railroad, direct sixes $650,000 Interest on same from July i, 1859, to January i, 1868, a. short time after which the title to the road was confirmed toThomas Allen and associates under act of March 17, 1868 331,000 Total 8981,500 To the Platte Country (formerly County) Railroad, direct sixes ^700,000 Interest on same from January I, 1861, to January 1868, soon after which time the state provisionally released her lien under act of March 17, 1868, to the Missouri Valley Railroad Company, the successor of the P. C. R. R. Co. 294,000 Total • 994,000 Principal $23,701,000 Interest 8,034,840 Grand Total - $31,735,840 — See Auditor^s Report, 1883—4, part 2, p. 100. 'The amounts received by the state in interest payments since the com- panies began to default and in partial payments by purchasers of the various roads from the beginning of the attempts to effect a sale till the roads were finally disposed of, including $25,000 recovered for the state from the purchasers of the St. Louis and Iron Mountain and Cairo and Fulton railroads (November 8, 1866), were as follows : Platte Country Railroad. June 28, 1865. Interest paid by James N. Burns for the Atchi- son and St. Joseph and Weston and Atchison R. R. companies under act of February 18, 1865 $26,670 August 16, 1866. First installment due January I, 1866, under act of February 18, 1865, from sale of P. C. R. R., paid by J. Condit Smith, President of Weston and Atchison and St. Joseph R. R. companies 100,000 August 16, 1866. Interest paid by J. Condit Smith on purchase price of P. C. R. R. under act of February 18, 1865 26,350 January 4, 1867. Interest on same due January I, 1867, paid by J. Condit Smith 9,520 161,540 CONCLUSION OF THE EXPERIMENT OF STATE AID $25,604,344. The second object, the extension of the railways, it may be said was accomplished ; the companies complied with the several acts releasing the liens by extending their lines. By this compliance there was secured to the state the amount of July I, 1867. Interest on same due July i, 1867, and Jan- uary I, 1868, paid by J. Condit Smith, President of the Missouri Valley R. R. Co. December3i, 1867. Interest on same due January i, 1868, paid by John G. Richardson, President of the M. V. R. R. Co. July I, 1868. Interest on same due July i, 1868, paid by M.V. R. R. Co. Total ;?i6i,540 23,120 23,040 6,180 §214,880 St. Louis and Iron Mountain and Cairo and Fulton Railroads. September I, 1863. Interest paid by S. D. Barlow, President of St. L. and L M. R. R. Co. 838,000 September l6, 1863. Ditto 1,200 October 27, 1863. Ditto 20,000 First installment of purchase price paid by John C. Vogel, Samuel Simmons, A. J. Mackay and Joseph C. Read 225,700 Interest on deferred payment paid by Thomas Allen 40,458 Ditto 40,458 Amount paid by A. J. Mackay, J. C. Vogel, on account of judgment in favor of state in circuit court of St. Louis 25,000 January 7, 1866. January II, 1868. January 15, 1869. July I, 1869. Total June 19, 1868. October i, 1868. Total June 14, 1866. June 23, 1866. §391,616 Pacific Railroad. First payment of purchase price under act of March 31, 1868, by P. R. R. Co. §350,000 Second payment by P. R. R. Co. 4,650,000 §5,000,000 South West Branch. Part of first installment of purchase price, paid by R. I. Mcllhaney, one of the commissioners who sold the road to General Fremont under act of February 19, 1866 - §319,650 Remainder of first installment paid by R. I. Mcllhaney 5>350 Total 325,000 I go STATE AID TO RAILWAYS IN MISSOURI 626 miles of additional railway.' At the time of the releasing of the state's lien, only 914 miles of railway had been completed no extension practically having been made since the act of February ig, 1866, the first comprehensive act passed for the disposition of the railways. As so many miles were added in compliance or practically in compliance with the several acts releasing the liens held by the state, these acts are to be regarded, as they were really, as acts passed to aid in the further extension of the railways. Taking this view of the matter, the debt of 825,604,344, as finally left upon the state, must be regarded as incurred for the purpose of assisting in the construction of not only the 914 miles of railway in existence at the time of the passing of the acts, but of the i 540 miles in existence after the companies had completed the railways in compliance with the acts releasing the various liens. Reckoned upon the latter number of miles, the indebtedness of the state had been incurred at the rate of g 16,626 per mile. The probability that the roads would have been extended without the release of the state's liens will be taken up in the closing chapter. § 12. As one might expect from the account of the many railway bills as given in the preceding pages, certain " charges and reports concerning bribery and corruption" were floating about North Missouri Railroad. July 3, 1868. Amount paid by Gerard B. Allen, John J. Roe, Solon Humphreys and their associates for the North Missouri R. R. as provided in act of March 17, 1868 j!200,ooo Total $200,000 Grand Total $6,131,496 — See Auditor's Repoi -t. 1883-4, part 2, pp. 98-99. On the North Missouri (main line) 60 " " " " (west branch) 150 " " St. L. and I. M. R. R 84 " " Cairo and Fulton 37-5 " " South West Branch 206 " " Missouri Valley R. R 88.5 Total 626 — See map on opposite page. CON'CLUSION OF THE EXPERIMENT OF STATE AID IQI during the month of March 1868 at the capital of Missouri, and on March 23, a few days following the disposal of the St. Louis and Iron Mountain, Cairo and Fulton, North Missouri, South West Branch, and Platte Country railroads, and a few days pre- ceding the sale of the Pacific Railroad, both houses appointed committees to investigate these charges and reports concerning bribery and corruption. Of course resolutions had to be passed by the respective houses requiring the appointment of such committees. The resolution in the Senate carried by a vote of 25 to 3.' It will be recalled from the sketch of the star-chamber report of the Pacific Railroad committee given above, which secured the passage of the bill releasing the state's lien, that the committee especially remembered Senators Spaunhorst and Woerner for their valuable help in passing the bill. And it is interesting to note that of the three negative votes on the resolution in the Senate demanding an investigation of the rumors of frauds and corruption, two were cast by Senators Spaunhorst and Woerner. Senators Ridgley and Rea, also mentioned by the committee as being of great service, voted, however, in the affirmative. The committee appointed by the Senate was Messrs. Holland and Woerner. In the House the resolution to appoint an investigating committee carried unani- mously — Branscomb, Colman, Smythe, and Van Wagoner, especially remembered by the Pacifip Railroad committee, all voting in the affirmative. The members of the House com- mittee were James D. Harper, D. T. Jewett, Albert Griffin, A. E. Wyatt, and H. J. Drummond.' This joint committee appointed during the morning session of March 23, was required bv the legislature to report on the following day, as if the work of months could be investigated in a few hours. Although all the members of this joint committee did not vote in the affirmative on all bills releasing the state's lien, and are there- fore not all to be summarily classed among those who doubt- less traded off the public interests for private gain, the inves- ' Senate Journal, Adjourned Session, 186S, p. 511. "House Journal, Adjourned Session, iSbS, p. 730- 192 STATE AID TO RAILWAYS IN MISSOURI ligation by the committee during the "afternoon" and "even- ing" of March 23, because of the insufficient time devoted to the matter, cannot be regarded as anything but farcical. And today we need not be surprised that the committee were "unable to obtain one word of evidence" that any member of the General Assembly had "received or indicated a willingness to receive, directly or indirectly, a single dollar, or any valu- able consideration as an inducement to support or oppose any railroad bill," or that any person had "used or been authorized to use any money to secure the vote of any Senator or member of the House,"' when it is known that one of the leading mem- bers of the committee. Senator Woerner, was at that time render- ing "valuable assistance" to the Pacific Railroad committee.^ ' The report, which was the same verbatim in both the Senate and House, is as follows : " Your committee appointed yesterday for the purpose of investigating rumored frauds or corruptions in connection with the railroad bills of this General Assembly, after having devoted the whole of the afternoon and until a late hour last night to the investigation, and having examined all the witnesses within our reach from whom there was any reason to hope or grounds to believe that any information could be had, have instructed me to submit the following report : " Your committee find that among the persons attending on the General Assem- bly, ostensibly in the interests of various railroads, there is a class of irresponsible lobbyists hanging around, with no apparent object except to make money by any means they can devise ; and prominent among these men is one S. W. Cox, who has indirectly, but not doubtfully, approached members of this General Assembly with the view of influencing their votes for the Pacific Railroad by the use of money. Said Cox states that he made these offers with the hope of making money, but further states that he had no definite plan in his mind by which he hoped to bring money into his own pocket in case the offered bribes had been accepted, and that he had not the slightest assurance that the railroad company or any member thereof would fur- nish a single dollar with which to buy votes. " Your committee have not been able to obtain one word of evidence that any member of this General Assembly has received or indicated a willingness to receive, directly or indirectly, a single dollar, or any valuable consideration, as an inducement to support or oppose any railroad bill, nor that any person has used or been authorized to use any money to secure the vote of any Senator or member of the House. "Your committee have had the evidence of the witnesses brought before them taken down by a phonographic reporter, but found it impossible to have it copied within the time allowed for making this report." See Senate and House Journal Adjourned Session, 1868, respectively, pp. 526 and 755. ^See Appendix ii. CONCLUSION OF THE EXPERIMENT OF STATE AID I93 § 13. As the railways were now all disposed of, it is pertinent to ask what was, in broad outline, the financial condition of the state. One of the aims of releasing the various liens was, as we have seen, that the indebtedness of the state might be reduced ; and we have noted that the indebtedness due to railway ven- tures had been reduced thereby from ^31,735,840 to ^25,604,- 344. The whole indebtedness of the state prior to the releas- ing of the liens was, however, much more than ^31,735,840. The state, during the war, had incurred a war debt of ^7,546,- 575." Of this, however, S3, 016, 657 had been redeemed before the close of the war.'' Consequently on January i, 1865, the aggregate debt of the state was S36, 094, 908.2 As early as February 15, 1865, the legislature passed a resolution to the effect that the faith of the state should be " The war debt October 30, 1865, was made up as follows : Defense warrants of 1861 and 1864 $1,476,575 Loan of Governor Gamble of 1862 150,000 Interest on same to January 1, 1866 30,000 Union military bonds of 1863 3,000,000 Interest on same 37>54S Union military bonds of 1865 2,000,000 Interest on same to May 15, 1866 100,000 Unpaid claims in Quartermaster's Department ) ^^^ Unpaid claims in Paymaster's Department ) Interest on Union military bonds of 1863, outstanding to May 1866, estimated 252,455 Total »7,546,S75 — See Auditor's Report, 1883-4, part 2, p. 115. 'Auditor's Report, 1883-4, part 2, p. 115. 3 The old state debt $ 622,000 The railroad debt, principal 23,701,000 The railroad debt, interest (revenue bonds) 431,000 Past interest due upon the two 5/923.320 The war debt of 1862 (reported) 150,000 Interest on same 21,000 Defense warrants, outstanding 292,099 Union military bonds of 1863, outstanding 1,230,489 Interest on same, estimated 123,000 Unpaid military claims (paid in 1865 and 1867) 3,601,000 Total 836,094,908 — See Auditor's Report, 1883-4, part 2, p. 116. 194 STATE AID TO RAILWAYS IN MISSOURI "preserved with all her creditors, and their demands, interest and principal, be satisfied to the fullest requirements."' But in the constitution adopted in 1875 ^ provision was inserted which prohibited the use of the credit of the state to assist any private or corporate enterprise whatsoever. The com- mittee entrusted with the matter of drawing up a plan in 1866 for funding the indebtedness of the state reported February 17,' and an act was passed on the sixth of March follow- ing to fund the debt by issuing 30 million dollars of "Con- solidation Bonds" to be dated January i, 1868, running thirty years, with coupons attached bearing rates of interest varying from 3 to 9 per cent, for different periods, as the time advanced, and averaging 6 per cent, for the entire period of thirty years. The surplus of the separate annual payments was to form a sinking fund such as would complete the extinguishment of the debt at the end of the period.^ On March 12, 1867, how- ever, an act was passed which provided for the issuing of "Con- solidated Bonds" to the amount of only the accrued interest remaining unpaid January i, 1868 ;3 and on that date (January I, 1868) the amount of $3,868,000 of "Consolidation Bonds" were issued for this purpose.' During the four years from 1865- 1869 the treasurer was enabled to reduce the debt of the state to the amount of $14,419,908, leaving the debt on January i, 1869, $21,675,000. The funds received by which this reduction could be made, other than the receipts from taxes, bonuses from banks in lieu of all other taxes, and the funds arising from the with- holding of 25 per cent, of the state revenues from the public schools for 1865, 1866 and 1867, came from the sale of the ^ House Journal, Adjourned Session, 1865-b, p. 556. ^ Laws of Missouri, Adjourned Session, 1865-6, p. 194. 'Auditor's Report, 1883-4, part 2, p. 121. ■•From the sale of bank stock ^1,178,635.50 From the sale of railroads and the payment of interest and dues by railroad companies - 6,006,038.00 From collections by Gen. J. B. Gray from the United States 4,863,924.90 812,048,598.40 -See Auditor's Report, 1883-4, part 2, p. 117. CONCLUSION OF THE EXPERIMENT OF STATE AID I95 Stock held by the state in the bank of Missouri, the sale of the railways, and the reimbursement of the state by the United States for military expenses incurred by the state during the war.* The rate of taxation had also been reduced during these years. In 1865 there was a revenue tax of 40 cents and a mili- tary tax of 20 cents on the ^lOO valuation of property and two poll taxes, one of gi.oo for revenue purposes, and one of ^2.00 for military purposes. In 1869 and 1870 and 1871 there were only two forms of taxes for state purposes, a revenue tax of 25 cents and an interest tax of 25 cents on the gioo valuation of property.' Thus in the past four years the indebtedness of the state had been reduced from ;g36,094,908 to ^21,675,000, and taxation had been reduced from 60 cents on the gioo valuation of property and ^3.00 poll tax to 50 cents and no poll tax. In closing his report December 31, 1868, Auditor Thompson says: "The revenues of the state have been gradually assuming order and regularity ; the arrears of taxes have been levied and col- lected in seventy-two counties, so that at the present day, with two exceptions, all the counties of the state levy and collect the current revenues. The state can, therefore, with good assurance, estimate the revenues which are to come into the treasury, and the expenditures which are required for the administration. With economy and strictest order in the management of our state finances, we may well feel satisfied that the future before us is bright with the hope of prosperity, such as only in a regenerated free state can be witnessed." ° 'Auditor's Report, 1883-4, part 2, p. 312. ^ House and Senate Journals, i86g, Appendix p. igo. CHAPTER VI. INTERNAL-IMPROVEMENT EXPERIMENTS IN SOUTHERN STATES. §1. The facts regarding the experiment of aiding railways in Missouri have been given. It now remains to take a glance at similar experiments in other states during the time in which Missouri was engaged in hers, and then to summarize the results of our study, in so far as it may appear that results have been reached. It has already been seen that many states, prior to 1850, especially between 1836-1841, in the matter of internal improvements, ran the whole gamut from the high notes of joy- ous expectation to the lowest notes of bitter disappointment. It is also true that some of the states never succeeded in getting under full headway in the matter of constructing public works till after 1850. After the failures of 1837— 1840 and during the con- sequent depression that extended through a large part of the following decade very little was done in aiding railway construc- tion by any of the states in the Union. The Northern States played at paternalism no further, and the Southern States did not recover from the shock of the crisis of 1 837-1 839 sufificiently to feel able to undertake industrial enterprises necessarily involv- ing enormous expenditures. Not a few of the Southern States about 1850 began to feel strong enough to undertake such experiments, but others did not become fully engaged in railway construction till after the Civil War. The experiments of the Southern States cannot strictly be classified as ante bellum and post bellum experiments, although not a few of them reached a considerable degree of development before the war, while others were not begun till after its close. Georgia, Tennessee, Virginia, South Carolina and Louisiana began aiding railway construction and internal improvements in general in a more or less preten- 196 INTERNAL-IMPROVEMENT EXPERIMENTS 1 97 tious way even as early as 1837, or during the period of great state activity in this matter in the North. Kentucky and North Carolina did not begin so early. In all the first-mentioned Southern States the internal improvements already inaugurated received a new impetus about 1850 through the returning pros- perity of the times; in the latter states (Kentucky and North Carolina), as in Missouri, the aiding policy began at this time and developed in the following years. The remaining states, which engaged at all in aiding railways, Alabama, Florida, Texas, and Arkansas, did practically nothing before the war. Concerning these states it is noteworthy that when they began to aid railways in real earnest, their enthusiasm did not last long. Their experiments were almost as short lived and as disastrous as those of Illinois, Indiana and Michigan prior to 1840. § 2. In Georgia the experiment of aiding the construction of railways was begun as early as 1835-6 on a small scale.' An act of December 29, 1836 provided that one-fourth of the capi- tal stock of the Chattahoochee Railroad and Banking Company should be "reserved for the state of Georgia ;"- and another of December 21, 1836, provided that "a railroad communication as a state work and with the funds of the state" should be made from some point on the Tennessee line near the Tennessee River to some point on the eastern bank of the Chattahoochee River suitable for the extension of a branch to Athens, Mad- ison, and other important points. No greater sum than $350,000 was to be " appropriated annually to the work contemplated by this act," unless a future legislature should otherwise direct.s Of the stock of the branches contemplated to the several towns named the state subscribed one-fourth on the condition that this would not make more than $200,000 to any one branch. As no provision had been made for funds with which to pay the amounts to be subscribed by the state, an act of December 29, 1838, authorized "the sale of script or certificates of state debt" 'Ads of Georgia, 1835-6, pp. 216-217. '/bid., p. 1S4. 3//,/,/., 1S36, p. 214. 1 98 STATE AID TO RAILWAYS IN MISSOURI to the amount of 1.5 million dollars bearing not more than 6 per cent, interest and extending over a period of thirty years before redemption could be demanded. The faith of the state was "solemnly pledged for the redemption of the entire debt, prin- cipal and interest," that might be incurred by the sale of such script. To insure the payment of interest the state pledged the "income . . . arising from funds" which the state held in the " Central Bank of Georgia and from all other bank stock belong- ing to the state" except that proportion already pledged to schools.' At the close of 1841 progress on the state road was so slow that further advance beyond a certain point was aban- doned by legislative act, and a special effort was made to com- plete the unfinished portion.^ Although the state found her connection with the Central Bank not only of no assistance, but really a burden, she soon felt able to press forward with the work of construction of the Western and Atlantic Railroad. 3 The act of 1 84 1 suspending operations on the road was repealed in 1843, 3-nd work was reopened on the portion of the road formerly abandoned. However, the act also required the governor to take the necessary steps to sell the road, if possible, for the sum of not less than one million dollars. '' From this time on till after the close of the war the activity of the state of Georgia, as such, in railway matters, proved a limping success. The act of December 27, 1845,= niade the governor really the manager of the railways. He was to hire the officers necessary to manage and superintend the business of transportation on the Western and Atlantic Railroad .... and to fix a reasonable rate of compensation for their services. In 1847 anxiety to have the road completed led to the passage of an act authorizing the issuing of $375,000 in 6 per cent, bonds of the state to be sold and the funds applied to the completion of the road.* In 1850 the public needs required the taxing of certain railway com- •Jcts of Georgia, 1838, p. 223. ^ Acts of Georgia, 1841, pp. 172-173; see also Committee Reports, 3d Session, XXVII. Congress, No. 296, pp. 68-69. ■ilbid., 1842, pp. 27-28. = Ibid., 1845, p. 165. ^Ibid., 1843, p. 139- ' li'id; 1847, pp. 301-303. INTERNAL-IMPROVEMENT EXPERIMENTS 1 99 panics one-half of i per cent, on their " net annual income," of one companj' " thirty-one and one-fourth cents on every one hun- dred dollars worth" of the additional stock just provided for, and one company at this same rate on the capital stock " actually paid in."' A general act was passed in 1852 " for the govern- ment and management of the Western and Atlantic Railroad." This act sought, as it were, to weave together the fragmentary strands of former legislation on the subject, and to present the matter as a completed whole. All questions of appointment and removal, the defining of duties of various officers, the mak- ing of contracts, the financial management, the question of rates and the like, were all provided for with considerable detail. An act three days earlier had authorized the issue of $525,000 in twenty-year 6 per cent, bonds of the state to further the prog- ress of the railroad,^ and an act of December 4, 1851, author- ized the issue of a much smaller amount of bonds to buy suf- ficient iron with which to equip the road.3 In 1856 the state became more ambitious, and passed a law (February 23) incor- porating the Atlantic and Galena Railroad Company and granted to it one million dollars of aid in the bonds of the state. The company had authority to construct a railway from the inter- section of the lines of Appling, Ware, and Wayne counties on the most practicable route to the western boundary of the state of Georgia at any point between Fort Gains in the county of Clay and the junction of the Flint and Chattahoochee rivers in the county of Decatur. To the stock of this company, which might be increased to five million dollars, the state made a subscription the outside limit of which was one million dollars. "^ It was the " intention of the state of Georgia by this act to provide a main trunk railway across her territory connecting the Atlantic with the Gulf of Mexico." In 1858, because of the fact that in the management of the Western and Atlantic Rail- road losses had doubtless occurred and were " liable to occur" unless frequent settlements were exacted of its " fiscal agents, and ^ Acts of Georgia, 1849-50, pp. 378-9. '^ Ibid., 1851-2, p. I16. 'Ibid., 1851-2, p. 114. 'Ibid., 1855-6, p. 158. 200 STATE AID TO RAILWAYS IN MISSOURI unless the state was invested with summary remedies against defaulters," an act was passed to secure "better government" for the road and "fidelity in its fiscal agents and all other per- sons" indebted to it.' In 1861, as if the state had had not enough experience with paper money not directly redeemable in specie, the legislature authorized the Western and Atlantic Railroad Company to issue and put into circulation change bills of the denominations of one dollar, fifty cents, twenty-five cents, ten cents, and five cents, the aggregate amount of which should "not exceed the sum of ^200,000." These bills were to be redeemed by the treasurer of the company in "current bank notes" when presented in sums of five dollars or upwards ; and for the ultimate redemption of the bills the "Western and Atlantic Railroad, its fixtures and rev- enues, together with the faith of the state," were pledged. Such bills were to be received in the payment of taxes and other dues to the state and of all dues to the Western and Atlantic Rail- road.'' This was simply a cheap money experiment and proved to be no exception to the rule that such experiments result in very harmful complications. 3 During the war of course little was done in the matter of railway extension ; "t and after the war practically nothing was accomplished in the further granting of state aid to railways till 1868. During these years, however, the state carried a large debt, which amounted to $5, 706, 500 on October 15, 1866; and the greater part of this had been incurred for the purpose of assisting in the building of railroads. ^ Yet one at least of the roads owned wholly by the state, the Western and Atlantic, yielded a handsome sum to the public treasury. In 1866 this sum amounted to nearly S6oo,ooo^ and in 1870 to quite one million dollars ' in clear revenue, if we estimate that the annual ^ Acts of Georgia, 1858, p. 62 ; and for some facts in certain litigation growing out of the connection of the state with this railroad, see Ibid., i860, p. 60. -Ibid., 1861, pp. 26-28. 'Ibid., 1873, P- 3l8. -I See Ibid., 1862, pp. 14, 63, 64, 136, 159, l8i and Ibid., 1865-6, pp. 19 and 261. ^Voo-!'!, Manual of Railroads, 1868-9, p. 438. ^Ibid., 1869-70, p. 463- T Ibid., 1S70-I, p. 492. INTERNAL-IMPROVEMENT EXPERIMENTS 201 charge on the bonds issued to pay for the road was only $252,000 annually.' Whether or not such an income proved so great a temptation to private individuals that a private company was formed for the special purpose of purchasing the road, or whether or not this company, like companies in other states, bought the legislature in order to get the railroad, cannot be asserted. At all events the state leased the road in 1870 to a private company for twenty years at $300,000 annually.^ When an investigation of the lease was made later no corruption was brought to light, and the general assembly resolved that the lease was a good thing, that it secured "a fair sum certain for the treasury" and removed "the road, with its business complications, from the poli- tics of Georgia," which, of itself, was "a consummation devoutly to be wished. "3 During the year 1868 aid was extended to a few roads at the rate of S8000, $10,000 and $12,000 per mile.'' In the following year roads were aided to the extent of $12,500 and $15,000 per mile.s From the foregoing it looks as if the state were about to enter upon a great era of railway building fostered by public funds. But not so. Even the party in control of the state when the first grants were made^ prepared the way for severing the connection of the state with the Western and Atlantic Railroad by means of leasing it to a private company. ^ When the war was over the aiding policy was brought to an end. The ante bellum politicians again came into power and declared most of the acts extending aid passed in 1869-70 unconstitutional, and therefore null and void. This action, together with the lease of the Western ■See "Debt of Georgia," in Poor's Manual of Railroads, 1879. 'Acts of Georgia, 1870, pp. 423-427. 3See "Joint Resolution," No. 33, in Acts of Georgia, 1S72, p. 531 ; also Acts of Georgia, 1871, p. 79. ■I To the Macon and Augusta, forty-six miles, Jio,ooo per mile. To the Georgia Air Line, extending from the city of Atlanta to the state line of South Carolina in the direction of Anderson court house, Si 2,000 per mile. To the Southern Georgia and Florida, S8000 per mile. See Acts of Georgia, 1868, pp. 143-147. 5 See "Brunswick and Albany," " Cartersville and Van Wert," and "Dalton and Morgantown" railroads, in Acts of Georgia, 1869. '' Acts of Georgia, 1869, p. 149. t Ibid., 1870, pp. 423-427. 202 STATE AID TO RAILWAYS IN MISSOURI and Atlantic Railroad, relieved Georgia practically from all her railroad enterprises. A general law of 1870 (September 30) provided that "the guarantee of the state should not be endorsed upon the bonds of any railroad until an amount equal to the amount of bonds" for which the guarantee or endorsement of the state applied had been, in good faith, first "expended by the stockholders of the road."' About three years later (February 25, 1874) the state took further steps to release herself from complications arising from aiding railroads. All aid heretofore granted and not yet received by the railway companies so as to become a vested right, was declared null and void.^ And a few days following this act a further act was passed turning over the three-fourths of the one million dollars of stock owned by the state in the Atlantic and Gulf Railroad to the company on the grounds that the recent war had inflicted such serious damages on the road that it was practically valueless to the state and that the end to be attained could be more easily secured by transferring this portion of stock to the company. 3 A further discovery was made in 1875 that the bonds granted to the Alabama and Chat- tahoochee Railroad Company under the authority of the act of March 20, 1869, were granted in violation of the constitution and were therefore declared of no effect (February 27, 1875).^ Measures were taken at this session also to secure the state in case any of the roads to which state aid had been granted should be in danger of being sacrificed by hard-pressed companies for very small amounts. The governor was authorized to buy in such roads, bidding as high as the amount of state aid granted. 5 In February 1876 the governor was authorized to sell one of the railways in order to secure for the state the funds loaned to the company.* In the following year the state passed a law pro- viding for the lease or sale of the Macon and Brunswick Rail- road. The lessees were to expend within two years after the lease ^200,000 for permanent improvements ; and after certain specified additional work was done the company should have •^ Acts of Georgia, 1870. '^ Ibid., 1874, p. 916. ^Ibid., 1875, p. 14. ^Ibid., 1874, p. 98. ••Ibid., 1875, p. 13. ^Ibid., 1876, p. 123. INTERNAL-IMPROVEMENT EXPERIMENTS 2O3 the option of purchasing the road for $1,250,000." Several years later the state compromised with the Ashcville and Spartans- burg Railroad for only a portion of the claim held against it. In 1877 a small amount of aid was granted to the Marietta and Northern Georgia Railroad Company ; and also the net revenues from convict labor were granted to this company annually till the road was completed to the North Carolina line.'' Notwith- standing this, the interest which the state had in railways was now very small, the chief interest being in the Western and Atlan- tic and the Macon and Brunswick, both of which had, for a long time, been leased. Beginning with 1870, misunderstandings arose between the lessees and the state : since then much time and money have been consumed in litigation, and the charter privi- leges of the company have been extended till this litigation can be concluded. 3 § 3. Prior to 1850 Tennessee had aided banks and turnpike companies to the amount of $323,000 ;■• but after 1850, although the state fostered turnpikes to some extent, her chief attention was directed towards aiding railways. Attempts at aiding rail- ways had been made prior to 1848, but none were carried through to completion. At this time, however, the people became deeply interested and a new plan was adopted. "The distinct feature of this plan was that the state endorsed the annual bonds of the companies instead of issuing its own bonds. The state was secured by a lien on the whole stock of the com- panies and on the road fixtures. Curiously enough, however, these bonds sold for less than par, whereas the bonds of the state were at or above par. This plan proved to be not more satisfactory than the other. Its most glaring difficulties were the failure to devise means by which the state could examine into the finan- cial condition of the corporations whose bonds had been endorsed, ^ Ads of Georgia, 1879, pp. 115 and 124; also ibid., 1887, p. 913. ^ Ibid., 1877, p. 29; also ibid.. 1881, p. 145. ^Ibid., 1890, p. 75; ibid., 1890-I, p. 280. "• Phelan, History of Tennessee, p. 293. 204 STATE AID TO RAILWAYS IN MISSOURI and the failure to reserve to the state the power of legislating to protect its own interests." In addition to this, as the state was the endorser and guarantor of the bonds issued, its ability to protect itself "depended on the actions of those over whom it had little control." " In 1 849-50 an attempt was made to cor- rect these defects. The state was to issue its own bonds, and have vested in it the title to the roads to secure the debt incurred for their benefit, and individual stockholders were required to accept and ratify the act. But again the legislature failed to provide the measures by which information could be obtained of the condition of the companies and also by which the state could legislate as a sovereign instead of resorting to the courts as an individual." ' It was now time for the legislature to exhibit some business sense, if it possessed any. Consequently an act of February 11, 1852, was passed "to avoid the defects of all previous enact- ments ; . . . . the bonds of the state were issued in its sovereign capacity and for the payment of which its credit was pledged and without involving itself in any relation of trust or partner- ship_. . . . The act of February 11, 1852, was called an act to establish a system of internal improvements in the state." Each company being aided had to secure a bona fide subscription to its capital stock sufficient to complete the roadbed and bridges for the whole line of the road ; then the state would grant ;?8ooo per mile for the purpose of purchasing the rails and otherwise equip- ping the roadway. The state was to retain a lien on the rails to secure herself. If the companies failed to pay the interest, the state was to sell the rails to reimburse her for her outlay. At the end of five years the companies aided were to set aside a small part of their earnings, I per cent, per annum, upon the amount of bonds loaned to be used in purchasing the bonds of the state ; these bonds were to be turned over to the state, cred- ited to the companies and to be used with interest accruing on them as a sinking fund for the cancellation of the indebtedness to the state. The presidents of the companies were to make ^ Phelan, History of Tennessee, p. 290. INTERNAL-IMPROVEMENT EXPERIMENTS 205 semi-annual reports to the state. The number of miles contem- plated to be aided by the act was about looo; at ^8000 per mile, the total aid granted by the act would then amount to eight million dollars. At 6 per cent., the rate of interest which seems to have been stipulated,' the annual interest dues of ^480,000, in case the state should have to pay the interest, does not seem a heavy burden for a state whose taxable wealth was 159 million dollars.^ The above act was amended February 8, 1854, increasing the amount loaned per mile to ^ 10,000; and whereas under the former act a division of twenty miles, after the first division of thirty miles had been completed, could be aided at a given time, a clause was inserted in this act providing that a division of only ten miles could be aided. A later act, February 21, 1856, inci eased the sinking fund to 2 per cent. The whole amount of bonds issued in Tennessee before the war amounted to ^14,841,- 000.'' As in Missouri, the breaking out of the war introduced an indeterminable quantity into the question of whether the state acted wisely in aiding railways. It is the opinion of an able writer, in speaking of the state debt, that " had it not been for the war and the Brownlow (governor) administration, the debt of Tennessee would doubtless have been paid in full."^ Follow- ing the war, however, there seems to have been as low a stage of public morality in Tennessee as there was in Missouri. Mr. Phelan, in his excellent history of Tennessee, says of this period, "As soon as the war closed, what is now called a raid was made on the treasury. From April 1866 to December 1868,'' a period which has been described as the ' carnival of revelry and corrup- tion,' at a time when every industry and enterprise had been overthrown by the war and when, by the loss of slaves, the assessed value of taxable property of the state had sunk from $388,936,000 (i860) to $225, 393,000 (1867), $14,393,000 were ' De Bow's Review, vol. xiii. p. 163. ° Phelan, History of Tennessee, p. 293. ^ Ibid., p. 291. "•The coincidence of the periods of public corruption in Tennessee and Missouri is noteworthy; in Missouri it extended from November 8, 1866, to March 31, 1868. 206 STATE AID TO RAILWAYS IN MISSOURI issued to railways, $113,000 to turnpikes, besides $4, 941, 000 issued under the act of 1868 to fund the war debt and $2,200,000 under an act of 1868 to fund the past due coupons." These amounts had increased the state debt in two years to $21,647,000. In addition to this an act was passed May 24, 1866, which incor- porated several tyrnpike companies and turned over the stock of the state in the East Tennessee and Georgia Railroad, amount- ing to $425,000, to the turnpike companies. With this help and the $113,000 issued between 1868 and 1870, and some private subscriptions paid in work, the turnpike companies succeeded in building during the time twenty miles of road. A number of acts during the years 1 865-1 869, were passed in the interests of the railroad companies. Because a number of these acts were passed "under circumstances of such notorious fraud and so clearly in defiance of the constitution as soon as the Brownlow and Senter regime was overthrown steps were taken to repudiate the bonds which were issued contrary to law."' Because of the likelihood of having the state reconstructed at the hands of Union men, however, the matter of repudiation was dropped.' The whole debt of the state of Tennessee, incurred for rail- road purposes, was $29,234,000. Up to 1880 $5,330,000 of those bonds issued before the war and $11,258,000 of those issued after the war were canceled. And January 1879 the whole state debt was $27,008,480, of which $7,635,000 was incurred on account of railways. This experiment satisfied the people of Tennessee fully as to the profitableness of aiding rail- ways. The Constitution of 1870 removes the possibility of any further internal improvements, as a political or economic scheme at the expense of or by the aid of the state; it enacts that "the credit of this state shall not hereafter be given or loaned in aid of any person, association, company, corporation or municipal- ity."^ § 4. In Virginia the usual form of aiding internal improve- ments was that of taking stock in the various companies. The ■ Phelan, History of Tennessee, p. 294. ''Ibid., p. 295. INTERNAL-IMPROVEMENT EXPERIMENTS 20/ agent for the state was the state Board of Public Works. From 1850 to 1857 much aid was granted, or rather the state took a great deal of stock in various turnpike, canal and railroad com- panies at the rate of three-fifths of the whole stock. Some direct subscriptions of aid were also made.' In 1855-6 not many new loans were made, and the state had to borrow to pay old subscriptions.^ Some canal companies were already in default and the state was making ready to foreclose the mort- gage on one.3 By 1857 the legislature felt that the state ought to be getting more out of her investments than she was. Accordingly an act was passed to make the "investments of the commonwealth more productive by enforcing payment of inter- est and sinking fund (sic) on loans to internal improvement companies ; of dividends on preferred stock, and the interest on the bonds of such companies guaranteed by the state."'' This act was, however, nothing more than the laying on of a penalty for not doing what the state wanted done. In 1858, since the state was pressed to make payments of subscriptions already made, it authorized the Board of Public Works to purchase those enterprises in which the state held an interest. Subscrip- tions to new enterprises were made and subscriptions to old ones were enlarged, however, just as if the treasury were overflow- ing. 5 In 1859-60 small subscriptions were made to turnpike and railroad companies.'' Three years later an act was passed to suspend the payment of further sums on the subscriptions authorized before the breaking out of the Civil War, made to those railway and turnpike companies in cases where private stockholders had not paid up their full subscriptions.' In ' The following are cases of direct grants and subscriptions: Stock subscription of three-fifths, m one company (Acts of Virginia, 1850-1, pp. 62, 65); like subscrip- tions (Acts, 1852-3, pp. 65, 66, 67, 69, 136, 137); direct grants (ibid., pp. 68, 136, 137) ; subscriptions of three-fifths again (Acts, 1853-4, pp. 35, 45, 47-49) ; definite grants (iHd., pp. 35, 46). Script which was to be issued by county courts was to be exchangeable for stock {Acts, 1853-4, P- 39)- ' Acts of Virginia, 1855-56, pp. 83 and no. 'Ibid., p. 84. ^Ibid., pp. 87-S9. t Ibid., 1 864, p. 38. *Ibid., 1857-8, p. 6. ^Ibid., 1859-60, pp. 278 et seq. 208 STATE AID TO RAILWAYS IN MISSOURI 1 865-6, when the state debt had reached the unprecedented sum of 45 million dollars incurred for the purpose of assisting turn- pikes, canals and railways, and no small part of which was of very long standing,' the state began to take measures to free herself to some extent from her burdens by selling out her interests and demanding release from unpaid subscriptions.'^ Turnpikes were turned over to the counties in which they were located. 3 The interest of the state was to cease and to be vested in the companies. During the following year the state granted no fur- ther aid, released a lien held on one road and offered to sell her interest in the Norfolk, Petersburg and Covington Railroad.'' The Board of Public Works was made the supervisor rather than the manager of the state's interests. ' During the same year (1866—7) the state ordered the Board to sell the stock owned by the state in the London and Hampshire Railroad, and to lease the Alexandria Canal for ninety-nine years.* After this piece- meal policy had gone on for a while the state determined to make an end of the whole matter. The Constitution adopted in accordance with the Acts of Congress of March and July 1867 provides, in the usual phraseology, that "the credit of the state shall not be granted to or in aid of any person, association, or corporation," and that "the state shall not subscribe to or become interested in the stock of any company, association or corporation." ^ § 5. Passing by the early activity of South Carolina in internal- improvement matters, we find the state in 1850-1854 responding quite liberally to requests for aid by many railway companies.^ ' See Committee Reports, XXVII. Congress, 3d Session, No. 296, p. 60. "Acts of Virginia, 1865-6, pp. 221-222. ^ Ibid., p. 725. ^ Ibid., pp. 223-224. ^ Ibid., pp. 812 and 813. * Ibid., 1866-7, PP- 707, 890 and 891. T Ibid., 1869-70, p. 626. 'See House Journal [Souih Carolina), 1850, pp. 54, 96, loi, 109, 123 and Acts of South Carolina, 1850, p. 60. December 25, 1850, the state took j!l25,ooo of stock in the Spartanburg and Union Railroad. See also Acts of South Carolina, 1851, "Reports and Resolutions," p. 246. In 1850 the state took ^50,000 in stock in the King's Mountain Railroad (Acts, 1851, 102). In 1852 the state guaranteed ;Ji, 250,000 in bonds for the Blue Ridge Railroad Company, and subscribed ^100,000 to the capi- INTERNAL-IMPROVEMENT EXPERIMENTS 20g And during this time a small sum in dividends was paid to the state on her railway investments.' Notwithstanding the liberal endorsements on bonds the railway debt of the state in 1856 was only $1,742,300.^ After 1856 the state continued the policy of granting aid but not in large amounts. Some help was effected by simply transferring to some other companies the bonds granted to one company which had proved unsuccessful.^ Of course the war worked great damage to the railway enterprises of the state, and in 1865, because of the financial weakness of the companies, the state postponed the closing of her lien on them."* At this time not much additional aid was granted, but some further transfers of grants were made. 5 It was not till 1868 that one great grant of aid, and the only one to any one rail- road, was made; this grant of three million dollars additional aid, making' in all four million dollars, was made to the Blue Ridge Railroad Company September 15, 1868. This grant was not, however, of very long standing. It increased the debt of the state to an amount (S?. 5/2,295) so large as to be thought tal stock of the Cheraw and Darlington Railroad (Aas, 1852, p. 200), $42,500 to the Pendleton Railroad Company {Ac/s, p. 160), and $250,000 to the Spartanburg and Union Railroad Company {Acts, p. 199). In 1854 a conditional grant of $500,000 was made to the Blue Ridge Company {Acts, 1854, p. 372) and $270,000 to the Charleston and Savannah Railroad Company {Acts, p. 346). 'See "South Carolina Railroad Company" in Acts of South Carolina, 1850. = To the Charlotte and South Carolina Railroad $ 3i>700 To the Greenville and Columbia Railroad 348,100 To the Laurens Railroad 50,000 To the King's Mountain Railroad 50,000 To the Wilmington and Manchester Railroad 200,000 To the Spartanburg and Union Railroad 250,000 To the Northwestern Railroad 200,000 To the Cheraw and Darlington Railroad 100,000 To the South Carolina Railroad 62,000 To the Southwestern Railroad Bank 15,000 To the Pendleton Railroad 35>ooo To the Blue Ridge Railroad 400.ooo $1,742,300 —See "Reports and Resolutions," Acts of South Carolina, 1856, p. 5. ^Acts of South Carolina, 1866, pp. 303 and 543; ibid., 1862, p. 156. •■Ibid., 1865, pp. 309-310. ^Ibid., 1866, p. 415. 210 STATE AID TO RAILWAYS IN MISSOURI prejudicial to the interests of the state.' On the second of March 1872 an act was passed, in the preamble of which it was stated that these bonds then outstanding were a serious injury and prejudice to the credit of the state. The act was passed "to relieve the state of South Carolina of all liability for its guar- antee to the bonds of the Blue Ridge Railroad Company by providing for the destruction of the same."^ The sum of 1.8 million dollars in treasury certificates was to be issued instead of the bonds, and of these one- fourth were to be retired annu- ally. An amendment to the constitution of the state was pro- posed at the same session which provided for the relief of the state from the four million dollar indebtedness to the Blue Ridge Railroad Company, to the effect that no further debt of any kind, except for ordinary and current business of the state, should be created, unless authorized by a two-thirds vote of the people. This amendment, proposed March 3, 1862, was car- ried at the next election and added to the Constitution January 29, 1873.^ § 6. North Carolina began aggressive work in aiding railway construction in 1848-9 by making, among other grants, a grant of two million dollars, in "certificates of indebtedness " bearing 6 per cent, interest and running for thirty years, to the North Carolina Railroad Company. This large grant was made at the rate of one dollar of public funds for every dollar of private funds spent. ■• The prospective railroad debt of the state had not, however, by 1851, reached more than $2,806,000 in the form of stocks and bonds guaranteed. ^ During 1852 much attention was given in the state to plank roads, though as yet not much aid was granted to them by the state.* During this 'Poor's Manual of Railroads, 1871-2, p. 569; ibid., 1872-3, pp. 678-9. ^ Acts of South Carolina, 1871-2, p. 79. ^Statutes at Large (S. C), 1872, p. 296 ; ibid., 1873, p. 467. * Acts of North Carolina, 1848-9, pp. 153, 155, and 158. 5 See "Treasurer's Report" in Acts of North Carolina, 1850-1, Appendix, pp. 19- 20; also Acts of North Carolina, 1852, p. 557. ^ Acts of North Carolina, 1852, pp. 167-483. INTERNAL-IMPROVEMENT EXPERIMENTS 211 year, also, the conditions of the two million-dollar grant of 1S49 were made easier for the state.' The activity in aiding railway construction continued vigorous until the breaking out of the war. In 1854-5 the governor was authorized to issue one mil- lion dollars additional stock, to be preferred stock, to assist the railways.^ During the next year aid was granted to the Western Railroad Company to the extent of ^400, 000 in 6 per cent, thirty-year bonds.3 In 1860-1 aid was granted to the Chat- tanooga Railroad Company to the amount of $200,000, to the Western Railroad Company $200,000 additional, and to the Wilmington, Charlotte and Rutherford Company one million dollars." The earnestness of the state in her policy of aiding railways was further shown in resolutions passed in favor of such activity .5 After the close of the war the bonds of the Wilmington, Charlotte and Rutherford Railroad were refunded.^ The policy of aiding railways was continued after the War, and additions were made to the debt of the state in other ways till the debt amounted, October i, 1870, to a total of $29,960, 000. ^ The credit of the state was undermined by this reckless granting of bonds to private companies. "The bonds issued were delivered over to many of the railway companies almost before the com- mencement of the work of construction, and, as might have been expected, were forced upon the market at ruinously low prices ; " moreover, the proceeds derived from these bonds were "squan- 'Acts of 1848-9, p. 153; ibid., 1852, p. 523. ■^ Acts of North Carolina, 1854-5, p. 64; also Private Laws of North Carolina, 1856-7, p. 71. '•Acts of North Carolina, 1858-9, p. 208. '■Jbid., 1860-I, pp. 124, 152, 155, 168 and 173. ^ Ibid., 1861, pp. 133-134; see also "Ordinances," Acts of North Carolina, 1S62, Appendix, pp. 31 and 82. ''Acts of North Carolina, 1865, p. 4. 'See Poor's Manual of Railroads, 1868, p. 430, and 1870, "Debt of North Caro- lina." The state still owned railroad stock in 1868 {Acts, 1868, p. 3) and appropria- tions to the Western North Carolina Railroad still held good {Acts, 1868, p. 28); two million dollars were granted to the Eastern and Western Railroad Company {Acts, 1868, p. 203), ^850,000 to the Edenten and Suffolk {Acts, 1868, p. 344), and 1.5 mil- lion dollars to the Williamstown and Tarboro Railroad {Acts, 1868, p. 90) ; see also ibid., pp. 252-3 for further evidence of a vigorous policy of state aid. 212 STATE AID TO RAILWAYS IN MISSOURI dered in one way or another without securing any useful results."' Measures had already been taken, however, to restore the credit of the state. In 1869-70 an act was passed to restore the credit of the state and to facilitate the construction of all unfinished railroads. All bonds in the hands of any rail- way president or company not disposed of were to be returned to the treasury of the state. ^ In March 1870 all acts of the ses- sion of 1868-9 were repealed and the bonds ordered returned. Other measures were passed to protect the credit of the state and no new loans were made.^ In 1873 the treasury receipts were sufficient to cover only the current expenses of the state.'' The debt went on increasing, chiefly through non-payment of interest, till it reached, in 1878, the colossal sum of $44,730,- 697.5 However, as things went in North Carolina at this time, so great a debt was not hard to manage. In the funding act of February 1879 the debt was scaled down till it could be easily controlled. The bonds issued before the war were funded at 40 percent., the new railroad bonds were funded at 25 per cent., and the funding bonds of 1866 and 1868 were refunded at 15 per cent.; all overdue coupons and interest were to be surren- dered ; the special tax bonds and the bonds of the Chatham Railroad and of the Williamstown and Tarboro Railroad, and the bonds of the penitentiary, under the acts of 1868, were "left out in the cold."5 Xhe experience of North Carolina is one, at least, to which no advocate of state activity in railway construction can point with pride. § 7. Louisiana also began the aiding of internal improvements as early as 1837^ and kept it up with varying degrees of inten- sity till the breaking out of the war, notwithstanding the neces- ' Poor's Mamtal of Railroads, 1871-2, p. 591. ^ Acts of North Carolma, 1869-70, pp. 78-120. ^Public Acts of North Carolina, 1870, p. 89. < Poor's Manual of Railroads, 1873-4, P- 731- ''Ibid., 1879, loio. ^Acts of Louisiana, 1837, p. no. In 1838 one steamship company was aided to the extent of ^200,000 in bonds {Acts, 1838, pp. 85 and 312). In 1839 the Clinton and Port Hudson Railroad was aided to the amount of ^(500,000 {Acts, 1839, p. 214). INTERNAL-IMPROVEMENT EXPERIMENTS 21 3 sity of having to pay interest on the bonds of the defaulting Mexican Gulf Railroad as early as 184 1. As early as this the legislature felt the need of a general law regarding the railway companies in order to protect the credit of the state.' Accord- ing to a general law passed in 1853 the treasurer of the state could subscribe one-fifth of the capital stock of any railroad or plank road company organized in the state, each payment, how- ever, to be authorized by a special act. Payments were to be made by the state in the proportion of one-fifth of the funds paid in by private subscribers, and the governor was to appoint three directors in each company aided.^ In 1854 the state asked Congress for a grant of lands to be used in building rail- roads, 3 and in 1856 a grant of land was made by Congress to Louisiana for that purpose.* By this grant the Vicksburg, Shreveport and Texas Railroad received 420,000 acres. The state was not, however, indisposed to the making of further grants of bonds, and March 16, 1857, made a grant of two million dollars to the New Orleans and Baton Rouge Railroad Com- pany. A special tax to be called the Internal Improvement tax was ordered to be levied for the payment of interest on the bonds. The tax was to be increased as additional bonds were issued. 5 Beginning with i860, however, the policy of aiding internal improvements grew less vigorous. The New Orleans, Jackson and Great Northern Railroad was favored, to be sure (January 18, i860), but only by the exemption of its capital stock from taxation for fifteen years.*^ In Louisiana as in other states little was done during the war and not much for some time afterwards. A good deal of aid was granted in 1869, 1870 and 1 87 1, chiefly by granting bonds at the rate of $12,500 per mile.^ A large part of the grant of 1871 consisted, however, of 2.5 mil- 'Acis of Louisiana, 1841, p. 458 ; see also, 1845, p. 36. ''Ibid., 1853, pp. 193-197. *lbid., 1857, p. 76. ^Ibid., 1854, pp. 12 and 33. ^ Ibid., 1857, p. 123. ^ Ibid., i860, p. 9. See also " Ordinance No. 29," of the Convention of the state of Louisiana, 1861, in Official Journal of the Proceedings of the Convention, pp. 278-9 ; also Acts of Louisiana, 1862, p. 46. T Actsof Louisiana, 1869, p. 22 ; 1870, p. 7 ; and 1871, p. 211 et seq. 2 14 STATE AID TO RAILWAYS IN MISSOURI lion dollars in the direct bonds of the state given in exchange for the second-mortgage bonds of the New Orleans, Baton Rouge and Vicksburg Railroad guaranteed by the state.' The total of rail- road and canal aid of the state (January i, 1870) was $3,595,- 000° and (January i, 1873) the total debt of the state, includ- ing all kinds of debt, was $2i,8oi,000.3 During this year (1873), as the New Orleans, Baton Rouge and Vicksburg Rail- road Company wanted the state to issue first-mortgage bonds of its own, the state took this opportunity of severing its connec- tion with the road as guarantor of second-mortgage bonds to the extent of $12,500 per mile.'' By 1874 the state came to the conclusion that the aiding of railroads and canals was unprofitable. In the funding act of that year it is provided that "all grants of state aid hereafter made, whether of bonds, endorsements, subscriptions of stock which have become lapsed or forfeited, be and the same are hereby repealed and annulled, nor shall the state hereafter modify, novate or extend any contract heretofore made for the giving of state aid in any form or under any pretext. "^ And in accordance with an act amendatory of this act suspending the funding of millions of indebtedness until it could be passed upon by the Supreme Court of the state, the $875,000 of second- mortgage bonds "guaranteed" by the state and $12,500 direct bonds of the state issued under the acts respectively of February 17, 1869, and April 20, 1871, were repudiated on the grounds that the endorsed bonds were "illegally" endorsed and the bonds of the state were "unconstitutionally" issued. § 8. Although Kentucky engaged to a limited extent very early in railway construction, she did not keep it up long, and as early as 1843 preferred to lease the Lexington and Ohio Rail- road to private persons.* The aid granted in Kentucky seems • Acts of Louisiana, 1871, p. 211 et seq. ° Poor's Manual of Railroads, 1871-72, p. 591. '^Ibid., 1873-4, p. 720. ''Ibid., 1873, p. 30. '^ Ibid., 1874, p. 41 ; also Poor's Mamial of Railroads, 1881, p. 880. ^ Acts of Kentucky, 1 843, p. 369. INTERNAL-IMPROVEMENT EXPERIMENTS 21 5 to have been granted rather by counties than by the state.' In 1868 (October lo) the state possessed stock in b*nking, railway and turnpike companies to the amount of $6, 122,794." But the debt of Kentucky and especially the railroad debt was never a burden because it never grew very large. § 9. While other states in the early period from 1837-40 engaged in aiding railways and canals and frequently banking institutions also, Alabama confined her efforts to the aid of banks and did not begin aiding railways till about 1850. The first assistance rendered by the state to railways was in the form of a direct grant of a portion of the "Two Per Cent. Fund" and " Three Per Cent. Fund" of the state. ^ There was not, however, very much activity for several years in aiding railways. Further grants of the "Two Per Cent. Fund " were made later and one or two direct loans made to railways. In 1861 the state had to foreclose a lien on one road to which bonds had been granted.* Very little was done during the war, although one further grant from the "Two Per Cent. Fund" was made.^ The first general law in the matter of aiding railways was not passed till Febru- ary 19, 1867.* This law established a system of internal improvements for the state ; it authorized the governor to endorse the bonds of the various companies at the rate of $12,- 000 per mile as often as a division of twenty miles was com- pleted.' In a short time the state grew more daring and the legislature authorized the governor (February 11, 1870) to issue the direct bonds of the state to the extent of two million dollars for the benefit of the Alabama and Chattanooga Railroad.^ At ^Acts of Kentucky, 1843, P- 3^9 o"- = Poor's Manual of Railroads, 1871-2, p. 581. 3 For a description of these "Funds," which were the same in Alabama as in Missouri, see above, chap, i; also Acts of Alabama, 1851-2, p. 209; ibid., 1853-4, p. 280. * Acts of Alabama, p. 8i ; 2\%o Acts of Called Session, 1861, p. 181. ^Acts of Alabama, 1863, p. 142. '•Jbid., 1866-7, P- 686; for general law authorizing counties to grant aid, see Ibid., 1868, p. S14. T Ibid., 1868, pp. 17 and 201. ^ Ibid., 1869-70, p. 89. 2l6 STATE AID TO RAILWAYS IN MISSOURI the same session the law of 1868 was reenacted and some of the provisions made broader.' The legislature also released the Tennessee and Coosa Railroad from the lien held by the state because the company had suffered greatly on account of the war.'' During 1870 the Alabama and Chattanooga defaulted in the payment of interest and the state had to provide for the loan to pay interest on her bonds loaned to the company and on those of the company endorsed by the state, 3 and during this year only one further grant was made.* But after that year, because of the inability of the companies to perform the tasks they had set for themselves and because of the growing indebt- edness, the state began to face about and march in the opposite direction. The railroad debt of the state amounted (October i, 1870) to ;g8, 480,000 and this debt grew rapidly till October i, 1875, when it amounted in endorsed and guaranteed bonds to $15,797,000, making the whole debt of the state $30,037,563.5 By 1873 default had been made upon nearly all the bonds loaned to the companies and the legislature had to take measures "to maintain the credit of the state. "^ As early as 1871— 2 an act provided that, in case of the una- voidable sale of any of the railroads, the governor should have the power to buy them in for the state at the amount of the bonds loaned so as to make the state secure.^ An act of 1873 provided that, in case the roads were sold the purchasers were to be constituted a "body politic and corporate" and so inde- pendently to manage the railways.^ This act clearly indicates that the state contemplated severing her connection with the railways; and this policy is emphasized in an act of March 17, 1875, repealing the act of February 21, 1870, which had been passed " to furnish the aid and credit of the state of Alabama for the purpose of aiding the construction of railroads within ' Ac^s 0/ Alabama, pp. 157 and 285. 'Ibid., p. 290. ^ Ibid., 1870-1, p. 12 ; also Poor's Manual of Railroads, 1871-7, pp. 576-77: "■Acts of Alabama, 1869-70, p. 376. 5 Poor's Manual of Railroads, 1872-3, p. 699, 1873-4, p. 714 and 1875-6, p. 885. "Ibid., 1873-4, p. 713. T Acts of Alabama, 1871-2, p. 43. ^ Ibid., l873,p. 57' INTERNAL-IMPROVEMENT EXPERIMENTS 21 7 the state." ' It is not necessary to make a resume of the repu- diating measures by which the state of Alabama scaled down her debt from something over 30 million dollars in 1875 to less than ten million in 1877. The debt of the state (October i, 1877) was only gg, 705, 678, of which only $1,542,500 is put down as due to aiding railroads.^ Such was the outcome of aiding rail- ways in Alabama. And the constitution adopted in 1875 pro- vides that "no new debt . . except to repel invasion or suppress insurrection shall be created." 3 § 10. In 1868 Arkansas had outstanding about 1.5 million dollars in bonds in favor of the State Bank and the Real Estate Bank, both of which were insolvent and in liquidation. These bonds were overdue and no interest had been paid on them for more than twenty years.* Two years later the state undertook to aid about 800 miles of railway to the amount of $10,000 per mile on roads which had received land grants and $15,000 per mile on roads which had received no land grants. s By the act of July 21, 1868, the number of miles to be aided was limited to 800 and the bonds to be granted to ten million dollars. But the Cairo and Fulton Railroad decided not to avail itself of the grant of bonds ; by this action on the part of this company the number of miles to be aided was brought down to 580 and the amount of bonds to be issued to not more than 6.3 million dollars. In April 1871 the railroad debt outstanding was only $2,150,000;'' July 1872 the bonds authorized to be issued amounted to 11.4 million dollars and bonds issued to date to $4,350,000. The total debt of the state was $9,885,000 and the state was in default of interest on all of it.' Up to February 9, ^ Acts of Alabama, 1875, p. 269. 'Poor's Manual of Railroads, 1868, p. 436. ^ Voot's Manual of Railroads, 1878, p. 993. :• Ibid., 1870-I, p. 500. iActs of Alabama, 1875, p. 29. 'Poor's Manual of Railroads, 1873-4, P- 714- * To the Memphis and Little Rock Railroad $1,050,000 " " Little Rock and Fort Smith " 900,000 " " Pine BluS and New Orleans " 750,000 " " Mississippi, Anachita and Red River '* 450,000 52,150,000 2l8 STATE AID TO RAILWAYS IN MISSOURI 1874, ^5, '350, 000 in state bonds had been issued to railroad com- panies' and these companies had all defaulted after the payment of interest October i, 1872. The legislature of that year made no provision for the payment of interest and the enforcement of the law requiring the earnings of the roads to be paid into the treasury of the state in case the roads yielded no more than enough to pay operating expenses. Such was now»the case and such was likely "to be the case for some time to come."'' The session of the legislature of 1875-6 repudiated the debt of the state incurred for aiding railroads, levees, and internal improve- ments 3 on the ground that the debt was created by "alien adven- turers ; " and at the time of the repudiation only one road, the Memphis and Little Rock, 130 miles in length, was completed.'' By 1878 another road, the Little Rock and Fort Smith, receiv- ing state aid was completed. ^ 'Grants of land were made as early as 1S52 (Acts of Arkansas^ 1852, p. 4) and some were made in 1855 [Acts, 1855, pp. 149, 169 and 172). In 1859 ^40,000 in stock was taken in the Mississippi, Anachita and Red River Railroad [Acts, 1859, p. 56). In 1861 ^100,000 were appropriated for the help of the Memphis and Little Rock [Acts, 186!, p. 136). A general law governing the granting of aid passed March 18, 1867. The railway companies were to provide funds " ample to prepare the entire road or 100 consecutive miles thereof for the iron rails before getting any aid from the state (Acts, 1867, p. 428). A further act for aiding railways was passed in 1868 (Acts, 1868, p. 148). By the terms of this act the bonds of the state were granted at the rate of ?i5,ooo per mile to railroads not having land grants, andSSooo per mile to those hav- ing land grants (Acts, 1868-9, PP- 2 and 187). An act of February 10, 1869, provided that the state should pay the interest on bonds issued to the railroads, but also that the state levy a tax on the railroads heavy enough to reimburse the state (Acts, 1868-9, P- 147). A general act of April 29, 1873, provided for the issuing of bonds by counties, cities and towns for the purpose of aiding railroads (Acts, 1873, p. 473). The act of April 10, 1869, providing for the payment of interest on bonds issued to railroad com- panies was repealed May 29, 1874 (Acts, 1874, p. 38). Lands were granted to several railroad companies in 1875 (Acts, iSys, passim). From this time on Arkansas was no longer interested in railroads from an industrial point of view. 'See letter from the Treasurer of the state of Arkansas, February g, 1874, in Poor's Manual of Railroads, 1874-5, P- 795' 3 For Railroads ^5, 350, 000 " Levees 3,005,846 " Internal Improvements 3,350,000 11,705,846 '• Poor's Mantial of Railroads, 1875-6, p. 826, and 1879, p. 1003. ^Ibid., 1878, p. 994. INTERNAL-IMPROVEMENT EXPERIMENTS 219 § II. In Texas the earliest aid granted to railways was in the form of land grants. In an act of January 30, 1854, the state granted to all the companies then organized, or to be organized, sixteen sections of land for every mile of railway completed.' Such aid in so undeveloped a state was, however, practically no aid at all. By 1870, as so little had been accom- plished up to that time, it was felt that the state must adopt a more aggressive policy. Aid was granted to the prospective International Railway, running from near Fulton in Arkansas, passing through the cities of Austin, San Antonio to the Rio Grande near Laredo, at the rate of $10,000 per mile in 8 per cent, thirty-year bonds of the state. The act also limited the amount of aid to be granted at any one time to the sum of 12 million dollars.'' This generosity of the state did not, however, call forth a quick response on the part of private capi- tal, and did not result in securing railways for the state. During the same year the state exchanged the debt held against the Houston and Texas Central Railway for stock in the company; 3 and in the following year the governor was authorized to dispose of the Houston and Brazoria Railroad, then in the possession of the state for "not less than the actual value of the iron on the track." ■* The railway debt increased gradually, however, for a few years. September i, 1872, the debt amounted to $2,173,- 278. A little more than two years later (January i, 1875) it amounted to $4,822,000. In 1873, 1874 and 1875 the state made further grants of land for aiding railways. ^ The people of the state seem to have been convinced at an early date, however, that the aiding of railways by means of state bonds was an undesirable form of state activity. It is to be noted that the state became involved in more or less litigation because of loaning funds to the railways.* Adopting the same line of action fol- ^ Laws of Texas, 1853-4, p. II. 'Ibid., 1870, p. 104; also Poor's Manual of Railroads, 1871-2, p. 581. -i Laws of Texas, 1870, p. 325. •> Ibid., 1871, p. 158. ^Ibid., 1873, pp. 406, 555 ; Ibid., 1874, pp. 36, 38, 46, 57, 74, 83, 93 ; Laws, 1875, pp. 16, 19. ^Ibid., 187s, p. 58. 220 STATE AID TO RAILWAYS IN MISSOURI lowed by many older states at this time and by some at earlier times, the people of Texas inserted into the constitution adopted in 1875 a clause to the effect that the legislature was prohibited from " giving or lending the credit of the state in aid of Or to any person, association or corporation, whether municipal or other (sic)."' A few years later (1882) the laws granting the land to railway companies were repealed/ This closed in Texas the experiment of aiding railways. § 12. The experiment of aiding railways in Florida never attained great proportions. The proceeds from the sales of land granted by Congress to the state upon the admission of the state into the Union (March 3, 1845)3 were applied by the state to the payment of interest on the bonds of railroad companies. The companies were authorized ten years later to issue bonds at the rate of g 10,000 per mile."* This act was slightly changed soon afterwards by amendment. = In 1858 the legislature resolved to ask Congress for a grant of lands for railroad purposes.^ In 1869 the direct bonds of the state were substituted for the bonds of certain railways.' In 1870 the bonds of the state to the amount of $16,000 per mile were granted to the Jacksonville, Pensacola and Mobile Railroad Company ; ;$200,000 to the Gulf Steam Ship Company for the purpose of improving the channel of the Apalachicola River ; and $8000 per mile to the Santa Rosa Railroad, Banking and Insurance Company to assist in building a railroad not more than fifty-five miles in length, and $2000 per mile bonus to this company after the road should be completed. ** In a short time four million dollars of the bonds of the state were delivered conditionally to the Jacksonville, Pensa- cola and Mobile Railroad Company. But in 1871 none of these bonds had been sold, and negotiations were pending for returning ^ Revised Statutes of Texas, 1879, P' ?■ '^ Laws of Texas, 1882, p. 3. 3 United States Statutes at Large, vol. v. p. 789. "^Laws of Florida, 1855, pp. 26-27. ^liid., 1856, p. 26. iIHd., 1869, p. 36. ''Ibid., 1868, p. 187. ^Il>id., 1870, pp. 10 and 60-66. INTERNAL-IMPROVEMENT EXPERIMENTS 22 1 them to the state.' In 1874 the road just mentioned was operated by the receiver for the benefit of the state,' and after 1870 no fur- ther direct aid was given to the railroads through the agency of the credit of the state. As late as 1881 and during that year lands were granted to thirteen separate railroad and canal com- panies.' Also in 1883 and in 1885 land grants were made to many companies. But the close of state aid, as an internal- improvement experiment, had long since come to an end in Florida. ^Yaoi's Manual of Railroads, 1871-2, p. 579. 'Ibid., 1875-6, p. 828. '^ Laws of Florida, pp. 126-155. CHAPTER VII. SUMMARY AND CONCLUSION. § I. The causes for the failure of the state experiments just reviewed, as well as those of earlier date, are not far to seek. They are two in number, (i) Incompetency and (2) Corrup- tion. If it be objected that the most competent management could not have succeeded in the enterprises of many of the states because of the times in which they fell, it must be answered that the state governments did not at the beginning of these enter- prises keep in mind a proper relation between liabilities incurred and the resources for meeting these liabilities. Such a mistake is the indisputable evidence of incompetency. Such being the case, when crises came the enterprises were doomed to such sig- nal failures and the states made to suffer such losses as would never have taken place had a competent management at the beginning caused a more rational ratio between liabilities and resources to be adopted. That incompetency and corruption may be seen to be the cause of most of the failures in those states aiding railways on a large scale from 1837 ^° 1840 but little need be said here in addition to what has already been given." In the case of the three greatest experiments of the earlier period (1837-1840), those of Indiana, Illinois and Michigan, which were practically contemporaneous, that form of incom- petency which has just been mentioned showed itself in an aggra- vated degree. In not one of these states did the authorities have due regard to the possibilities of the state to carry burdens. And with reference to Illinois there can be no doubt that political jobbery played no small part in the experiment. That the plan was conceived and executed by incompetent management is plain from the magnitude of the debt incurred, the early failure of the ■ See above, chapter i. SUMMARY AND CONCLUSION 223 system, and the subsequent hasty action of the legislature to undo the acts of only three years previous." Nor did the state, after the people became conscious of what an enormous debt had been incurred, immediately accept the debt without some talk of repudiation. In 1841 both the Whigs and the Democrats were unwilling to commit themselves on the question of repudiation. The Sangamon jfournal and the Alton Telegraph, the two leading Whig papers in the state, boldly took the ground that the debt of the state "never could and never would be paid, and there was no use saying anything about it."'' In Indiana the negotiation of the railway bonds was effected by a system in which there was the "most fearful jobbing," and which "resulted in serious losses to the state." 3 Because of the connection of the internal-improvement system of Indiana with her unsound banking system further losses were sustained by the state. One of the fund commissioners whose duty it was to sell the bonds of the state to the best advantage possible was one of the largest stockholders in the two banks, and one whaling (sic) company, through which the bonds were negotiated. In this transaction the state lost g2, 275, 000. Further losses were trace- able to the perfidious conduct of this particular fund commis- sioner. 3 Although Michigan disposed of her railways when only partly built and on better terms than any other state, the attempt to construct railways upon capital borrowed at that time (1837) was not wise. Moreover, in the discussion of the failure of the experiment in Michigan it is to be taken into account that " some of the leading and influential men of the state, as subsequently transpired, were in the interests of those large moneyed institutions on the seaboard that sought to procure on time the obligations of sovereign states with which to prop their own tottering credit abroad. It would not have been difficult to show a conspiracy on the part of several moneyed ' See above, chapter i. = Davidson and Stuv^, History of Illinois, p. 453. 3 Hunt's Merchants^ Magazine, xxi. p. 152. 224 STATE AID TO RAILWAYS IN MISSOURI concerns to procure the obligations of the state for their own purposes." ' And, again, the results of this experiment must be taken into account because it resulted in leaving upon the state the odium that attaches to repudiation. All attempts to deny this are futile. It is said Michigan " has never repudiated," though her position " has been too equivocal." The defense is this : the state did not get all of the amount for which her bonds were sold ; she acknowledged and paid with interest all that had been received on the sale of bonds, therefore Mich- igan has not repudiated.^ This line of argument will not do. Innocent parties held the bonds of the state for which they had paid, but, to be sure, for which the state never received an equivalent. 3 These parties were cut out by the final settlement, therefore the state did repudiate. The attempt of the state of Pennsylvania to construct and operate a system of public works also proved a failure through incompetency and corruption. It has already been seen'' that the system of public works in Pennsylvania was " conceived without judgment and executed without skill," that the]^ were laid out with a view to " benefit private lands," and that private routes of transportation were so much better conceived that they "naturally drew business from the state lines." That the state, through her industrial enterprises, lost her financial honor is simply a matter of history. ^ That unfortunate position of the state grew out of "three radical errors; (i) government system of internal improvements; (2) unsound financial legislation; (3) a corrupt connection with a rotten banking system."^ On some of her canal enterprises "the contracts were political jobs shamefully performed for enormous sums so that reconstruction and repairs" in course of a short time "amounted to more than the original cost."' Concerning political corruption in con- ' Hunt's Merchants' Magazine, xxii. p. 34. 'Ibid., xix. p. 23. 3 See also Scott, Repudiation of State Debts, pp 161-164. 1 Chapter i. p. 19. 5 Worthington, Historical Sketch of the Finances of Pennsylvania, p. 59. " YhxvA'i Merchants' Magazine, xx. p. 256. T Ibid., p. 258. SUMMARY AND CONCLUSION 22 5 nection with the system of public works in Pennsylvania, it is said that there is "every reason to believe" that these works, "during the last sixteen years of their history, were maintained as an instrument of political corruption which was invaluable to the political party in power." ' Whether or not there was much corruption in connection with the internal-improvement enterprise in New York the change of policy introduced in 1836, after success had crowned the efforts of the state, was the result of incompetency in indus- trial management. At that time the seeds of final failure for the enterprise of the state were sown. The failure of many of the banks of the state in 1841 brought the state government to the end of its " wild-cat" policy. Between 1839-1841 many railroad bonds were sold "regardless of law and of price." ° § 2. The state experiments just referred to constitute prac- tically all the important experiments which had run their full course prior to the Civil War ; some of these states, to be sure, had completed their experiments several years before the break- ing out of the war. The experiments in many other states, we have seen, were begun some years prior to the war and had not proceeded in their course far enough to be called successes or failures at the time of the breaking out of the war. Concerning these the question arises what might they have done had not the war interrupted their progress. Of these experiments that of Missouri is the most important from one point at least — it involved the state in a larger debt than did that of any other. In discussing the possibilities of the ultimate success of these experiments, and especially that of Missouri, two things must be kept in mind : (i) The nature of railway management ; (2) the qualifications the state governments possessed for meeting the demands of that sort of management. In the first place the managing of railways is strictly an industrial business, one that requires special training in scores of different ways, peculiar ' Worthington, Historical Sketch of the Finances of Pennsylvania, p. 32. = Hunt's Merchants' Magazine, xviii. p. 248. 226 STATE AID TO RAILWAYS IN MISSOURI business insight, a knowledge of markets, home and foreign, and the products of different sections to be permeated by connecting railway systems, and a knowledge, too, of the habits, fashions and caprices of society. This being the case the pertinent question arises, could the state governments in the cases in hand have supplied the demand ? Had any state prior to the war succeeded in supplying this demand ? Plainly not. All had failed. We have seen that private parties laid out better lines of railways in Pennsylvania than the state government did. Private enterprise outran public activity in Massachusetts. Soon after the failures of Illinois, Michigan, Indiana, Ohio and other states private enterprise set to work and built railways which proved to be profitable investments. Had not the war inter- rupted possibly some of the states would have brought their enterprise to completion in a desirable form. However, as a matter of fact all the states, those interrupted by the war and those entering into internal-improvement undertakings after the war, sooner or later gave up the business as unprofitable. And so far as Missouri is concerned it has been seen in the account of her experiment that no small amount of incompetency crept in and a style of political corruption was developed which made that of other states, so far as brought to light, pale into insig nificance. This corruption, especially that which is brought to light in connection with the sale of the Pacific Railroad, indicate the presence of possibilities for corruption that would have made the continued connection of the state with railways after the war a most hazardous enterprise for the state. In that event it was certainly more profitable for the state to dispose of the roads for what they would bring, even if this must be done at a sacrifice and at the hands of corrupt legislators. Moreover, barring all possibility of corruption a further con- sideration must be kept in mind in deciding upon the feasibility of the continued management of railways after the war by the states then so engaged. The same consideration holds good for those states which entered for the first time into the aiding of railways after the close of the war. In many sections of the SUMMARY AND CONCLUSION 227 country extensive railway systems were being constructed by private enterprise. Long trunk lines would soon be formed under such management. The management of state enterprises would thus inevitably be brought into direct competition with private management on private railway systems. In the event of such a course of things, if the state management should at all resemble that of earlier times, it is not difficult for one to decide which would, in the long run, gain the victory. That the uncompleted roads in Missouri would have been completed without the release of the state's liens is certainly true, notwithstanding the fact that several of the companies complained greatly from time to time that the liens were heavy burdens, preventing them from floating bonds of their own. It is impossible as one reads memorial after memorial from the North Missouri and some from the Pacific (completed, however, while the state was aiding) to escape the impression that these companies wanted release from liens so that, by virtue of that fact, they would come into the possession of great values for which they would render no quid pro quo, and would then, if needed, have a greater basis upon which to build credit. This was especially the case with the North Missouri. If the state lifted from this railway property, more than half of which she had contributed, the burden of securing state bonds, of course the property would then be capable of serving as collateral for a like sum of railway bonds. Consequently releasing the liens meant making direct gifts to the companies of the state's interests in the roads, and we have seen that in the case of the St. Louis and Iron Mountain, the North Missouri, and the Platte Country railroads this interest was very much greater than was real- ized when the state canceled the liens. But if these uncom- pleted roads were to be completed with the liens holding against them, the state must do the work or wait till the prospects of profit lured private capital into the enterprise. With trade and industry developing as they likely would after the close of the war the state might not have to wait long for the prospects of profit to entice capital into the work of completing the railways. 228 STATE AID TO RAILWAYS IN MISSOURI This plan would have had, however, the fault of indefiniteness and the interest of the debt of the state would have been increasing all the time. The state could not do the work for the reason that an increase of debt would have been necessary, and the railway debt with interest had already reached more than 30 million dollars, the constitutional limit of debt for such pur- poses. Consequently the state was limited to the one course of disposing of the roads by releasing the liens. In such a case an able and honest legislature would have made as favorable terms for the state as possible. As it was, however, the state interests were sacrificed to the extent of several millions. The greatest sacrifice was that of nearly six million dollars on the Paci- fic Railroad — a road upon which the lien should not have been released because it was already a completed road and was earn- ing handsome dividends. The release of the lien on the Pacific was accomplished by corruption of the most disreputable sort. And as it was the same body of legislators who released the liens on all the roads we may say that the state's interests, to the extent they Were sacrificed, were sacrificed by unprincipled representatives of the people.' § 3. In so great an amount of state activity as we have reviewed in the preceding pages it is pertinent to ask if there have not been found some redeeming features along with so much that is objectionable. The plans, systems or policies of state aid, as such, have all failed. Out of these wrecks no states but Georgia and Illinois have saved anything in the form of a direct and possibly perpetual income to the state treasury. To be sure, indirectly, in states like Pennsylvania and New York especially, and many more in general, in which permanent inter- nal improvements were more or less firmly established by the 'The following names are given in the star-chamber report (see Appendix II.) of the committee that represented the Board of Directors of the Pacific Railroad at Jefferson City in the winter of 1868 and secured the passage of the act of March 31, 1868, releasing the lien on the Pacific Railroad : In the Senate, Stephen Rldgeley, J. G. Woerner, H. J. Spaunhorst; in the House, G. C. \'an Wagoner, C. H. Branscomb, C. R. Smythe, Norman J. Colman. SUMMARY AND CONCLUSION 229 activity of tiie state, tiie community gets a valuable income. And yet in regard to the question as to whether or not this income is greater than could or would have been secured by private enterprise, neither the advocates of state activity nor their opponents can ever make a satisfactory answer. The income of the state of Georgia, as a remnant of her industrial activity in railway matters, is in the form of a month-rental from the Western and Atlantic Railroad. In 1890 (December 27) the state leased this road to the Nashville, Chattanooga and St. Louis Railway Company for twenty-nine years at a monthly rental of S35,OOi or 8420,012 per year." As the state pays, however, the annual charge of 8252,000 on bonds issued in behalf of the company, the gain to the treasury amounts only to $170,012 annually. In Illinois a much better showing is made. It should be said, however, that the gain now coming to the state of Illinois from the Illinois Central Railway is not a remnant of the early experiment (i 837-1 840) of the state in aiding railways. This income arises from a later connection of the state with railway matters. The income to the state is in the form of a percentage of the annual earnings of the Illinois Central Rail- way ; this company pays into the treasury of the state, in addi- tion to taxes, 7 per cent, of the gross receipts in the state of Illinois. The receipts in 1893 amounted to nearly three-fourths of one million dollars.^ § 4. By way of conclusion the writer would say only a word on the general question of state activity versus private enterprise in railway matters. The advocates of state activity in railways and in like industries partaking more or less of the nature of natural monopolies are accustomed to refer us to the success of '"Debt of Georgia" in Poor's Manual of Railroads, 1879 and succeeding years; also ibid., i8gi, p. 991. 1891 ^599,064 1892 645,905 1893 ' 707,688 Report of the Railroad and Warehouse Commissioners, 1893, pp. 40 and no. 230 STATE AID TO RAILWAYS IN MISSOURI the governments of continental Europe in these matters. It should be kept in mind, however, that before one nation should accept and adopt fully a habit, custom or institution of another, the former should inquire if the custom or institution about to be adopted is or is not in accordance with the genius or social instincts and inherited tendencies of its people. Between the countries of continental Europe and the United States of America there is a divergence in these matters as wide as the East is from the West. The leading peoples of continental Europe from the time they began to assume really national pro- portions, have been accustomed to more or less strongly cen- tralized governments ; they have inherited a deference amount- ing to reverence for authority. Under such political conditions those in public office are in immediate subjection to authority. Such an arrangement is virtually a political hierarchy ; and if applied to industry it becomes an industrial hierarchy and works like a machine. And so, because of the exactness with which such governments as those of the continent of Europe work, be the field politics or industry, maladministration has little chance to enter. Whether or not an industrial system less like a machine, a system in which there is more of individual initiative, such, for instance, as is found in Anglo-Saxon countries, is productive of more good to society as a whole and of less individual ine- quality, is an open question. With what ought to be or what may possibly be we are not here concerned ; we are concerned only with what has been. The facts of social development through centuries among Anglo-Saxon peoples prove that the genius of the Anglo-Saxon flourishes best under a system in which the individual is given the largest possible freedom consistent with what is conceived to be the good of society. However, the fore- going study is not an argument for or against state activity in industrial matters ; it is a presentation of a body of facts, a bit of evidence, to be taken into consideration, possibly, in succeed- ing times, in the discussion of the question. APPENDIX I. TABLES RELATING TO RAILROADS IN MISSOURI. EXPLANATORY NOTE. The tables are compiled from the reports of the Board of Public Works, and from communications made to the legislature by the different companies. These reports and communications are found in the appendices of the House and Senate Journals for the period covered by the tables. The amounts in the columns are the totals to date unless otherwise stated. A blank means that the number in the preceding column is repeated. For notes to tables see pages 238-242. 231 232 STATE AID TO RAILWAYS IN MISSOURI pq <; Q <; o A < < ^ 8 « - « d . . . . \0 tj-1 . • ■ -^00 . . CO 01 01 ON . . * ■ iri c> ■ CO d^ ' CO r^ rC O ■ * (TJ O CO Tj- ■ CO 00 00 to 10 ONOO • ■ CO CO . I-. CO • -^ 01 . . . . ^ . . h-t • ►-• _ . . . . ON LTl • . . . TT ■ Tj-io 5 r^ 01 00 . CO w • 0) Tj- 1-1 u-i r>. 10 ■ LO ON ■ ON IJ^ CO COnO tJ- DO a ■ '-' o .■ y^" !>. 01 CO to 00 c^ 1;;^ VO ON - '^ "^ • CO CO On -^ • *^ 1-1 ^_^ "S S" 8 d - . . . O Ol ■ o ■^ ■ • i>. . 1-1 COOO 01 O tD O NO . • •* 00 to 01 TfO ■ 01^ ■ °^ lonO CO CO d; c> : 0" rC ' CO Ol 00 CO a, nO On 00 i-i CO CO 01 01 On . ■* nD NO CO CO ■ W: ^^ M ■2 S- d . . w O QC . o o r^ o ^ - o o S o NO NO i-i w Ch m t-H O ■<; 1>»00 00 to -d- - O^ O u x>. nO^ -^ »H^ 0^ oi lO C(0 la, no' o"nC ! '-'*" o'-rV CO CO O W >-« a CO CO rC d' '=3- to d\ 1-1 OO O C M -^ ■^ TT 01 On 01 OJ 1-1 o r- ' HH O-t-- •* On 01 to 0( 01 Xfl " o CO rC : '^c 0" ..... ^ t-i -♦ 6 . . O c -) ■ CO O O O . - CO 1-1 rJ-vO + O ^ ■ !>. O U-) O 01 01 00 CO 0_ L/ } ■ CO q_co OO ■^ °S, to '^ o„ 00 VJ-1 o" c* S : CO CO no" no" CO nO" 00" 00" CO CX3 o 00 LI- T o r- o NO CO CO ■^00 ""* 5, r^ r- \ oo ■Tf ■"^ ON 0^ NO CO M no" o" 0" ■ *^ • ■ 1-. -^ O O ■ O O sO O 'S r ■ • o CO o ON . • 00 <-* t~>. + to o o o o oo O I' ■\ nO 00 to r^oo o o q_ ^ -^ o^ o q_ 0-00^ o_ ''J; nO^ t^ oo O 6 6 rr ^ d" d" i-H "^00" oT nO r^ to oT 01" CO O -N oo O CDOO o On OnOO 01 CO 01 -. O LO t^OO i-i CO cs CO "--^ CO CO w '^ Ol 01 " — ' rC oT CO comd" 0" i-T m" d^ ^ ^ o • • o r-. o rt ■ >- • «; o ON f-l 1-. M 6 o O O O 3 ^ "^ °^ o • LO gB Ol 00 On I>.nO o m o ■ CO nO 01 00^ i-^nO^ 00 o" "^ -^ d" c ! '^^ C C^ ON CO T? On o NO ^ o 00 00 ^ ■^ CO o J>. O J>. 01 01^ o" CO CO tF nO «^ ^ O O M O . CO TT 00 . . . r^ c. (N 01 NO 01 01 00 i>;QO_ O 00 l-H -^ to CO in" CO nO" • • %«9= '^ O O - O M O 00 - "^ O 00 00 r^ OnnO i-" 01 tOvD :^ o o o O On O '-' • 01 O On O 00 -"T r^ M 01 ra- ■Tf ON ^ m o o o rj o no • O O 01 CO On CO 01 On ^ -^ 00 o 6 6 too o r- ; >- OO d o to ro tnOO On to i-H~ CO J^ o COnD O lt COOO t^ !>. tT TT Ol 00 01 m Lo I>-0O o ; Tj- LT, 01 CO 01 CO -T cT 01 ^ ^ o o o _; o o o - o o o ^ o o o ■ q_ o^ q_ ^ i>-o^ q_ ■ O ■ O CO O On . ■ ■ ^-^ o M nO • On Ol w O • o_^ I>. O) O; 0^ V. ^ : UO o" d" d"-rv, tF (n" d" ; O oo u-j «D 1-1 •-' o 0" CO CO 00" d" OO 0) p u W '-' o c^ i-H -u !>. Lo Lo ■ rt •"• 10 r^ -T 2 of : ""■^ ^ « *Q. Td • '5 ; "S - Td a; a. G > (U - . o . 'o bo ; t3 • 3 c CO ^ "^ bo "^ "S Lh .B nds autho subscriptic scriptions. lal subscri bscription bscription nds issued t on bonds c ■ U3 ,^ ri tn • U 'U S sional 1 les acre debt... nge cha road pe rolling 5 a ft C5 C! C OJ t/:i rt _, DO 7; ^^0 tu X _ portat et pro< er cent c rt s -2 C *= c §-1 OJ c/l CJ U hH H H y^ R CJ^ tH tu < H U U H H < < 7^ Ph APPENDIX 233 ro ,-. li^ r^ 00 o -^ ^ O (N OJ O U-) 10 ^ tn '-' CO rj- t^^O ON (^ o" cT LO cT '^ O TT ^ Q -< O Pi < < w H O M pq H en W H D O vO 00 ON w o\ -d- ON O t^ m" o a NO ro o m i>. c^ c^ •-< vo ^ 00 ro >j^O f^ d r^ ■rr O O O O c<> o O O O O (N o 00^ ^o o m o 00 "^ 3 2 .5" (u i5 w o S § a 3 — o o s C C T3 -3 O o OJ C •^ -^ -( o r- rn rt 00 vo « fO-t; o o ro 00 O 00 r^ o N O bflOO <-« o" O ro O W oo^ j>. q_ o 1 o N o r^ OOOOOi^OO OOOOOt-iOro o" rC o" Lo oT n" o" c^ O M u^ W O OOO ■c S c _o h S S 5i 2-° S'E g S oJ C! o O O 3 bo U .^ w l« (-i " ( j3 -S C o O O ; 3 ■»^ '-3 -2 Q. o,.!2 ■" S -C " o S "> fl g in 2 -O -^ =i O JD 3 a 3 o " S -! t/] (n o -6 ^ ^ OT ^ ^ ^ tn (U , ^ T3 ■2 _^ »M § o °_, '-' O O O -•-> J-i UJ tj (X (U rt Pi o p: H< "3 g C 3 O. o 3 . l>.CO m OJ « 1 !>. OJ 00 -^ CO LO >-t OJ 00 '::*; ON NO OJ «1 5, i>. of d! CO <-o "? "^ oT oT ■ as . vn * 0" : rn ■ a« OJ 00 u^ OJ nO ^ u~, *:*• OJ ON ON 1 r^ LTi "^ ON lo 1 --,c "cS-.-^ tT On LTl Tj- 0^ r^ vo 01 i860 (Nov. I.) . • m ■ [>. '. ^ : -^ • oT . ■ Tj- ■ r^ . 0" * ro • U-l * ON ' 01 00 nO OJ \N j>. r^ oo-N \0 01 i>. I-H tF d" oo o" -—^ 'd- ON 1.; ^ ^ ^ •— ' d . rC ; i< T:f oT d" ^ ■ 0" -<" d CO .0 0'-' "j^vo ' 00 00 i>-.mLo-^roTj-; oi M ►1 • oT oT "^ >~i ■ i>- ]>. r^ ■ r^ r^ j>. - M3 (>. I>. ■ vo" LO l/l . CO LTl iv^ d 00 r^ 00 ?> 5^ • • -^ • ■ . LTl t^ ■ • ■ ""l. "^ *^ ° °° ■ ' ' \^ d d 1-^ ' ; ; OJ vo 04^ ro ^ ; • ■ oT oT r^ ON LO LO d oj" ON <- 0^ vD OJ r^ VJ-i !>. LO rooo ■^ Oj"o Ln ON m r^ On M NO OJ OJ d • . '-' LO • . "-o q_ ■ . DO CO Tf q_ q_ o_ ' ' di T? lA d" c> -^ ■ r- (N LT) 04 Ln Lo • • oT oT (^ .-T OJ fO 00 OJ OJ 00 1856 (Nov. 30.) . ■ 9, 9. * Ln ■ M : d d CO OJ - ■ 04 • X) • ON ■ ON ■ en 00 d oj" CO ooooo^ooio OOOOOunO'd-O 0^ q_ q_ q^ CO q_ c^ 0^ d" Lo d" '-^■SoS' r^^d" or^Or^Tj-i>.o '-' ^J-t ^n i-i i-i '•O -^ oT i-T of >-<" 00 T? d" OJ ■^ f^vO 00 r^ '^ rn Lo cNj" OJ*' ON o_ OJ ^ « 1 '. . U] . • C • . m . • ri g :.S •C.2 J3 ■>:; 3 "S f .>; .1=; ;i .2 i Q (A a c 'I = ,0 > C a; : t/ ul ■a c "c C a u V s II £§ c S 3 ^ D u ■S a <" 13 g Co" 1 (H P nJ c t/ u e OJ u ■^ bj . J. 'o 1/ U _1 u a ^0 - 01 p X c .c P u 'a CJ -OJ "a ;=( c G .s P s- OJ H C C OJ L. (J Li OJ 236 STATE AID TO RAILWAYS IN MISSOURI < < O < H p o o Q o H V3 t; ^ • « W O ( • r>- r^ o , • « \0 o ' vo" rC c? vD sO O^ -1 I-. CO M -: o o cf^ "-T sO O N »-« U-) O^ "TO T^ O I>- 1>; o" rC tC a^ 0*0'^ r^ lo in o o o r* o o o o ^o vO o in rC tC o" m o ro r^ o cr> ov o^ M \o vo" o"- N f* O !>. in o o o r^ o ^ o o o o o •-> o o^ o^ "^ 0^00 N o o rn o c» O^ *n mo ^n ■-T ro rn rn ■^ o i-« I>- in M M colus HH moo m m • o" rT ro >-h" cT-r! in o\ o 00 N ^ o o r^ o ro 00-^00 o_ o in o •-H_ vo" ^cT 00" o" >-<" r^ !->. C3^ !>■ r* N ot m M <-< ro CO rn rn O rn m OOGOOMOO ooojooooor^ 00000"^00( OOOOOt-tOOi ooomrnLooo oinooornoo^o o i>« m^D os t-f o in vnininf:'^'-' tj-n P^ W5 U3 -^ 1 '-^ c ; B- O Pi C E^ .2 2 o ^ .y O O O O -^ 2 ■ a. 4-1 o -U 3^ O *^ C 'p^ fjL, J-H <^ O ^ , 2 0210. APPENDIX 237 TABLE VI CAIRO AND FULTON RAILROAD. State bonds authorized County subscriptions Individual Subscriptions Total subscriptions Total subscriptions paid Bonds issued ' to the company. Discount on bonds sold Congressional land grants. County land grants Land sales Funded debt Floating debt Annual interest due to state Total interest, discount and exchange charges Total expenditures 1857 (Oct. 20.) $650,000 419,500' '842,275 1,261,775 415.918 180,000 20,000 (acres) 56,007 370,820 180,000 ■ 4,000 n (Dec. I.) «459,675 464.593 250,000 32,172 (acres) 514,500 SS,ooo 15,000 34,313 420,366 1859 (Oct. I.) ^504,663 650,000 110,030 none 39,000 138,810 842,673 (Jan. I.) TABLE VII. PLATTE COUNTY RAILROAD. 1856 (Nov. 30.) 1859 (Oct. 15.) 1863 (Jan. I.) State bonds authorized . . . . / County subscriptions Individual subscriptions Total subscriptions Total subscriptions paid Bonds issued Discount on bonds sold Funded debt Floating debt Annual interest due the state Total interest, discount, and exchange charges Cost of road per mile Cost of rolling stock per mile Total Total expenditures Annual receipts for transportation Annual expenses for transportation Per cent, on investment $700,000 1,255,800 151,150 150,000 none 150,000 187,412 not given (cir.)25,000 251,190 $175,000 766,875 700,000 none 28,981 42,000 not given i,445,i59 809,125 1,657,393 ' This company defaulted in the payment of interest due the state, July i, i 238 STATE AID TO RAILWAYS IN MISSOURI REFERENCE NOTES TO TABLES. TABLE I. ' Of this amount, $795,000 was cash ; the remainder was bonds. ' Premium instead o£ discount. 3 Exclusive of transportation expenses. * That is, 1.5 per cent, on the cost ($1,799,713) of the first division (thirty-seven miles). This includes a ballasted roadbed, fenced, and protected by cattle-guards. 5 This amount includes all the expenses on the South West Branch to date, and the expenses for the survey of the Iron Mountain Road. [Senate Journal, Adjourned Ses- sion, i8js. Appendix, p. 179.) ^ Premium and discount balance. ' The floating debt, March 10, 1856, was $1,337,828. ^This amount covers the cash cost of the line to Jefferson City only. It includes rolling stock, depots, water stations, ballasting, fencing, tools and machinery, and land damages. In the report of the following year, this amount was increased to $6,577,266. This would make the cost per mile a little more than $44,171. In 1858 the total cost to Jefferson City was put at $7,542,353. ' See note 8 above. '" This includes all interest, discount, and exchange charges, $10,397 of which was on account of the South West Branch. " On the cash cost to Jefferson City. The earnings given being for only seven months (ending September 30, 1857), the annual rate would be 5.12 per cent. " After 1 85S, all figures pertaining to the South West Branch are omitted. For these, see Table II. '3 Number of acres, 1224.9. '■•On the cost to Jefferson City; see also note 8 above. '5 Net discount. ''Number of acres, 87,274. "' From St. Louis to Syracuse. "* The state paid the interest due by the company, January i, i860. ■' This includes: Per Mile Cash cost of grading, masonry, superstructure, ballastmg, and bridges $37,127.37 Cash cost of right of way and real estate - 2,121.80 Cash cost of fences and protection 901.97 Ca.sh cost of buildings and machinery 1,965.58 Cash cost of telegraph line 35.93 Cash cost of engineering and agencies 1,695.00 Total ■ $43,847.65 This is the net cost of the road, per mile, from St. Louis to Otterville, 176 miles. The gross cost was $53,700. APPENDIX 239 ^On the cost to Otterville ; see also note 19 above. ='Net cost to Sedalia, 189 miles from St. Louis ; the gross cost is $55,970. " Of this stock St. Louis county held $1,104,000 St. Louis city 500,000 Johnston county 150,000 Jackson county 275,000 Morgan county 17,754 Moniteau county 69,500 Henry county 7,600 Pettis county 102,400 Cass county 1,500 Individuals 1,381,361 Total - 1(3,609,115 — Cf. Appendix to House and Senate Journals {/868), p. 221. =3 The interest due by the company to the state was $3,780,000. ==400 Contractors 100,000 $469,400 — House Journal CRegulax Session, 1855), Appendix, p. 49. "The purchase price was $1,209.50. 3 Of this amount $1,268,000 were "direct" bonds of the state. The remainder 240 STATE AID TO RAILWAYS IN MISSOURI were the bonds of the company " guaranteed " by the state. The first bore 6, and the last 7 per cent, interest. ^ $200,000 additional sevens had been guaranteed by the state. ^ Senaie /ourna/ {Adiourned Session, 1858-9), Appendix, p. 79. 'For nine and one-third months, ending September 30, 1859. 'This brought ^17,777.95. a Road defaulted in the payment of interest, July i, 1861. 'This is the average cost of seventy-seven miles of road then completed, December 22, i860. There is only a very small amount of rolling stock included ; all other items of railway construction are included. "Assuming the difference between the total expenditures for this period and for i860 to be equal to the cost of grading west of Rolla, we would have the cost per mile of road the same as in i860. A table given in a regular report of the company, however, put the cost of the road to Rolla (stated in the report to be seventy-six miles) as follows : Cash cost of road per mile - |!33i9S9 Interest, discount, exchange, and commission 20,953 Rolling stock 1,507 Land-grant expenses 414 Total §56,833 TABLE IIL • Subscriptions : I. By counties Marion Iioo.ooo Livingston 26,000 Buchanan 100,000 Daviess 1,000 2. By the city of Hannibal 50,000 3. By individuals in Shelby county 4,000 Macon county 8,400 Linn county 8,300 Livingston county 17,300 Caldwell county 5,900 Grundy county 1,400 Daviess county 3,100 De Kalb county 300 Clinton county ^,500 Buchanan county 29,500 Boston and New York cities 1,000,000 By J. Duff & Co. 27,800 'The whole of the subscription to the stock was 82,551,280. From this APPENDIX 241 deducted the amount of stock canceled by a resolution of the Board of Directors, as follows : Individual stock Si.ooo.ooo City of Hannibal 6o_ooo County of Livingston -jj ggg Delinquent 65^800 ;?i,iS7,48o Leaving i,393,8oo 3 This includes bonds sold : State bonds j!3,ooo,ooo Land bonds of the company 5,000,000 Convertible 447,000 Total S8,447,ooo ■• Former amount corrected. SFor §144,707. 'Cash cost October i, 1859, for the whole line (208 miles) $6,030,317.82. 'Smaller than in 1859 because of delinquencies. ^ For §352,188.40. 5 This includes cost of rolling stock, interest, discount, and exchange charges, in addition to the ordinary expenses of construction. The cash cost was §28,447. " As estimated at this date. "During the war and just after its close no full reports were made. TABLE IV. 'For the short period from August 20 to September 30, 1855. ^Not given separately. 3 All of this discount was sustained by 1250 bonds, 704 bonds selling at par. The lowest price, 67^ cents, for the bonds of this road, was reached September 30, 1857.— House Journal {t^A]o\rcneA Session, 1857), pp. 48-49. ■•Deficit §19,476. These figures include all expenses for transportation, from the beginning up to date. 5 Smaller than formerly because of delinquencies. 'Defaulted in the payment of interest, January i, 1859. 'Total to date. * These sums extend over twenty-five months immediately preceding November 1863. 'See Senate Journal (lifj). Appendix, p. 881. "The whole expenses given were §753,826, but §205,083 was for keeping up the roadway, and therefore not strictly chargeable to running expenses. — JHd. 242 STATE AID TO RAILWAYS IN MISSOURI TABLE V. ' Made up as follows : Private subscriptions in counties ^243,300 Madison Iron and Mining Company, cash 50,000 American Iron Mountain Company, cash 50,00° American Iron Mountain Company, bonds 25,000 Total 8368,300 ''The lowest price reached was 69^ cents. 3 Defaulted ip the payment of interest, July I, 1858. •tFor eleven months prior to Nov. 30, 1858, expenses are not given. 5 This does not include county bonds. * This was the gross cost of the road per mile. The length of the road is, in all, 96 miles; main line, 86.5 ; switches and branch, 9.5 miles. The cash cost was 843,517 per mile. 'This sum includes the cost of the Potosi Branch. The sum for 1858 does not. * Of the state grant, 899,000 was forfeited because the road defaulted in the pay- ment of interest. 'Total to date, 8931,770. "■For a period of twenty-five months immediately preceding January i, 1863. " The company paid 840,000 interest this year. " The earnings of this company are given for calendar years as follows : Gross Earnings Expenses Net Earnings 1859 (11 months) 8222,574 8167,659 8 54,915 i860 235,291 175,853 59,437 1861 212,945 145,922 67,023 1862 253,232 187,976 65,258 1863 420,911 259,688 161,223 House Journal (Adjourned Session, 1863-4), part ii., pp. 750-752. N. B. — These figures do not correspond to those in the table, being strictly for calendar years, while the others are not. '3 Cf. &Kizfc yo^^Kfl/ (1867), Appendix, p. 880. The figures on this page, how- ever, are general estimates and are therefore not meant to be technically exact. TABLE VI. 'The following subscriptions were made by counties to be paid in lands at 81 per acre : By Stoddard county 8150,000 By Butler county 100,000 Carried forward, 8250,000 APPENDIX ^43 Bv Dunklin county By Scott county By Ripley county Amount brought forward, ^250,000 100,000 50,000 19,500 ^419,500 " Since this item is not generally given, only the amount of state bonds issued to the company is included. 3 This column is essentially the same as that of 1859. Nothing reliable is to be found later. APPENDIX II. BILL OF COMPLAINT AND DFXREE AGAINST THE COMMITTEE OF THE BOARD OF DIRECTORS OF THE PACIFIC RAILROAD COMPANY. United States of America, Eastern Division of the Eastern Judicial District of Missouri. In the Circuit Court of the United States ) In and for the Eastern Division of said District. \ Be it Remembered, That on the fourth day of May, a.d. 1868, there was filed in the office of the Clerk of the Circuit Court of the United States, for the Eastern Districts of Missouri, a certain Bill of Complaint, in words and figures following, to-wit : ( Bill of Complaint. ) In the Circuit Court of the United States for the Districts of Missouri. To the Judges of the Circuit Court of the United Slates for the Districts of Mis- souri. James L. Lamb, a citizen of the State of Illinois, and Henry F. Vail, Solon Humphreys and James Purnett, citizens of the State of New York, bring this their bill against the Pacific Railroad, a corporation incorporated under the laws of the State of Missouri, and George R. Taylor, Henry L. Patterson, Daniel R. Garrison, Charles H. Peck, James H. Lucas, Oliver A. Hart, Joseph Brown, Robert Barth, George H. Rea, Benjamin Stickney, James Harrison, Timothy B. Edgar, Hudson E. Bridge, John C. Porter, John M. Cooper and Madison Miller, citizens of the state of Missouri, and, there- upon, your orators complain and say that the Legislature of the state of Mis- souri did by act of the General Assembly of the said state, approved March 12, 1849, entitled, "An act to incorporate the Pacific Railroad," and by an act amendatory thereof, approved March ist, 1 851, entitled "An act to amend the act entitled 'An act to incorporate the Pacific Railroad,'" create a cor- poration by the name of the Pacific Railroad for the construction of a railroad from the city of St. Louis to the western boundary of the state of Missouri ; that by an act of said General Assembly, approved February 22, 185 1, entitled " An act to expedite the construction of the Pacific Railroad and of 244 APPENDIX 245 the Hannibal and St. Joseph Railroad," the state of Missouri provided under certain conditions for the issuing to said corporation of the bonds of the said state to a large amount which were to be sold by said company and the pro- ceeds thereof expended in the construction of said railroad : that in pursuance of said last named act the said state did issue to said corporation bonds of said state to a large amount ; that by said act it was provided that the acceptance of said act by said corporation and the issuing of the said bonds thereunder should constitute and be to all intents and purposes a mortgage upon the road of said company to the people of the state of Missouri for the purpose of securing the payment of the principal and interest of the sums of money for which said bonds should be from time to time issued and accepted as afore- said : that prior to the year 1864 divers other acts of the said' General Assembly of the said state were from time to time passed and approved authorizing further issues of the bonds of said state to said railroad for the furthering of the construction of said railroad under substantially the same conditions and the payment thereof secured in the same manner as provided in the act above mentioned, and which bonds so authorized were issued by said state in pursuance of said acts to said company and were disposed of by said company. Your orators further show that prior to the loth day of February 1864 the bonds of the state so issued to said corporation defendant herein amounted to about seven millions of dollars, but that the said corporation had expended all the money, derived from the sale of said bonds and from private, county, and municipal subscriptions and loans, upon said railroad, and had completed the same no further than the town of Dresden in Pettis county in said state of Missouri, and for the purpose of securing the completion of said railroad the General Assembly of the state of Missouri passed an act approved Feb- ruary loth, 1864, entitled "An act for the extension and completion of the Pacific Railroad to the western boundary of the state of (sic) Kansas City and the North Missouri Railroad to the Iowa state line to complete the South West Branch of the Pacific Railroad and to reduce the state indebtedness," whereby the said Pacific Railroad was authorized, in order to furnish it the means to complete said railroad, to issue not more than one thousand five hundred bonds of One Thousand Dollars each, bearing interest at not more than seven per cent, per annum and having four, five and six years to run in equal proportions, which bonds were to be secured by a first mortgage on the main line of the said Pacific Railroad, west of Dresden, and that the state of Missouri for the object and the said amount and extent thereby relinquished her first lien and mortgage and right of forfeiture upon said railroad west of Dresden, retaining, however, a second lien thereon. Your orators further show that in order further to secure the payment of said bonds authorized to be issued under said acts last mentioned there was 246 STATE AID TO RAILWAYS IN MISSOURI created by the said act last mentioned an officer therein called "Fund Com- missioner" whose duty it was and is to receive all the bonds authorized to be issued under said act, and during the existence of the mortgages, provided to be made by said act ; to receive and collect all the profits, earnings and income of said railroad ; to apply the proceeds of the sale of said bonds and the said earnings to the completion of the said road after payment of his salary and accruing expenses, and after the completion of said railroad that the said Fund Commissioner should apply any surplus after paying the accruing interest to the purchase or payment of the bonds which should be issued under the provisions of said act. Your orators further show that the act last named with all the previous acts was accepted by the said corporation and that in accordance with said act the Defendant, the Pacific Railroad, issued her bonds to the full amount authorized by said act of One thousand dollars each, which bonds were dated the first day of April, 1864, and in conformity with the provisions of said act the said corporation defendant executed its Deed of Mortgage, dated the first day of April , 1 864, upon that portion of the railroad west of Dresden to Kansas City to your orators Henry F. Vail, Solon Humphreys and James Purnett, all of the City of New York, as trustees to secure to the holders and purchasers of said Bonds so authorized by said act and issued in conformity thereto the payment thereof. Your orators further state that your orators Vail, Humphreys and Purnett are the trustees under said Deed of Trust and Mortgage and that your orator James L. Lamb is a stockholder of said corporation owning one hundred shares therein and that he is also owner of bonds of one thousand dollars each so issued by said corporation under said last mentioned act and secured as above mentioned, and they further show that a very large amount of inter- est upon the bonds of the state of Missouri to said railroad and for the amount of which the said state had and has a first lien upon said railroad and its appurtenances (subject to the prior lien created by virtue of the terms of the last mentioned act of that portion of said railroad west of Dresden) have long since become due and are unpaid together with the said bonds, and no part of the same has been taken up or paid by said railroad, and that the one-third of the said fifteen hundred bonds issued by said corporation and secured upon that portion of said railroad West of Dresden which became by their tenor due on the first day of April, 1868, have not been paid. Your orators further show that the defendants, George R. Taylor, Daniel R. Garrison, Henry L. Patterson, James H. Lucas, Charles H. Peck, Oliver A. Hart, Robert Earth, Benjamin Stickney, Hudson E. Bridge, and James Harrison, have, for more than six months last past, been directors of said corporation, having been legally elected ; and that said defendant George H. Rea was elected a director about one month since and said Edgar and- Brown APPENDIX 247 were appointed under the said charter of said corporation directors at about the same time ; and all of said persons have been since their election and appoint- ment directors of said corporation and are now acting as such ; that said defendant Taylor is and for over six months last past has been president of said corporation, and during the same time said defendant John C. Porter has been and is now treasurer thereof ; said defendant John M . Cooper auditor thereof ; and said defendant Madison Miller has been and is fund commis- sioner under the provisions of the act last mentioned. Your orators further state that the said amount of principal and interest for the payment of which the said corporation was bound to the said state at the commencement of the present year amounted to about ten millions of dollars and largely more than the full value of the road ; that the said bonds so issued by said corporation and made payable four years after date were about to mature and that there was owing to the county of St. Louis by said corporation the sum of Seven Hundred Thousand dollars ; that there was a large floating debt necessarily contracted in the furnishing and equip- ping of said railroad due by said corporation, amounting to over $700,000 ; that a large expenditure was needed to put the road in good running order ; and a still greater expenditure was necessary in changing the gauge of the railroad to conform to that of other railroads to the east and west of said railroad and connecting with it ; that in view of all these things and consider- ing it best for the interest of the stockholders as also for the state of Missouri, the Board of Directors of said corporation determined to make an effort on behalf of said corporation and the stockholders thereof to purchase of the said state of Missouri its interest, debt, claim and demands against and upon said railroad and corporation, and with that view the said Board of Directors, by resolution passed on the 30th day of Novem- ber 1867 appointed Henry L. Patterson, Daniel R. Garrison, and George R. Taylor a committee to proceed to the City of Jefferson and secure the pas- sage by the General Assembly of said state of Missouri of an act enabling the said corporation and its stockholders to purchase from the state of Mis- souri all its debt, claim and demand upon said road and said corporation, and authorizing the said committee to employ such other persons to assist them as they might deem useful, and in all things to do whatsoever in their judgment they might consider expedient or necessary to secure the success of their mission ; that under said authorization the said committee proceeded to Jefferson City and caused to be introduced a bill before the General Assembly of this state having that end in view, and finally the said General Assembly did pass an act, entitled " An act for the sale of the Pacific Railroad and to foreclose the state's lien thereon and to amend the charter thereof," which act was on the 31st day of March 1868, approved by the governor of this state; that said act is just and fair to the state of Missouri and just and fair to the 248 STATE AID TO RAILWAYS IN MISSOURI corporation and its stockholders, and was such an act as did and should commend itself to every fair-minded and honest legislator. Yet so it is that the said committee in making, after the passage of the act, a report of their doings in the said matter, reported that in procuring the passage of the act they had employed agents for the purpose of influencing favorable legislation thereon, and who were supposed to have influence with the dominant political party in the legislature, and had expended and promised monies in other ways in order to accomplish the passage of the act, but in what way or to what particular persons they decline to specify ; that the said committee reported that the amount of such expenses for the purposes aforesaid which had been incurred by them was $193,648.60, of which amount $57,313.60 had been paid, leaving an amount of $134,865 still unpaid ; that a copy of said report is herewith filed marked Exhibit A, which your orators pray may be taken as a part of this bill. Your orators have heard and believe and so charge it to be true that a large amount of the said sum of $193,648.60 was given to and promised to members of the General Assembly of the state of Missouri in order to pro- cure their votes for the passage of said bill ; that a still larger amount was given and promised to mere lobby agents whose business it is corruptly to influence legislation by promoting the passage of unwise and corrupt laws for a consideration paid or promised to them, and to resist the passage of wise and just laws unless those whose pecuniary interests may be supposed to be benefited thereby shall satisfy their corrupt and illegal demands, and your orators charge that upon the face of the report it stands admitted that almost the whole of this large sum was thus illegally expended and promised. Your orators further state that the whole of said amount of $193,648.60, with the exception of some small sum not to exceed $10,000, so paid and proposed to be paid, is altogether illegal, unauthorized, and a fraud upon the rights of stockholders of said corporation, of the holders of the said mort- gage bonds so executed and issued by said corporation, and upon the state of Missouri and upon the creditors of said corporation. Your orators further state that one of the said defendants, Hudson E. Bridge, on the 8th day of April, 1868, offered in said board a resolution that the treasurer of the company be and thereby was instructed not to pay out any money or give any notes on account of the action of said committee until such voucher should be approved by the Board of Directors, which reso- lution said Board of Directors rejected, and thereupon on the 9th day of April, 1868, the said defendant. Bridge, on behalf of himself and all other stock- holders, and all others whose interests were invaded by the proposed action of said board in the payment of said amount of $134,865 not yet paid but promised to be paid, did give written notice to said George R. Taylor as president, to said Porter as treasurer, and to said Miller as fund commis- APPENDIX 249 sioner not to credit, allow, pay, or cause to be paid, any money, note, or voucher to said committee, or either of them, or upon their order or direc- tion in and about the pretended and illegal claims, expenditures, and con- tracts made and entered into by said committee and referred to in their said report above mentioned, and on the i6th day of April, 1868, he did serve upon the other directors of said company a similar notice, copies of which notices are herewith filed as Exhibits B, C, and D," and prayed to be taken as a part of this bill ; that on the same day the Board of Directors by resolu- tion, a majority of said board voting therefor, voted that the president, secre- tary, treasurer, and auditor be instructed to settle all outstanding engage- ments made by the said committee before mentioned, being the same referred to in their report hereinbefore mentioned. Your orators further state that by the by-laws of said corporation before any claim, expense, or demand against said corporation can be paid by the treasurer of said corporation or the said fund commissioner, the same must be passed upon, allowed, and audited by the auditor of said corporation, that though by the act of February 10, 1864, all payments and disbursements of the receipts, incomes, and avails of said corporation and said road were to be made by said fund commissioner, yet in fact they are made by the treasurer of said corporation. Your orators further state and charge that it is the intention and design of said board of directors to take, apply, and expend the means and monies of said corporation to the payment, liquidation, and satisfaction of the illegal and corrupt contracts and bargains above mentioned to the extent of S134,- 865 ; that the amount already expended by them is greatly more than suf- ficient to pay and satisfy all fair, honest, and legal claims and demands for any legal services or expenses connected with said legislation, and that if not restrained therefrom the said Board of Directors and the officers of said com- pany and said fund commissioner will divert said monies and means of said corporation to the payment and satisfaction of such illegal and corrupt con- tracts and claims ; that said fund commissioner, though knowing the kind and character of the said expenditures and payments so made, amounting to §57,313.60, and that the greater portion of them were illegal, nevertheless per- mitted such payments to be made, and will, unless restrained, suffer other monies and means of said corporation to be diverted from the payment of the expenses, claims, and liabilities for which they were set apart by the act of the loth of February, 1864, as hereinbefore set forth, and expended for the satisfaction of the illegal and corrupt bargains and contracts herein men- tioned. So it is that sometimes the said defendants, or some of them, pre- tend that large sums of money have been expended and promised in sub- ■ These " Exhibits" have not been reproduced, as they were not regarded neces- sary. 250 STATE AID TO RAILWAYS IN MISSOURI sidizing the newspaper press, but your orators state upon information and belief, and charge that no such sums for that purpose were ever expended or promised ; sometimes Ihey pretend that large amounts were paid and due for legal opinions obtained by said board from learned and eminent members of the bar, whereas your orators upon information and belief state and charge that but a small part, and less than J?Sooo, was evtr expended for such a purpose ; and sometimes the said defendants, or some of them, regretfully admit that but a small portion thereof was expended or promised for legal or proper expenditures or services. Your orators further state upon information and belief and charge the fact to be that no portion of said sum of $134,865 so engaged and contracted by said committee and so ordered by said board of directors to be paid has yet been paid. Your orators pray that said corporation, its officers and servants and the said defendants and each of them may be perpetually restrained and enjoined by the decree and injunction of this court from auditing, allowing, giving or paying any monies or other consideration of said corporation on account of the said sum of one hundred and thirty-four thousand eight hundred and sixty-five dollars referred to in said report of said committee, Henry L. Pat- terson, Daniel R. Garrison and George R. Taylor, as having been contracted for by said committee and not yet paid and from giving, paying out or expending any monies or property on account of procuring or favoring or assisting in procuring the passage of said act of March 31, J 868 ; and that the defendants pay the costs of this suit and that your orators may have such other and further relief as the equity of the case may require and as to your honors may seem meet. To the end, therefore, that the defendants may, if they can, show why your orators should not have the relief hereby prayed and may upon their several and respective knowledge, remembrance, information and belief, full, true, direct and perfect answer make to the several interrogatories hereinafter numbered and set forth, that is to say — First : Whether the defendants Henry L. Patterson, Daniel R. Garrison and George R. Taylor were on or about the 30th day of November, 1867, appointed a committee to go to Jefferson City and secure the passage by the general assembly of the state of Missouri of an act enabling the said corpora- tion and its stockholders to purchase all the debt, claim and demand of said state of Missouri upon said railroad and said corporation ? Second : Whether said persons so appointed did proceed to Jefferson City and did use their exertions to procure from the said general assembly the passage of such an act or any act having any such object in view or in relation thereof ? Third : Whether in and about procuring the passage of such bill the APPENDIX 251 said committee incurred any expenses for board and lodging and other expenses strictly personal, and if so to what amount ? Fourth : Whether on account of said object and in furtherance of it said committee expended monies in the furnishing of entertainment, wines and liquors, and to what amount ? Fifth : Whether on account of said object and in furtherance of it, said committee expended any money in printing agreements, bills and memorials and if so to what amount, and to whom paid ? Sixth : Whether in furtherance of said object the said committee pro- cured the opinions of men learned in the law as to the legal rights of said corporation and of the state of Missouri in reference to said railroad and in obtaining such opinions they expended any money, and if any, what amount and to what persons the same was paid, specifying the amount paid each, and if any amounts for such legal services have been promised to be paid and not yet paid for what amount and to whom ? Seventh: Whether the said committee employed the assistance of other persons in influencing and procuring the legislation which was desired or in procuring the passage of any act by said general assembly of the state of Missouri, and if so whether said committee or said defendants or any of them paid any money for such services and to whom, specifying the amount to be paid to each and whether said committee promised to pay either any money or other consideration for such services which have not been paid or per- formed and if so how much and to whom, specifying the amount promised or contracted to be paid to each ? Eighth : Whether the said committee or any of them, or said defendants or any of them paid to any proprietor or editor of any newspaper published in this state, any money or promised to pay any money for the printing and publishing any agreements or articles in any newspaper, advocating or approv- ing the passage of any bill by said general assembly having in view the sale and disposition by the state of Missouri of said claim and demand of the state against said corporation and said road or in keeping silence in relation thereto or did they or either of them payor promise to pay to any proprietor or editor of any newspaper published in this state any sum of money whatever since the first meeting of the said general assembly, and if any sum was paid or promised in and about any of the matters in this interrogatory mentioned, state to whom and in what amounts to each ? Ninth : Whether the said committee or any of them or the said defend- ants or any of them for themselves or for said corporatior from the said 30th day of November to the present time ever paid or promised to pay or give to any member of the last general assembly of the state of Missouri any money, property or consideration or office whatsoever in relation to or connected with said railroad or said corporation or in relation to their action or vote in 252 STATE AID TO RAILWAYS IN MISSOURI reference to said railroad or said corporation or in relation to or furtherance of any act proposed or passed relating to said railroad or said corporation ? Tenth : Whether the said defendants or either of them ever paid or promised to pay or give any money, or other consideration, to any ofificer of the state of Missouri or of said corporation about any matter connected with said railroad or said corporation or in and about the said act of March 31, 1868, or any proposed act ? Eleventh : Whether in and about the procuring of said act in the last interrogatory mentioned said committee did not create and contract expendi- tures and liabilities to the amount of $193,648.60, and if so state in detail how much and to whom and on what account such expenditures have been made and contracts entered into, specifying how much has been paid to each and how much has been contracted to be paid, but has not yet been paid? James L. Lamb. Subscribed and sworn to before me this 2gth day of April, A.D. 1868, at Springfield, 111. Fred M. Cole. U. S. Com., South Dist., 111. May it please your honor to grant to your orators a writ of subpoena issu- ing out of and under the seal of this Honorable Court, directed to said defend- ants the Pacific Railroad, George R. Taylor, Henry L. Patterson, Daniel R. Garrison, Charles H. Peck, James H. Lucas, Oliver A. Hart, Joseph Brown, Robert Barth, George H. Rea, Benjamin Stickney, James Harrison, Timothy B. Edgar, Hudson E. Bridge, John C. Porter, John M. Cooper, and Madison Miller, commanding them to appear and make answer to this Bill of Com- plaint, and to perform and abide by such order and decree as to the Court may seem required by principles of equity and good conscience. May it also please your Honors to grant to your orators a provisional or preliminary injunction issuing out of and under the seal of this Honorable Court, enjoining and restraining said corporation, its officers, servants and agents, and other defendants herein named, to the same purport, tenor and effect as hereinbefore prayed for in regard to said perpetual injunction, and your orators will ever pray, &c. Glover & Shepley, Sohcitors for Complainants. United States of America, District of Illinois. On this 29th day of April, 1868, before me came James L. Lamb, acting for himself and for and on behalf of the complainants in said Bill of Com- plaint, and being by me duly sworn doth depose and say that he has read the said bill and knows the contents thereof, and states that as to those matters APPENDIX 253 and things therein stated as of complainant's knowledge, they are true, and as to those stated as upon information and belief he believes them to be true. Fred N. Cole, U. S. Com., South Dist., III. (Exhibit "A" to Bill of Complaint.) COPY. Report. The undersigned committee, appointed by the Board of Directors of the Pacific Railroad, in pursuance of the following resolution, to-wit : '' Resolved, That Henry L. Patterson, Dan'l R. Garrison, and George R. " Taylor, be and are hereby appointed a committee to proceed to Jefferson " City during the approaching session of the Legislature, and there urge, •• and, if possible, obtain such legislation as will enable this Board, as Trus- " tees of the Stockholders, to purchase of the state her claim upon this com- " pany ; and they are instructed to use their best efforts to have such legisla- " tion to conform as nearly as they can to the bill approved by this board ; " and they are hereby authorized to employ such other persons to assist them " as they may deem useful, and in all things to do whatsoever in their judg- " ment they may consider expedient or necessary to secure the success of " their mission." Under this resolution, this committee accepted service. By it they were " zw/r«<:/(?^^ to employ such other persons to assist them," etc., in attaining the desired end. The language of the resolution is so full, positive and explicit, and granted such large powers, that this committee felt complimented by, and grateful to the board for the unlimited confidence reposed in their judgment and discretion. Therefore, instantly ujion their appointment (November 30th, 1867), they entered actively and earnestly upon the duties assigned them. They thought that the first important step to be taken was to secure a favorable consideration of our scheme by the St. Louis press, and at once determined to accomplish this (as it seemed to us) great end. After very many conferences, much delay and anxiety this was effected. Our next move was to engage, or "employ" in our interests, "persons" of such political affinities, standing and power with the dominant party in the legislature, as would soften down or remove the "Copperhead" character attributed to our board, and enable us to go before the party endorsed by some high in the faith. Were we to detail our efforts in this direction it would lengthen this report to a fatiguing extent. Suffice it, therefore, to say, after more than a month's daily search, consulta- tions and inquiries, we found the men suited to our purpose. They were, in their political, social and business characters what we desired ; had had legis- 2 54 STATE AID TO RAILWAYS IN MISSOURI lative experience and were of our views, agreeing to the fairness of our offer to the state, and willing for a " sufficient consideration" to abandon their own business and undertake ours ; they were engaged, and did good service. Did not the policy of this report forbid it, we should be most happy to here insert all their names, that hereafter this company might know who were their friends. They were paid a small portion of the stipulated amount down, the balance being made "contingent" upon success. These contingents are now outstanding, the parties relying upon the personal pledges of this com- mittee and the good faith of the Pacific Railroad Company for ultimate pay- ment. You are all probably aware that at a former session of the legislature, some parties presented a bill for the sale of this road to another corporation and that four millions, the then offer, came near buying it. This led us to believe that an offer of the same amount made in the interests of the stockholders would be favorably received. On our arrival at the capital we soon discovered that we were mistaken — instead of favor we met hostility most violent and unaccountable of twelve members from St. Louis county, eight were determined and bitter in their opposition — and outside of the "House," cliques were formed to spy, report and oppose, scandalous rumors (sic) circulate freely ; libelous assertion was current, and telegrams were intercepted and returned by mail to the enemy — every sort of parliamentary trick was resorted to, to cripple by amendment or delay or defeat any favorable turn we were able to give the question. When present during the discussions, we were denounced as belonging to a set of thieves (doing tis the favor, however, to include the whole board). Our earnings were shown to be millions and not a dollar paid to the state, all gone into the pockets of the directors — "Those Railroad Kings." We men- tion these little pleasantries, with a view to give the Board an idea of our experience at Jefferson City in the year 1868, and they may be useful here- after should another committee be commissioned for the same locality. To overcome a determination to seize this road, as the Iron Mountain had been and as ours was — almost — we called for the opinions of eminent and popular "counsellors at law" and collected those we had before obtained relating to our legal rights ; these with an explanatory address were published in pam- phlet and at a meeting called for the purpose were read, argued and distrib- uted — this was somewhat costly, but we think it paid well, the effect fully meeting our judgment — for in the course of a week or ten days we found the "Seizing fever" abating. After allaying this immediate and dangerous threat our next effort was to impres? upon the minds of legislators the crip- pled condition of the company, dilapidated condition of the road, our inability to remedy either, (sic) determination under any circumstances to hold on until 1870, and the necessity of a sale. APPENDIX 255 By much figuring we showed enormous amounts of .cash demanded for instant use. Our progress now was very slow, and at times terribly discour- aging ; but persevering from 9 a.m. till past midnight week after week ably assisted by the numerous parties " engaged" for the purpose, through them we were at length let into the secret of how things are sometimes done, when all other modes are ineffectual; we saw no possible chance for success, unless we adopted what appeared to be the usual mode, as understood and prac- ticed by many. It was terribly costly for an ordinary job but as we were going for millions, and every one off counted well, we determined, after seri- ous consultation with discreet friends, not to fail — leaving the morality of such proceedings to those who have inaugurated the system and divided its gains. The bill is now passed, approved by the executive and before this Board to become upon us a. binding law, if we so elect, the sum of five millions is the price, the state abating six millions of her claim — the terms of payment very favorable. It was obtained through our exertions and appliances at a cost to the company or stockholders of $57,313.60 already paid and §134,865 to be paid, the whole aggregating $193,648.60; this cost in dollars is by no means all, for it cost this committee an amount of anxious labor, pain, mortification, and we may safely add degradation, that they will never again willingly undergo and which this or any other company can never adequately compen- sate. This committee would be truly ungrateful were they to dose this report without referring to the devotion to our interests shown throughout by our senator, now co-director, George H. Rea ; from the beginning he was our staunch and firm friend. We were indebted also for valuable assistance to Messrs. Stephen Ridgeley, J. G. Woerner and H. J. Spaunhorst of the Senate, and G. C. Van Wagoner, C. H. Branscomb, C. R. Smythe and Nor- man J. Colman of the " House.'' Our labors in this behalf are now ended, except so far as arranging on the best terms we can for the company's con- venience the outstanding pledges of this committee. Sufficient is known as to accomplish (sic) facts for the Board to decide whether we have done well or otherwise, whether we have transcended the authority the resolution vested in us, or abused the confidence you did us the honor to repose in us. Six millions of the state debt abated, the terms of the five millions to be paid unusually favorable, the threatening attitude of the state removed, the independence of the company secured, stockholders protected, and promised €re long some return for their mouldy investments : these are some of the advantages secured by the exertions of your committee ; to offset these we have the cost of obtaining them which through unexpected circumstances, undeserved accusations, foul combinations and dishonest schemes is swelled to an amount incomprehensible to some, unsatisfactory to others, but, as this 256 STATE AID TO RAILWAYS IN MISSOURI committee believe, quite low — considering modern railroad operations. Thus presenting our experience and the result of our labors we regret for our own sakes (in the future) that we cannot without violating solemn pledges name to you in detail the name, service and pay of each person engaged and that the necessities of the case permit us only to speak oi parties and (sic) aggregate, in general, rather than in specific terms. In conclusion it is sub- mitted to this Board to say whether the contracts made by the Pacific Rail- road Company through their committee, under and by virtue of the resolution of November 30, 1867, and in furtherance of the interests of the stockholders of said company, shall be honorably and speedily fulfilled, or whether, hav- ing sent them out as your fully empowered and accredited agents — you will now deny, or question their acts and put upon them the mortifications and pecuniary responsibilities your repudiation would certainly bring. We have no such fear and would not have disfigured this report by any such allusion but for the knowledge that threats looking to such result had been made. Respectfully submitted. Henry L. Patterson, (Signed) Daniel R. Garrison, G. R. Taylor, Committee. And afterwards, to- wit : on the 1 2th day of October, a.d. 1868, the fol- lowing among other proceedings were had and appear of record in said cause, to-wit : (Final Decree.) James L. Lamb, et al.. Complainants, against The Pacific Railroad Company, et al., Defendants. And now at this time come the Complainants by their Solicitors and move the court to enter up a decree pro confesso in the above cause against the Defendants, and it appearing to the Court, that said defendants have failed to plead, demur, or answer to the Bill of Complaint within the time required by law and the Rules of this Court, It is ordered that the said Bill of Com- plaint be taken as confessed by them and each of them, and the Court doth therefore order, adjudge, and decree that the injunction heretofore granted in this cause be made perpetual, and that the said Defendants, the Pacific Rail- road, George R. Taylor, Henry L. Patterson, Daniel R. Garrison, Charles H. Peck, James H. Lucas, Oliver A. Hart, Joseph Brown, Robert Barth, George H. Rea, Benjamin Stickney, James Harrison, Timothy B. Edgar, Hudson E. Bridge, John C. Porter, John M. Cooper, and Madison Miller, and each of APPENDIX 257 them, their servants, and agents, be forever enjoined and restrained from giving, paying out or expending any money or property or obligation of said Corporation, the Pacific Railroad, on account of procuring or favoring, or assisting in procuring the passage of the Act of the General Assembly of the state of Missouri, approved the 31st day of March, 1868, entitled "An act for the sale of the Pacific Railroad and to foreclose the state's lien thereon," and to amend "the Charter thereof" and from auditing or allowing any claim, or giving or paying any money, property or obligation of the said Pacific Rail- road on account of any alleged contract, or liability, entered into by said Patterson, Garrison and Taylor as a Committee, on the part of said corpora- tion, amounting to one hundred and thirty-four thousand eight hundred and sixty-five dollars mentioned in the report of said Patterson, Garrison and Taylor to the Board of Directors of said Corporation, and referred to in said Bill of Complaint, as having been contracted to be paid in order to procure the passage of said Act of the 3d [31st] day of March, 1868, and that said defendants do pay the costs of this suit and that an execution or fee bill issue therefor. United States of America, Eastern Division of the Eastern Judicial District of Missouri. I, T. L. Crawford, Clerk of the Circuit Court of the United States, in and for the Eastern Division of the Eastern Judicial District of Missouri, do hereby certify the writing hereto attached to be a true copy of Bill of Com- plaint, Exhibit "A" and Final Decree in Case No. 2590 of James L. Lamb et al. Complainants, against the Pacific Railroad Company ,?/ a/., Defendants, as fully as the same remain on file and of record in said case in my office. IN WITNESS WHEREOF, I hereunto subscribe my name and affix the seal of said Court, at office in the city of St. Louis, in the Eastern Division of said District, this first day of November in the year of our Lord, eighteen hundred and ninety-four. T. L. Crawford, Clerk of said Court, By John J. Conway, Deputy. INDEX. Accounts, publicity of, in Massachusetts 70 ; in Missouri 69 Aid to railways, first grant of in Missouri 65 ; second 80 ; policy of granting, popular in Missouri 74 ; act of Decem- ber 10, 1855, analyzed 100 ; reasons for final grant 105 ; further, attempted "3 Alabama, internal improvements in 215; debt of, for railways 216; former laws of, concerning internal improvements repealed 216 Allen, Thomas, the railway needs of St. Louis and Missouri pointed out by 58 ; letter of, to Governor Fletcher con- cerning bids for railways 149 ; testi- mony of, concerning sale of certain railways 153; title of, to the St. Louis and Iron IVfountain confirmed by the legislature 155 Alton and Springfield Railroad 53 Arkansas, internal improvements in 217 ; repudiating measures in 216 Atchison and St. Joseph Railroad 142 Atlantic States, railway facilities of 54 Banks, false conceptions of functions of I7>30 Banks and banking, western views of 30 ; debts in Alabama, Mississippi, Arkansas, Louisiana and Missouri on account of 28 ; in Missouri 30 ; rail- ways not to be connected with in Mis- souri 71 Baltimore, a railway wanted by 15 Baltimore and Ohio Railroad 15 Benton, Thomas H., ideas of, concerning a railway from the Mississippi to the Pacific 61 Blue Ridge Railroad in South Carolina 209 Board of Internal Improvements estab- lished 36 Board of Public Works, duties of, per- tain to only two roads 96 ; powers of, not broad enough 97 ; powers of, made more extensive 109 ; not con- tinued 130 Bonds, of Missouri, sold at low rates 108; "guaranteed" 7's hard to sell log; low price of 114 Cairo and Fulton Railroad, prospective route of described 68 ; aided by the state 106 ; default of, in interest pay- ments 113; work of construction on 138; sale of, provided for 143; sold 146; sale of, approved by the gover- nor 145 Canals, in New York 1 1 ; in Pennsyl- vania 12; in Ohio, not profitable 19 Capital, investment of, in Missouri hin- dered by too rigid laws 79 Change bills, issued by the Western and Atlantic Railroad Company in Georgia 200 Chicago, commerce of, compared with that of St. Louis (1850) 50,51 ; railway facilities of (1850) 52; railways from, penetrating the northwest 59 Committee, an investigating, in connec- tion with railway proceedings in Mis- souri 146 ; report of the McGinnis in- vestigating 147; further investigations by 149, 152 Construction, work done in Missouri in railway, 1858-9 iii, 112 259 260 INDEX Contracts, faults of large, in railway con- struction 92 Corporation Law of Missouri, general fault of 79 Corruption, fears of in Missouri 91 ; no proof of 92, 94; charges of 150; proof of 185 ; farcical investigation of charges of 191 ; in Tennessee 205 ; in Indi- ana 223 ; in Pennsylvania 225 Cost of railways, estimates of, too low 5 ; causes for great 94 ; in Missouri compared with cost in other states 120, 121; cost of the Hannibal and St. Joseph 112; of the North Missouri 112 ; of the Pacific 121 ; of the South West Branch 121-124; of the St. Louis and Iron Mountain 112 Credit of Missouri, how to be protected 109 ; mortgages in railways may have to be foreclosed to restore 141 ; constitu- tional amendment against the use of, for aiding private enterprises 194 Crisis of 1857, effect of, on railway legis- lation in Missouri 108 Cumberland Road 7 Debt of Missouri, limitation of, for inter- nal-improvement purposes 113; for railways 187; miles of railway for which incurred 190 ; total incurred for railways 139-187 Defense warrants, issued in Missouri 125 Duties, on railway iron to be remitted 6 Earnings of railways, increase of during the war 127; on the Pacific 1 16-176; on the North Missouri 117, 160 ; on the St. Louis and Iron Mountain 117, 153 ; on the Hannibal and St. Joseph 1 18 ; on the South West Branch 117, 170 Erie Canal 4, 7, 11; earnings of 1 1 ; effect of on western states 18, 21 Finances, condition of, in Missouri when state began aiding railways 66 Financiering, bad, in Missouri 97 Fisk, General Clinton B., appointed by the governor to operate the South West Branch as a state road 170 Florida, internal improvements in 220 Fund commissioner, office of, established 130 ; duties of 131 Funds, need of, for internal improvements 6 ; a bank to be established as a means of obtaining 5 Fremont, General John B., South West Branch purchased by 168; default in interest payments by 169 ; South West Branch sold by 169 Georgia, internal-improvement debt of 27 ; internal-improvement experiment of 2 ; railways removed from politics in 202 ; unconstitutional issue of bonds in 202 ; railways leased by 201 ; litiga- tion in, on account of railways 203 ; returns to, received from connection with railways 228 Highways, or common roads, from Mis- souri to Mexico 2 Hannibal and St. Joseph Railroad, me- morial to Congress to secure lands for 40 ; aided by the state 65 ; land grant to 73 ; work of construction not early commenced on 87 ; eastern capital interested in 87 ; financial condition of 103; sinking-fund require- ments complied with by 105 ; com- pletion of 1 1 1 ; cost of 112; earnings of 118 Illinois, internal improvements in 20 ; Northern Cross Railroad in 22 ; inter- nal-improvement debt of 23 ; returns in, resulting from aiding railways 229 Illinois and Michigan Canal 21 Incompetency in internal-improvement matters, in Missouri 100 ; in North Caro- lina 2 II ; in Illinois 22 ; in Pennsylvania 1 3 ; in New York g INDEX 261 Indiana, internal improvements in 23 Inexperience, one cause of increased cost of railways 120 Interest, default in payment of by rail- way companies no, 115; causes for default in Ii6; railways remain in default of 140 Interest relief act 99 Internal improvements, in Alabama 215 ; in Arkansas 217 ; in Florida 220 ; in Illinois 20; in Indiana 23; in Ken- tucky 214; in Louisiana 212; in Maryland 14; in Massachusetts 44; in Michigan 25 ; not a success in Missouri 7 ; renewal of interest in, in Missouri 39 ; in New York 8 ; in North Carolina 210; in Ohio 17; in Pennsylvania 1 1 ; in South Carolina 208 ; in Tennessee 203 ; in Texas 219 ; in Virginia 206 ; cost of in Penn- sylvania 13; general characteristics of in western states 16; none in New England states 44 ; southern states interested in 1837 46, in 1850 46; southern states not interested in before the war 197 ; causes of failure of exper- iments in 222 Iron industry, railways to develop in Missouri 4 ; condition of 48 King Boodle, influence of, in legislature of Missouri 184 Kentucky, internal improvements in 214 Land grants, to Alabama, Indiana, Illi- nois, Ohio, Mississippi, and Missouri 37 ; unproductivity of in Missouri 118 Loans, extent of in Pennsylvania 13 Louisiana, internal improvements in 212 ; repudiating measures passed by legis- lature of 214 Maryland, default in interest payments by IS ; debt of 16 Massachusetts, internal-improvement debt of 27 ; internal improvements in 44 McKay, Read, et al. purchasers of the Cairo and Fulton and St. Louis and Iron Mountain railroads 146 Memorials, to Congress concerning improvement of rivers 3 ; to Congress for land grants 6, 41, 47 ; to the legisla- ture of Missouri by the Pacific Railroad Company 76 ; by the North Missouri Railroad Company 78 Memphis, railway convention in 60 Mexico, trade to, 1,2 Miami canal 19 Michigan, internal improvements in 25 ; repudiating measures passed by legisla- ture of 224 Missouri Valley Railroad Company 157 ; liberal policy adopted by legislature towards 157 ; able to pay interest dues 158 ; lien of state released on 159 Money, false notions of 90 ; right given by Georgia to a railway company to issue cheap 200 ; results of cheap, in Georgia 200 Natural resources, of Missouri 47 Net earnings, privilege granted to apply to the extension of roads 130 ; on some roads sufficient to pay interest owed to the state 140, 161 New England States, no internal-improve- ment enterprises projected in 44 New York, internal improvements in 8; debt of 10; change of policy in internal improvements in 9 North Carolina, internal improvements in 210; bonds of, recklessly granted to railways 211 ; credit of, undermined by grants of bonds to railways 211; re- pudiating measures passed by legis- lature of 212 North Missouri Railroad, prospective route of, described 67 ; aided by the state 81; route of, located 86; cost of first division of, exceeds estimates 86 ; 262 INDEX work of construction on 104; com- pleted to junction with the Hannibal and St. Joseph 112; cost of in ; default of interest payments 113 ; earnings of 117 ; destruction of parts of, by Confederates 26; West Branch 128; privilege to issue first-mortgage bonds granted to, by the state 129 ; bonds of, do not sell 133; an unequal competitor with the Hannibal and St. Joseph 135 ; unable to carry the freight offered it 136 ; second lien on, taken by the state 137 ; sold 167 Ohio, internal improvements in 17; debt of, limited in amount 19 ; debt of 20 ; canal tolls do not pay interest on internal-im- provement debt of 20 Ohio Canal 18 Pacific Railroad, aided by the state 65 ; possible amount of land to fall to 76 ; land grant to 80; "inland" route of, west of Jefferson City, conditions of 81 ; cost of first division of, exceeds estimates 83 ; short of funds 84 ; grants of aid to, by St. Louis city and county 84 ; more aid wanted by 103; cost of 112; default in interest payments by 115; earnings of 116; destruction of parts of by Confederates 126; cost of a division of 128; privilege of issuing first-mortgage bonds granted to, by the state 129; work on, sus- pended two years 127; bonds of, sold at par 131; in need of funds 133; special grant to, by St. Louis county 133; release from lien held by state asked for 173 ; approximate value of 174; if sold, stockholders fear foreign capital will get control of 175 ; value of, report of a committee on 177; growth of business of 176; minimum value of, as given by committee 177 ; earning capacity of 177 ; sale of, course of bill providing for 180; cor- ruption in connection with sale of 185 Parish, J. W., rumored bid of, for St. Louis and Iron Mountain Railroad 150 Passenger train, first to run from Kansas City to St. Louis 133 Paternalism, results of, in southern states 29 Pennsylvania, internal improvements in II ; private versus state railways in 14; incompetency in internal improve- ments in 224 Platte County Railroad, prospective route of 68; aided 106; default in interest payments by 116; earnings of 117; unsatisfactory reports to Board of Public Works by 122; violation of law by 122 Platte Country Railroad, same as Platte County Railroad 138 ; work of con- struction on 138 ; sale of, provided for 141 ; cursed by a blood-sucking man- agement 142; sale of, provided for 143 ; sold 145 Private enterprise, possible competition of railways under state management with those under private management 227 ; versus state activity 229 Profits, on Illinois railways 79 Railways, time allowed for completing 71 Railway aid, plan of, to be adopted in Missouri 65 Railway charters, duties imposed by and privileges granted in 68 Railway construction, begun in Missouri 73 ; progress of, on Pacific Railroad 79 ; hindrances to, in Missouri 84 Railway facilities, comparison of, be- tween states having aided and those not having aided (1850) 45 Railway land grant to Missouri 73 Railway locomotive, first west of the Mississippi 80 Railway system of Missouri, a system, radiating from St. Louis 72 Relief notes, in Pennsylvania 13 Revenue bonds no INDEX 263 Rivers, board of internal improvements to improve in Missouri 34 Road and canal fund, in Missouri 35 ; distributed among counties 38 St. Louis, raiWay convention in 3 ; state tobacco warehouse in 33 ; the chief center to be developed by pro- spective railways 48 ; industries in 50; commerce of 51; inactivity of, in securing railway facilities 53 ; rail- way convention in 57 St. Louis city and county, release from interest payments granted to North Missouri Railroad on St. Louis city and county bonds by 129 St. Louis county, special grant of aid to Pacific railroad by 133 St. Louis and Iron Mountain Railroad, prospective route of, described 67 ; to be a branch of the Pacific Railroad 81 ; route of, located 88 ; work of, construc- tion on 104 ; default of, in interest pay- ments 113; earnings of 117; released by St. Louis from further payment of interest on bonds by the city 132 sale of, provided for 143; sold 145 sale approved by the governor 146 bid of Mr. Thomas Allen for 149 purchasers of, sell at an advance 150 earnings on 154; value of, based on net earnings 154 Sale of railways, preliminary steps for the 141 ; reasons for and against the 141 ; first act providing for 141 ; pro- visions for 143 ; conditions of 143; bids 146; bids and other bids 148 Santa F^ I Script, issued in Georgia for the purpose of aiding railways 200 Second lien, genesis of the idea 98 ; on the North Missouri Railroad, taken by the state 137 ; release from, asked for by the North Missouri Railroad Com- pany 164 ; the North Missouri released from 167 Sinking fund, provision made for loi ; provision for, suspended 107 Slavery interests of the South influenced by Mr. Asa Whitney's Pacific Railway route 57 South Carolina, internal-improvement debt of 27 ; internal improvements in 209 ; amendment to constitution of, prohibit- ing the further aiding of railways by 210 South Pacific Railroad Company 172 South West Branch, genesis of 76 ; land grant to 80 ; aided by the state 80 ; route of, located 85 ; finances of in bad condition 85 ; work of construction on 103; default in interest payments by 116; earnings of 117; bad manage- ment of 122 ; violation of law by 122 ; built almost wholly by state bonds 122 ; costliest piece of railway in Missouri 124; incompetency or fraud in connection with 124 ; completion of, to Rolla 133 ; sale of, provided for 143; false valua- tion of 168; operated as a state road 170; condition of 170; various parties interested in 171 ; road and lands granted in fee simple to a corporation 171 ; conditions of grant 172 State credit a means of importing capital 8 State debt of Pennsylvania 13 State ownership, railroads to revert to the state 70 Tariff duties, on rolled bar iron (rails) 95 Taxation, necessary in Ohio, to cancel internal-improvement debt 20 ; exemp- tion of railroads from, in Missouri 71 ; increase of 126; rate of, reduced 195 Taxes, necessary in New York to cancel internal-improvement debt 10 ; not judiciously managed in Pennsylvania 12; reduction of, in Pennsylvania 12; impossible to collect in Indiana 24 ; imposition of, in Missouri, to save credit of the state 109 264 INDEX Tennessee, internal-improvement debt of 27 ; internal-improvement experiments in 203 ; bonds of railway companies indorsed by 204 ; plan of aiding rail- ways in, not satisfactory 203; bonds issued by, for aiding railways 204 ; aid granted per mile by 204 ; progress of railways in, interrupted by the war 205 ; corruption in 205 ; debt of, incurred for railways 206 Texas, internal improvements in 219 Three per cent, fund in Missouri distributed among the counties 38 Tobacco warehouse 33 Trade, Western, from Missouri to Mexico I Union military bonds of Missouri 125 Union Pacific Railway, bid of, for Pacific Railroad 174 United States, subscription by, to canal stocks 15 " United States Bank" in Pennsylvania 12 Virginia, Chesapeake and Ohio Canal Company, incorporated by 15 , internal- improvement debt of 28 ; internal improvements in 206 ; internal improve- ments aided by stock subscriptions in 207 ; debt of 208 ; constitutional amend- ment in 208 Wabash and Erie Canal 23 Western and Atlantic Railroad in Georgia igg, 201 Weston and Atchison Railroad 142 Western states, general characteristics of internal improvements in 16 Whitney, Mr. Asa, pioneer in securing a railway from the interior to the Pacific coast 55 ; plan of, indorsed by South- ern states 55 ; plan of approved by Congress 60