Central Pacific Railroad Company: documents

How can this sum be assured to the United States without bankrupting the Railroad COmapyn is the all important and only questions to be solved.

The argument on the one hand that certain persons have made immense fortunes in the construction of the road by getting out the contracts to themselves at exorbitant prices and on the other hand that the early construction of the road was of immense pecuniary benefit to the United States that they were completed to dispose of their bonds at an immense discount to purchase gold and that the United States have granted bonuses in the shape of the land grants to competing lines thereby seriously injuring the lessening their profits are but side issues. The answer to the first is that if fraud in the construction of the road and letting out the contracts was committed there are laws upon the statute books to punish all unlawful acts. The answer to the last is that the haste in completing the road was not so much accommodate the Government as to anticipate a racial corporation [VI8?]: The Union Pacific Railroad so as to secure as much as possible of the United States loan. That the bonds were worth per in the legal currency of the country and the discount which they paid was to turn them into gold and that when they took them they were aware of their value and they suffered no unexpected depreciation when they accepted the contracts.

The United States by Act of the Congress approved July 1 1862 granted to the builders of the Pacific Railroads see Section five (5) the loan of insurance of a certain amount of

United States six per cent interest bearing bonds proportioned to the number of miles of road constructed these bonds were made payable thirty years after date with their interest and the courts have decided that such interest is not due till the maturity of the Principal and that congress by any subsequent modification or enactment cannot alter the terms of the contract though they can by means of such laws as the act known as the Thuraen Act secure its final payment.

Both parties should live up so she contracts and no harsh or hasty legislation should be enacted that would work unnecessary injury to the thousand of innocent holders of the securities of the Company but who nevertheless may be compelled to suffer in order that the obligations of the company to the government should be fulfilled.

Any plan proposing that the control of the road be wrested from its present owners and assumed by United States Governmental Officials either in the shape of the Receivers or otherwise will be strenuously resisted in the Courts in all probability with success from the fact that the Company have up to the present time complied with all the requirements of the laws prescribing presents to the United States and all demands of the Government have been promptly met.

The principal object to the plan of funding the debt by an issue of fifty (50) years three (3) percent bonds is that it virtually compels the Company to pay from the present time up to the maturity of the bonds now issued compound interest upon all accruing interest.

It seems to me a much better plan would be the passage of an Act of Congress directing the semiannual payment

in a sinking fund of the amount of interest due upon the bonds for that period, VIZ: three (3) percent on $27855680 or $835670.40 making an annual payment of $1671340.80. While the officials of the Railroad Company and then United states Comissionors both assert that the Railroad Company's income is inadequate to meet such a demand.

I respectfully state that the books and financial statements taken from the books and vouchers point to a different conclusion. Let me quote the defense of this position from these books and statements

Owing to the terms of the lease after its execution the books do now show the actual receipts the rental for each year being credited in the following on debut this is corrected in the annual published report of the Companies for this period therefore I take my figures from these reports.

The Profit and Loss account by the published annual Report of the E.H. Miller Jr. Secretary gives for the year ending December 31 1883. . . . . . . . . . . . . $24978988.33 which amount agrees with balance sheet see Vol. 7 United States Pacific Railroad Commissioners Report Exhibit No.22.

The annual report of the Secretary gives for the year ending Decmber 31 1866. . . . . . . . . . . . $28813000.87 or an increase during the three years of $3834012.04

To This should be added dividend No.17 paid February 1st 1884. . . . . . . . . . . . . . $1778265.00

Making a total of earnings fro the three years end December 31 1886 of. . . . . . . $5612277.04 or an average income per annum of. . . $1870759.01

The five years prior show the following amounts carried to the Profit and Loss including the dividends paid to the stockholders which properly belonged to that find and were taken from the earnings of those years.

1870. . . . . . . . . . . . . . . . . . . . . . . . $3043260.51

1880 including dividends paid. . . $4776790.85

1881 " " ". . . . . . . . . . . . . $7301537.37

1882 " " ". . . . . . . . . . . . . $6130322.17

1883 " " ". . . . . . . . . . . . . $5463919.33

Total. . . . . . . . . . . . . . . . . . . . . . . . $26715830.23 or an annual average of. . . . . . . . .$5245166.05

See exhibits 17 to 22 inclusive of Vol.7, United States Pacific Report. These figures represent the increase in the Profits and Loss account after all payments of operating taxes interest and general expenses have been deducted.

According to the terms of the Lease of the Central Pacific Railroad Company to the Southern Pacific Company (see page 3446 of U.S. Pacific Report) the latter agrees to pay the former in addition to all interest terms betterment and expenses of operating and maintaining the road of Lesser a minimum sums of One million two hundred thousand dollars ($1200000) and also will discharge all the annual obligations imposed upon said Central Pacific Railroad Company by existing Acts of Congress and will during the continuance of this agreement fully comply with the terms of perform all the [autics?] prescribed in and discharge all the obligations imposed upon said Central Pacific Railroad Company by the Act of Congress commonly known as the Thuran Act.

Should the receips of the Lessor exceed the sum of One Million two hundred thousand dollars ($1200000) in any year the excess up to the sum of Two million four hundred thousand dollars is to be paid into the Treasury of the Lessor.

The United State requirements for the year ending December 31 1886 were $418271.56 and it is not likely they will fall below that amount.

To these amounts should be added proceeds of Land sales in 1886 sixty thousand dollars. Interest on sinking fund investments in 1886 $463446.66 and dividends earned on Investments in 1886 $7200.00. These sums added to the guarantee of $1200000 are largely in excess of the sum required for the annual interest to the United States on its Bonds and is not likely in any event to be lessened. Any one who has studied the wonderful grown of California during the last year and its promise for the future will recognize the truth of this.

But should the income fall off below this amount of $1671340.80 VIZ - the annual interest on the United States bonds then the Railroad Company have a reserve fund to fall back on of $28813607.37 of undived profits which have gone into "Construction of Road" Payments to sinking fund" to the "United Sattes" dc. and "income Bonds" out of this Surplus could be issued and sold to meet any deficiency.

Any claim that this sum which represents the amount of undivided earnings on the whole line can de separated and apportioned between the aided and non-aided portions of the road is absurd. The very fact that certain portions of the