Central Pacific Railroad Company: documents

non-aided roads have been partially built by the proceeds of this fund and that therefore the profits arising from such portions of non-aided roads consequently belong to the aided roads shows the fully and impossibility of attempting to divide or apportion this fund - The United States undoubtedly have a lien upon it and can enjoin the Company from dividing it among their stockholders if they can show that the other property subject to their lien is inadequate to meet their claims.

The payment therefore of this sum of $1671340.80 into a Sinking Fund for the next ten years till the maturity of the Principal and Interest of the bonds would almost certainly be assured.

To this gradually increasing Sinking Fund should be added the amounts now to the credit of the COmpany in the United States Treasury.

This sum according to the statement of Hugh S. Thompson Action Secretary of the Treasury was on November 30th 1887 as follows:-

Central Pacific Railroad Company Transportation Service. . . . . . . . . . . . . $5574812.90

Central Pacific Railroad Company cash payments 5 per cent of Net earnings. . . . $658283.26

Central Pacific Railroad Sinking Fund. . . $2749120.58

Western Pacific Railroad Transportation Service. . . . . . . . . . . . . . . 9367.00

Total. . . . . . . . . . $8991583.74

The annual report of the Secretary of the Railroad Company makes the amount of this indebtedness December 31 1886 $10427238.15 and this amount agrees substantially with the books if the sum of $418271.56 paid by the Southern Pacific Company in the early part of 1887 but properly chargeable in 1886 be added. See Exhibit Np.25 United States Pacific Commissioners Report and Schedule No. annexed. The difference same $1500000 is probably due to amounts that have been paid to Governments but which have not yet been adjusted and therefore not credited the Company.

This amount i snow in the Treasury of the United States in the shape of Credit on account of transportation for future payment of interest when due and in a Sinkin Fund. On neither sum does the Government receive any interest while on the latter owing to the peculiar nature of the Trust the interest derived from it by the Company is but nominal. If these two amounts be consolidated in the Sinking Fund above proposed and two trustees appointed one by the President of the United States and one by the Railroad Company and they be empowered to invest the funds not only in all United States securities but also in the present existing loans outstanding of the railroad Company four per cent upon the market value or present coast of those securities could easily be obtained.

The value of such Sinking Fund compounding the interest every six months on July 1 1893 about the average date of maturity of loan would be (see Schedule No.3) $37891776.26 deducting this from the amount that will then be due the Government say $77043630.66 would leave the then debt at $38151854.40

This amount could very readily be handled then at four percent either by arrangement with the United States or by the placing of a loan by the Company upon the market presuming that no financial crisis or panic then prevailed are the interest payable bt the Company would be after that date reduced to less than twelve hundred thousand dollars per annum ($1200000)

To further exemplify the financially ability of the Railroad Company to meet the Governmental obligations I would refer to Schedule No. 4 being the report of the Company December 31 1886 of their assets and liabilities. This account ignores the undivided earnings or "Profit and Loss Account" amount the terms of Indebtedness. It also included among its assets the estimated value of the lands unsold some thirty Millions of Dollars. It serves to give additional assurance of the ability of the Company to meet all demands of the United States when such demands fall due.

But however to provide against all contingencies the Profit and Loss account should in no event be reduced below its present Status. While the railroad COmpany should have full power to divide among its stockholders all future income or earnings over and above the Government demands as above stated this fund should be preserved inviolate.

To reiterate the plan above set for maybe condensed as follows:-

1. Create a Sinking Fund with two Trustees one appointed by the President and one by the Railroad Company.

SCHEDULE NO. 1

Statement showing the dates of maturity the dates of delivery to the Company or the commencement of the Interest the amount of Bonds the amount of securing interest at date of maturity and total amount due at maturity of the United State Bonds issued to the Central and Western Pacific Railroad Companies.

Central Pacific Railroad Company.

Amounts Carried forward

Jany. 1 1898| Nove 3 1868| 29 1 26| 640000| $1119786.67

Central PAcific Railroad Co. Principal| $25885120.00