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In my last annual report I called your attention to the imperative necessity for some legislation by Congress to provide a way for the more speedy settlement of the private land-claims in the territory (except California) acquired from Mexico by the treaty of Guadalupe Hidalgo in 1848, and the Gadsden treaty of 1853, than is now provided by law. The reasons then given for asking such legislation were :
First. The slow progress made under existing laws in the settlement of said claims.
Second. The large number of claims still remaining unsettled, covering large tracts of land, which interfere with and retard the sale and disposal of the public lands.
Third. The want of harmony between the land system of the United States and the system under which said grants were made, which engenders strife and conflict between the grant claimants and settlers.
To remedy these evils and avert further difficulties, I recommended the passage of an act providing for the appointment of a commission with full power to hear and determine the validity of all such claims within the territory named, subject to an appeal to the United States courts.
No law was enacted by Congress at its last session for the more speedy settlement of said claims, although a bill was introduced in the Senate which, had it been enacted, would, in my opinion, have accomplished the desired object.
All the reasons which existed one year ago, making such legislation necessary, still exist, and the last is intensified by the disorders and bloodshed which have occurred in New Mexico during the last year, most of which are traceable directly to the conflicting interests of grant claimants and settlers.
The following sections were accepted by the President at the dates given, and on the roads specified below:
On the 23d of January last, so much of the fifth section of the Southern Pacific Railroad of California, constructed under the act of March 3, 1871, as lies between the beginning of said section and the point where it crosses the western boundary of Fort Yuma military reservation, California; on the 13th of February, 1878, the tenth section of the main line of said road, 41.66 miles; on the 7th of May, 1878, part of the sixth, all of the seventh, and part of the eighth section of the said road, formerly known as the California and Oregon, now by consolidation part of the Central Pacific Railroad of California; and on the 11th of July, 1878, the seventh, eighth, and winth sections of the Oregon and ('ali. fornia Railroad.
BUREAU OF RAILROAD ACCOUNTS. The act of Congress approved June 19, 1878, established a Bureau of Railroad Accounts in this department for the purpose of having all matters relating to indebted Pacific Railroad companies, and certain land. grant railroad companies taken cognizance of, examined, investigated, and reported upon. The following abstract of the operations of this bureau since its organization on July 1, 1878, is presented:
The Auditor of Railroad Accounts in making his first annual report states the immediate causes which led to the establishment of the burean, and gives a review of legislation in regard to reports and investigations of subsidized railroads had and proposed since the incorporation of the Union Pacific Railroad Company in 1862. The government directors of the Union Pacific Railroad Company, in their report for the fiscal year ending June 30, 1877, strongly recommended the establishment of such a bureau in this department. In view of the condition of the affairs of all the Pacific Railroad companies, and the discussions relative to their indebtedness and operations, the recommendation of the government directors met with my full concurrence. The necessity that Frists for some officer of the government, specially charged with such duty, to examine the books and accounts of these railroad companies, and to see that the provisions of the act approved May 7, 1878, for the establishment of a sinking fund in the national Treasury to provide for the payment of the indebtedness of the Union Pacific and Central Pacific Railroad Companies to the United States, are properly complied with, is fully confirmed by his report. Other reasons, however, demanded that it be made the duty of some officer of the government to familiarize himself with the affairs of these railroad companies, and to verify the correctness of their reports by personal examination of their books and records. The act of Congress approved June 22, 1874, by which the Secretary of the Treasury is directed to make demand upon the Pacific Railroad companies for the payment of 5 per cent. of their Det earnings due and unapplied, made it a necessity that the amount thereof should be properly ascertained. Under the same act the Attorney-General has instituted suits against the Union Pacific Railroad Cumpany and others, which are still undecided; the one, however, against the Union Pacific Railroad Company, involving an amount of nearly $2,500,000, has reached the Supreme Court of the United Statesthe lower courts having given judgment in favor of the government, both as to date of completion of the railroad and as to the amount claimed on account of 5 per cent. of net earnings, and as soon as determined further settlements with all of these companies must be made and become the duty of some officer of the government. In this and the other suits of the same kind, the bureau just organized has been and will be able to give its assistance to the Department of Justice. It has also been of some service in the suit of the Atchison, Topeka and
Santa Fé Railroad Company vs. The United States, in which questions have arisen involving not only the rights of the United States under the condition attached to the land-grant, but also what constitutes “a fair deduction for the use of a railroad as a public highway by the United States free of toll or other charge,” under the recent decision of the Supreme Court.
The gathering of facts and statistics bearing upon the establishment of sinking-funds for the payment of the indebtedness of the Kansas Pacific, Sioux City and Pacific, and the Central Branch Union Pacific Companies, as well as the question of “pro-rate and continuous operation” of the Pacific Railroads, and future questions in regard to cost and other matters which are likely to arise, all of which require special and careful investigation, will be better accomplished, undoubtedly, if intrusted to this bureau, the necessity of which in such regard has been long felt.
The geographical limits named in the act include all subsidized railroads, in whole or in part, west, north, or south of the Missouri River. This construction of the act is objected to by the counsel of some of the land-grant railroad companies.
The land granted by the general government to certain States for railroad purposes was in most cases granted with the condition that the road should be and remain a public highway for the use of the United States, free from toll or other charge for the transportation of any property or troops of the United States. This condition has been decided by the court of last resort to give to the United States only the free use of the roadway, not to include that of the equipment, rolling-stock, &c.; and the court awarded compensation for transportation over these roads subject to a fair deduction for the free use of the roadway under the law.
The value of this condition, therefore, under the decision of the court, becomes a question for special inquiry and determination, involving the cost of construction, equipment, and other matters relating to the earnings and operations of a railroad.
Some companies, again, have made answer that their books are not kept in such a way as to enable them to furnish the required information. As to this, it has been, and will be for the future, the desire of this department to cause, if possible, no additional expense or trouble to the companies, so long as the information furnished satisfies the requirements of law, and is sufficient to enable an intelligent opinion to be formed in regard to their condition and operation.
The Union Pacific Railroad Company has rendered reports to the Auditor, under a reservation explained by a letter of the president of the ·company, a copy of which is given in the appendix to the Auditor's report. One thousand and thirty-eight and sixty-eight one-hundredths miles of this road were subsidized by an issue of bonds, in addition to the land-grant, of which five miles are leased to the Central Pacific Railroad Company and 1,033,68 miles operated by itselt. The company owns 178 locomotives, 128 passenger-cars, 41 baggage, mail, and express cars, and 3,357 freight and other cars. The stock subscribed amounts to $36,783,000; stock issued to $36,762,300. The par value of shares is $100. The subsidy bonds amount to $27,236,512; the funded debt to $51,116,200; total stock, subsidy bonds, and funded debt is $115,115,012. Floating debt and interest accrued on subsidy and other bonds to June 30, 1878, amount to $17,683,394.07; bonds and stocks of and invest. ments in other companies amount to $4,916,229.77; cash, material, and accounts due amount to $10,195,160.15. The cost of road, equipment, and Missouri River bridge, as appears on the company's books, is $120,627,064.69. The earnings for the year ending June 30, 1878, were: From passengers, $3,259,223.42; from freight, $7,573,105.21; miscellaneous earnings, $1,951,812.59; total earnings, $12,784,141.22. The operating expenses of the road were $5,803,266.95, and the net earnings, $6,980,374.27. The interest paid is $3,402,891.58. The dividends paid amounted to $2,204,700. Ten million seven hundred and sixty-four thousand nine hundred and forty-seven acres of land granted to this company remain unsold.
The Aulitor further states that, under the laws in force to June 30, 1878, there will be retained probably of the amount due the Union Pacific Railroad Company, $616,066.93, as one-half of the amount due for transportation, and $352,330.17 as 5 per cent. of net earnings; total, 8963,397.10, applicable on account of subsidy bonds; the remainder of government transportation account for the year payable to the company being $263,736.76; and the total government transportation being $1.232,133.86.
If the sinking-fund act liad been in force during the last fiscal year there would have been retained, $616,066.93, one-half of transportation, and $106,660.49, cash payment on account of 5 per cent. of net earnings; total, $722,727.42, which, if deducted from the above amount of $968,397.10, leaves $245,669.68 as the amount to the disadvantage of the government under the new law, so far as a direct payment for the use of the United States is concerned, although $616,066.93 being required for the sinking-fund, the total payment by the company becomes more than was required under previous laws by the sum of $370,397.25.
From the statement of the Auditor it also appears that under the sinking-fund act the net earnings at the disposal of the company for the last fiscal year would have amounted to $4,016,383.04, and that this sum would have enablecl the company to pay interest on all its bonds, landgrant, sinking-fund, and bridge bonds, and dividends on par value of its capital stock of very nearly 6 per cent.
The ('entral Pacific Railroad Company has not complied with the law meniring reports to be made to the Auditor, and certificates as to their neglert to do so have been submitted to me. A report of this company, under section 20 of the act of 1862, and under the act of June 25, 1868, which have been repealed, was, however, received by this department,
I kan de Parific Railway Company hare rendered and are renderIn tots in conformity with law. On Sorember 3. 1876. Carlos S. Greless and Henry Villard were appointed receiver of this company amowrated the road until removed by the United States circuit court in (Dober, 1878. The Auditor reports the business of this road as rapidly improving; and the following facts and figures are gathered from bin raport: Miles subsidized, 638.34; miles operated, 672.06; number of Joxumotive, #9; number of passenger-cars, 51; baggage, mail, and exprema cars, 17; freight and other cars, 1,323; stock subscribed,
9,992,500); stock issued, $9,689,950; subsidy bonds, $6,303,000; funded debt, *22,180,600; floating debt, $4,753,010.22, not including #1,913,356.94 accrued interest on subsidy bonds; total debt, 35,155,967.16; total stock and debt, $14,813,917.16; cost of road,
31,359,540.66. For the year ending June 30, 1878, passenger earnings were 698,710.45; freight earnings, $2,348,388.86; miscellaneous earninga, 252,938,50; total earnings, $3,300,037.81; operating expenses,
2,125,832.80; net earnings, $1,174,205.01; interest paid, $613,316.32; Tands in old, 4,803,933 acres.
The Denver Pacific Railway and Telegraph Company and the receiv