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ness here, that that portion of Hot Springs Creek running through the reservation should be thoroughly cleared out, so as to give the water a clear and swift passage. This I did with your approbation, at a cost of seventy-five dollars. I also paid F.C. Stearns, by your direction, eighty dollars for care of Commission papers; also H. A. Whittington, for rent of room for same, thirty-three dollars. Thirty-seven dollars carried to the July account. The balance of water rent collected up to June 30, 1878, is deposited in the Merchants' National Bank, Little Rock, Ark., amounting to $5,035, making a total collection of water rent $5,260. Very respectfully, .


Superintendunt. Hon. CARL SCHURZ,

Secretary of the Interior.





Boston, December 7, 1878. SIR: With the exception of a single one of their number (Mr. Chadwick, of Connecticut, who was originally made a member of the board in March, 1877), all of the present government directors of the Union Pacific Railroad were appointed within the present year. They none of them had any previous knowledge of the affairs of the corporation, or were more than generally informed as to its relations with the government. Under these circumstances it was fortunate that very shortly after their appointment was decided upon, two acts of Congress were passed which greatly simplified their work. By one of these acts the annual payments, allowances, &c., to be made to the government by the Union Pacific were fixed; while by the other a new bureau was established, in connection with the Department of the Interior, for auditing the accounts of that company, among others. These two measures of legislation effectually relieved the present government directors from further considering many subjects which had engaged the attention of their predecessors. For the immediate time being, and at least pending the action of the courts in cases arising out of the operation of the acts referred to, and which are now, it is understood, ready for decision, the financial relations of the government and the Union Pacific must be considered as definitely settled. This subject, therefore, calls for no further discussion. As respects also the condition of the company's finances, its resources and the disposltion made of them, the government has its own auditor, and is in immediate possession of all the facts and statistics which it would be in the power of government directors to furnish. Veither have the present directors thought it incumbent upon them to further investigate questions of the past connected with the construction of the Union Pacific road or its earlier operations. They have, on the contrary, deemed that they would best subserve the purpose of their appointment by strictly confining their attention to questions of the present, giving the department such information as they might be able to procure relating to the existing condition of the property, and the policy now pursued by the direction in the management of the company's affairs.

The usual yearly inspection of the road was made in September and October last. All of the members of the board took part in it, with the exception of Mr. Chadwick, who was prevented from so doing by business engagements. He therefore does not join in that portion of the report derived from personal observation of the property or its manage. ment on the spot. Both locally upon the line and in the general offices of the corporation at New York and Boston every facility has at all times been afforded the directors toward obtaining whatever information they may have desired. No disposition to withhold or conceal has at any time been apparent. On the contrary, from the beginning, the fullest investigation seemed rather to be courted; while more than once the feeling has been openly expressed that justice has not been done either to the actions or intentions of those now responsible for the management of the company's affairs. A public inquiry, at once impartial and intelligent, could, it was claimed, result only to its advantage.

So far as the inquiries of the present government directors have gone, they have been of a general character, and have related solely to the two subjects already referred to—the material condition of the property and the business policy of those managing it. As respects these also, the inquiry has necessarily been both partial and superficial. The conclusions arrived at, so far as they go, are in many respects quite different from what the directors anticipated when the inquiry was begun. Such as they are, however, they could not be avoided.

In passing upon the material condition of the Union Pacific Railroad, the first point to be determined is the standard by which it shall be judged—whether by that in use on the Eastern trunk lines, or by that in use on the best roads of the Mississippi Valley, or by the less severe standard which is usually applied to the newer roads west of the Missouri. In view of the facts, which it is unnecessary to more than refer to, connected with its organization and construction, it seems manifestly right that the Union Pacific should be judged by the most severe standards known among the railroads of the country. No good reason is apparent why it should not be held strictly to this test, or why its owners and officers should object to it. As is matter of common knowledge, the road was practically built out of the public money, and the stock, which now represents its ownership, represents little besides the enterprise and energy which the original constructors put into their undertaking. The corporation, on the other hand, received from the government an indorsement of uuprecedented liberality. The road was designed to be a great national thoroughfare; a monument of public liberality and of private enterprise. Under these circumstances, those representing the government in the conduct of its affairs would clearly not be justified if in their inspection they applied any standard short of the highest known to the railroad system of the country. Especially would this be so when, as in this case, the road, as a commercial enterprise, has proved a brilliant success; when its annual gross earnings, falling but little short of $13,000,000, are the largest, with five exceptions only, in our whole railroad system. Neither are those earnings peculiarly absorbed in the necessary operation of the road. On the contrary, while but three companies only in the country—the New York Central and Hudson River, the Pennsylvania, and the Central Pacific-report larger annual net proceeds, the percentage of operating expenses to gross receipts (42 per cent.) has during the last three years averaged lower with the Union Pacific than with any other great railroad company, without exception. These facts are referred to in this connection, not to prejudice the corporation, but simply to fix beyond a question the character of the standard which should be applied to its road.

In applying that standard, however, the directors have endeavored to bear continually in mind the peculiar conditions of climate, soil, traffic, and population under which the Union Pacific is operated. While in many respects most favorably placed for economical working, that railroad is also subject to natural laws which seem peculiar to itself. For instance, the line was originally laid out and the road was constructed

rather, it would seem, to save time and money and to earn a mileage subsidy than with any regard to what are considered sound engineering rules. It was a surface road, in which cuts and embankments were carefully avoided, without regard to curvature or undulation of track. As the subsidy was paid by the mile, such a method of construction, while it saved money on the one hand, earned it on the other. In gradually converting this original structure into a first-class permanent work, it would naturally be expected, according to all established precedent, that the alignments would be rectified, the embankments made higher, and the cuts deeper, while the surface undulations would have been reduced to grade. Experience, however, has shown that, whether sagaciously designed or otherwise, the original construction was for this particular road the best construction possible. It has enabled the trackmen to contend successfully with the clouds of fine dry snow which drift in winter over the plains, filling every cut, but blowing clear of all embankments. Accordingly the whole tendency of the company in the renewal of its road-bed has been to seek the shoulders of the hills by curves and undulations, instead of going through them on straight lines at au even grade. The effort is to keep the track at all points slightly elevated above the country through which it runs.

So, again, as respects mason work. In the usual process of first-class railroad renewal the gradual substitution of stone for trestles and piling is assumed as a matter of course. The Union Pacific, as regards certain large portions of its line, seems to be an exception to this rule. In many places the company is now even taking out original mason work of a fair order and replacing it with piling. This, too, is done because experience has shown that, in their soil, and with the climatic conditions under which they work, masonry is far more liable to wash-outs than piling. The annual rain-fall is not large, but at times it comes in torrents. No ordinary provision is then adequate for the water's escape, and where the surface of the soil has been broken to put in mason work, without carrying its foundations down to bed-rock, the superstructure is peculiarly liable to be undermined and swept away.

The same climatic conditions, on the other hand, affect the road most favorably as respects its economical operation. The character of the soil and its freedom from water obviate the great difficulty of frost, against which the Eastern roads are forced to unceasingly contend. On very large portions of the Union Pacific the directors were assured that the track and road-bed came each spring out of the winter in much the same condition, apart from regular wear, in which they went into it. The soil neither heaves nor washes. This again immediately affects the life of rails and ties, as well as the condition of the rollingstock. Indeed, cottonwood ties were pointed out which had apparently been in the track since the original construction of the road ten years ago, and which were still in good order.

As respects fuel, ballast, and building material, except wood, the Union Pacific, as compared with the generality of Eastern roads, is most advantageously placed. Contrary to all expectation, and again, in apparent defiance of experience, the native soil thrown up from the roadside during the process of original construction has, on a large portion of the line, proved itself a ballasting material of the best description. Dry, elastic, and easily handled, it calls for no foreign admixture, and would hardly be improved by it. For only 80 miles of the entire line, or but 8 per cent. of the whole, is foreign ballast even deemed necessary. So also as respects fuel and building material. They are found in great plenty and of the best description directly on the line of the road, although in many cases a long haul is required to get them where they are needed. Yet this haul is in every case wholly over the company's own rails, and for it they can use their own returning rolling-stock at their own convenience. Practically its cost is thus reduced to a minimum.

In the matter of grades, also, the line is, considering the elevation necessary to be overcome, most fortunately circumstanced. The whole eastern half of it, a distance of more than 500 miles, is a gently ascending western grade, averaging 10 feet to the mile; while the heavy grades of the mountain divisions are limited to three localities, respectively of 60, 50. and 80 miles in extent, in which 90 feet to the mile is the maximum, and that at one point only. Of the entire 1,036 miles of the road, over 800 are most easy of operation. Nor is this all. The overcoming of grades is, of course, a mere question of power. In the case of the Union Pacific, the grade and the power which overcomes it are met together. As the coal-mines are in the mountain divisions, allowing for the difference between the value of coal at the mouth of the mine ($1.13) and in Omaha ($7.50), it would actually seem to cost the Union Pacific but a trifling amount more to haul its trains over the mountains west of Cheyenne than it does to haul them over the plains east of that point.

As respects water and the price of labor, the company operates its road at certain points at a serious disadvantage. Indeed, in the western divisions the absence of good water is probably more seriously felt than the presence of the grades. In the matter of snow, on the other hand, the difficulties originally apprehended have been, to a great extent, overcome, and the expenses reduced until they are no longer material. The officers have learned how to deal with it, and during the last three years the entire cost of removing ice and snow, including the repair of sheds and fences, has added hardly one cent per mile to the expense of running trains.

In passing upon the material condition of the line, it should also be borne in mind that in the traffic which the Union Pacific is called upon to accommodate there is little which requires frequent or expensive handling; that is, the business, both freight and passenger, through and local, whether originating and ending on the line of the road or not, is usually carried long distances; so that none of the complicated movement and frequent interchange of trains is required which is usual on Eastern roads. This, of course, necessitates no such elaborate and costly arrangement of tracks, sidings, yards, buildings, and general appliances as is found upon roads with much smaller traffic in other portions of the country. These need not, therefore, be looked for. The Union Pacific at present requires only those accommodations necessary for doing a business of the simplest known character.

Taking all these things into consideration, and making full allowance for them, the directors are unable to say that the present condition of the Union Pacific road is in all respects satisfactory. On the contrary, when measured by the standard which has been suggested, its deficiencies are many and apparent. The policy, as respects the completion and renewal of its road, which the company apparently has pursued and now is pursuing, might, perhaps, if judged by the test of strict business principles, in the shrewd management of a practical monopoly, be deemed a fairly liberal one. In making their examinations, it is true, the present directors labored under the great difficulty of having no previous knowledge upon which to base a comparison, but it is, nevertheless, sufficiently obvious that the property, instead of deteriorating, is being brought up with steadiness, though slowly, to a fair degree of average excellence. It is still, however, far short of what, with its orig.

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