Page images

committee submitted a bill to accomplish the purpose of their report, but it did not become law.

A number of propositions were made by the Central and Union Pacific Railroad Companies at that time and subsequently, both to the executive departments and to Congress; and sundry bills were introduced at different times and referred to the Committees on the Judiciary and to the Committees on Railroads of the Senate and House of Representatives, without result other than investigation and report.

On March 4, 1878, Forty-fifth Congress, second session, Senator A. G. Thurman submitted Report No. 111 from the Senate Committee on the Judiciary, to accompany bill S. 15, as amended, by which it was shown, first, that the Central Pacific and Union Pacific Railroad Companies were fully able to meet the requirements of a sinking-fund for the payment of their indebtedness to the government; second, that one-half of the compensation for services rendered for the government, added to the amount of five per cent. of their annual net earnings, was insufficient to reimburse the government, or to provide the necessary requirements for a sinking-fund for that purpose; third, that the decisions of the Supreme Court in recent cases completely removed all doubt as to the power of Congress in the premises-whether to create a sinking-fund, or to alter, amend, or repeal the act of incorporation, and the acts amendatory thereof. After lengthy debate and some amendments, the bill passed the Senate April 9, and the House of Representatives April 24, 1878, and became a law by the approval of the President May 7, 1878 (Chap. 96, U. S. Stats., II, of 1877–78, p. 56).

On April 17, 1878, the Hon. Wm. W. Rice, from the Committee on Pacific Railroads of the House of Representatives, submitted Report No. 620, to accompany bill H. R. 4399, “ to establish a board of Pacific Railroad Commissioners," as a substitute for several bills introduced to relieve the complaints of the branch roads of the Union Pacific system against the Union Pacific Railroad Company of a violation of the relations established between them by Congress, of unjust discriminations, and of illegal and oppressive treatment. The bill provided for the appointment of a permanent board of three commissioners; said board of commissioners to have general supervision of the Pacific Railroads: to have an office in the city of Omaha; to examine the roads, books, and papers of the companies; to inform themselves of the rates and charges for transportation of freight and passengers; to ascertain whether the companies furnish safe and convenient accommodations at reasonable and proper rates, and perform and discharge their duties to the government, the public, and each other, in accordance with law; to establish rules and regulations to govern the operation and management of the roads, with power to issue subpænas for witnesses and for the production of books and papers, and to administer oaths at any hearing or examination; to require reports from said corporations at such time and in such manner as the commissioners shall direct, and to make an annual report to Congress. This bill was known as the “pro-rate bill," and was not taken up on a motion to suspend the rules.

On June 14, 1878, Senate bill No. 1337, creating a board to be known as “the Pacific Railroad Commissioners," was considered as in Commit tee of the whole of the Senate. The bill proposed to constitute a special board of three commissioners to serve until January 1, 1879, to ascertain certain facts in regard to the construction, property, earnings, operating expenses, transportation rates, terminal facilities, and any other matters to aid in establishing equitable rates orer said roads or any portion thereof; to make a report to the Secretary of the Interior on Decem: ber 1, 1878, of their proceedings and doings and the facts ascertained by them, together with suggestions and recommendations, and to state what, in their opinion, would be an equitable and fair tariff of rates or division of earnings between the companies for the transportation of freight and passengers over the whole length, or any parts thereof, of any two or more of said roads. This bill was passed by the Senate, but was not reached in the business of the House before adjournment.

A supplemental report will be made by this office on December 1, 1878, bearing upon this and other questions relating to those companies.

On June 14, 1878, Senate bill No. 1,368, in relation to the Kansas Pacific Railway Company, and for the establishment of a sinking-fund similar to that established for the Central Pacific and Union Pacific Railroad Companies, was passed by the Senate. The only points of difference between this bill and that passed for the Central and Union Pacific Companies were the necessary alterations in names and amounts, and the following amendment, offered by the honorable Senator G. F. Hoar, of Massachusetts, viz:

The compensation of the government directors appointed for the Union Pacific Railroad, by virtne of the provisions of the act to which this is an amendment, shall be fixed at $10 a day while absent from home engaged in their duties as directors, in addition to their actual traveling expenses, the account of their services to be rendered to and approved by the Secretary of the Interior before such payment. No governinent director shall hereafter receive any compensation from said company, except as aforesaid, for any service rendered to it, or make or be interested in any contract with the said company whereby he shall receive any emolument or advantage whatever.

The bill was not reached in the House prior to adjournment.

The necessity for further information, before legislation can be had in regard to the establishment of sinking-funds for the payment of the indebtedness to the United States of the Sioux City and Pacific and the Central Branch Union Pacific Railroad Companies, and for information bearing upon the question of "pro-rate and continuous operation” of the Pacific Railroads, and other matters relating to the companies; the existence of the pending suits between these railroad companies and the United States, in regard to the questions of " completion of road," 6 net earnings,” and “ compensation for carrying the mail," as well as others that may arise in regard to the disposal of their lands; and the questions at issue in the suit of the Atchison, Topeka and Santa Fé Railroad Company is. The United States, in regard to what is 66 a fair deduction for the use of a railroad as a public highway by the United States free of toll or other charge,” are all of them matters in which the bureau has been and is expected to be of great service to the government; and it was undoubtedly with this view, among others, that the art creating it was passed.


A copy of the act will be found in the appendix (1) annexed to this report.

The following brief synopsis will serve to explain its operation and effect:

Section 1 repeals the laws previously in force in regard to reports required to be made by railroad companies to the government, excepting only that relating to the Texas and Pacific Railway Company—the law of 1871, requiring reports from that company, being still in force—and the sections of the law incorporating the Northern Pacific and the Atlantic and Pacific Railroad Companies.

Section 2 provides for the organization of the bureau and the necessary appropriations.

Section 3 specifies the duties of the Auditor, which are, among other things, to prescribe a system of reports, to examine the books and accounts of each railroad company, to see that the laws relating to the railroad companies are enforced, and to report annually to the Secretary of the Interior; and describes, by geographical limits, the railroad companies embraced in the act.

Section 4 enacts that the railroad companies described in the previous section shall make such reports as the Auditor may require from time to time, and that they shall submit their books and records to his inspection.

Section 5 fixes the penalty for neglect or refusal to comply with the requirements of the law at not less than $1,000 nor more than $5,000 for each case of neglect or refusal, to be forfeited for the use and benefit of the United States, and to be recovered by the Attorney-General of the United States.

Section 6 applies the provisions of the act to all persons or companies into whose hands either of said railroads may lawfully come.

Section 7 names the day on which the act takes effect as July 1, 1878.

In its general features, the act seems to have the sanction of the most intelligent and advanced thought in regard to the railroad problem," which may be summarized briefly as (1) publicity as to the condition and affairs of railroad companies; (2) certification as to such condition after examination by competent government commissioners or auditors, followed by (3) stated and correct reports uniform in character and as to time, and (4) such wise and considerate legislation, based upon the information so obtained, as shall allow the great natural law, “ the survival of the fittest," to govern. In this respect, the State or national government would but take the place of a committee of stockholders or creditors often appointed to inquire into the affairs and conditions of a railroad company—the Auditor or commissioner of the government becoming a kind of permanent committee for such purpose-the end served being the true interests of the company itself, and the general public welfare. This is undoubtedly the direction in which governmental control of railroad companies is tending, as it is being realized, gradually, that the regulation of rates for transportation by legislation must necessarily operate unequally and disastrously on different railroads and in different sections. Each railroad company must in this respect be a law unto itself; its rates must be regulated by its own exact elements entering into the cost of transportation, varying greatly on every road, as to the amount of capital invested, the cost of construction and equipment, the rate of interest paid for money, the volume and kind of business done, the expenses of operating and keeping the road in repair, and last, but not least, the quality of its management. It is for the general welfare that railroad property shall be reasonably productive and remunerative, and that capital so invested shall not be sunk, wasted, or rendered unprofitable. “Combination," so called, or co-operation, as the reverse of vicious 6 competi tion," legally and properly supervised as a means to such end, is nothing more or less than practical, strong “common sense."


Whatever may have been the design of the bill as introduced, the act itself as passed describes by greographical lines the railroads whose pròprietors or lawful owners are required to render reports, in the follow. ing language, viz: “ The railroad companies whose roads are in whole or in part west, north, or south of the Missouri River, and to which the United States have granted any loan of credit or subsidy in bonds or lands."

The two questions involved in this description are, first, where is the geographical boundary-line to be drawn? and, second, within the limits of such boundary-line, to what railroad companies have the United States granted any loan of credit or subsidy in bonds or lands?

As to the first question, a careful calculation, made by Mr. C. Roeser, principal draughtsman in the General Land Office, shows that the latitude and longitude of the confluence of the Mississippi and Missouri Rivers, the point from which it is decided to draw the lines, is as follows: Latitude, 38 degrees 51 minutes and 23 seconds north; longitude, 90 degrees 8 minutes and 8 seconds west of Greenwich.

A line drawn north and south from this point intersects the following railroads, viz: Wisconsin Central; La Crosse and Milwaukee; Saint Louis, Iron Mountain and Southern; Cairo and Fulton; Memphis and Little Rock; New Orleans, Baton Rouge and Vicksburg; and Morgan's Louisiana and Texas. North or south of a line drawn west from the same point, are the remainder of the roads named in the list marked B in the appendix.

As to the second question, a careful examination of the statutes under which the grants were made by the United States shows that to the three classes of railroads into which they are divided in Appendix B, bonds or lands have been granted, either to the original companies as named therein, to companies or persons into whose hands the said railroads named in the statutes have lawfully come, or to the States named in the statutes for the sole use and benefit of the line of railroad designated therein. The only point upon which any doubt can arise, is whether a grant of land to a State solely to aid in the construction of a railroad named and specified in the act making the grant, is a subsidy in lands as contemplated in the act creating this bureau. It is found that the certificates issued by the General Land Office for the land granted in all such cases name the railroad for whose use it is to be applied, and in some cases does not even name the State. The construction put upon this clause of the act is, that such grant is a subsidy as contemplated by the act. Railroad corporations generally have so much litigation of one kind or another that it becomes a regular part of their business to go to law, and railroad men being, as a class, naturally rugged and combative, it was not to be expected that the land-grant railroad companies would quietly submit to the requirements of the act. The main point made in objection is that the grant to a State for a railroad specified is not a grant to the railroad company. This has been deemed somewhat in the nature of a quibble or evasion, inasmuch as the title vests in no one but the railroad company, and the final ownership must be through the railroad company and the railroad company only.

List C in the appendix gives the reference to the acts of Congress relating to each railroad, the condition upon which the grants were made as to transportation for the government, the amount of bonds issued to each company, the estimated quantity of land granted, and the number of acres of land certified to June 30, 1878. (See, also, map accompanying this report.)


In prescribing the system of reports for the railroal companies to render to this office, the following considerations have governed :

1. That the reports should be practical and simple, stating facts, and, whenever possible, by mere transcript from the books of the company or the regularly prepared statements of its officers. 2. That the number and frequency of reports required should be reasonable, and only such as the directory of the company might require for its own information. 3. That the matters reported should be useful and necessary, not only to the government, but for the proper and economical management of a railroad. By this means, it was considered that, while the government may have no choice of method or system of bookkeeping to be used by a railroad company, so long as the plain and elementary principle of properly debit. ing and crediting erery transaction as it occurs is practiced, whether relating to the liability or the expenses of the company, the officers would, of their own will, avail themselves of every opportunity to improve their system in such a way as they might judge best, but in any case, so as to enable them to furnish the information required by law.

The forms adopted may be classified as follows: first, those relating to 6ownership and control"; second, those relating to“ financial condition"; third, those relating to 6 revenue and statistics thereof"; and, fourth, those relating to "expenditures and statistics thereof." (See list D in the appendix.)

Forms Nos. 3 and 11 relate to the ownership of a railroad company, embracing facts as to its organization, officers, capital stock, &c. Reports are required on these forms semi-annually, or as often as the transfer-books are closed, prior to the payment of a dividend.

Forms Nos. 1, 10, 12, 13, 14, 16, 17, and 18 relate to the financial con. dition of a railroad company, its liabilities and assets. The proper showing of the financial situation, or condition, of a corporation is, perhaps, one of the most vital elements in its permanent prosperity. For this purpose, probably every railroad company in the United States has a trial balance taken from its general ledger once a month, or at stated intervals more or less frequent; if any company does not require this, it is at the mercy of its officials, and the proper conduct of its affairs is next to impossible. The books of the Treasury of the United States are trial balanced four times a month; and while its receipts and expenditures during the eighteen years from July 1, 1859, to June 30, 1877, aggregated the enormous suin of $29,487,254,043.04, the Treasurer's books balanced to a cent, and every cent of the balance was accounted for. The question of a reasonable expenditure for book-keeping should be a minor one; every proper safeguard is 'a legitimate expense. It would have been a wise economy, probably, for the Manhattan Savings Institution to have expended a few hundred dollars on a time-lock for their vault. The actual showing of both sides of the general ledger is required upon Form 1, monthly; statistical information as to assets on the other forms, semi-annually.

Forms Nos. 2, 4, 1.5, and 19 relate to revenue and the statistics connected therewith. Forms Nos. 5, 6, 7, 8, 9, and 15 relate to operating and other expenditures and statistics relative thereto. Every railroad company should undoubtedly have monthly returns of its earnings and expenses in detail ; some companies have summarized daily reports and fuller weekly reports. Without this important information, a company could hardly be expected to live alongside its more progressive competitors. Daily, weekly, and monthly, as well as continuous and yearly, comparisons are necessary to a vigorous and economical management.

The forms adopted are not supposed to be perfect. They will be im. provel from time to time as experience and necessity may require.

« PreviousContinue »