^^1 BANCROFT LIBRARY < THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA 6, SENATE. 1st Session. ' \ \ Part 6. )TH CONGRESS, ) SENATE. j Ex. Doc. 51, Session, j TESTIMONY TAKEN BY HE UNITED STATES PACIFIC RAILWAY COMMISSION, APPOINTED UNDER THE ACT OF CONGRESS APPROVED MARCH 3, 1887, ENTITLED "AN ACT AUTHORIZING AN INVESTIGATION OF THE BOOKS, ACCOUNTS, AND METHODS OF RAILROADS WHICH HAVE RECEIVED AID FROM THE UNITED STATES, AND FOR OTHER PURPOSES," EGBERT E. PATTISON, OF PENNSYLVANIA, Chairman, E. ELLERY ANDERSON, OF NEW YORK, DAVID T. LITTLER, OF ILLINOIS, Commissioners. VOLUME V. REPORTED BY CHARLES P. YOUNG, of New York, I SECRETARY AND STENOGRAPHER TO THE COMMISSION. WASHIKGTOK: GOVERNMENT PRINTING OFFICE. 1887. P R VOL V 1 2331 pt TESTIMONY TAKEN BY THE UNITED STATES PACIFIC RAILWAY COMMISSION, AS TO THE WORKING AND FINANCIAL MANAGEMENT OF THE RAILROAD* THAT HAVE RECEIVED AID FROM THE GOVERNMENT IN BONDS. OFFICES OF THE CENTRAL PACIFIC RAILROAD COMPANY, San Francisco, CaL, Monday, July 25, 1887. The Commission reconvened upon the call of the chair, all the Com- missioners being present. y EDWARD H. MILLER, JR., being duly sworn and examined, testi- fied as follows : By Commissioner ANDERSON : Question. Where do you reside? Answer. In Alameda, Alaineda County. Q. Do you do business in San Francisco ! A. Yes, sir. Q. How long have you been in business in San Francisco ? A. Since 1873. THE CENTRAL PACIFIC OF CALIFORNIA. Q. What has been your connection, if any, with the Central Pacific Railway? A. I have been secretary and am a director of the com- pany. Q. When was your first connection with the company f A. In 1863. Q. When was your original connection ? A. My original connection was as book-keeper, for about one year. Q. And that was for the Central Pacific of California, as it was then known ? A. Yes, sir. Q. Where were their headquarters f A. At Sacramento. Q. Had they any office in San Francisco at that time ? A. No reg- ular office. But President Stanford was in San Francisco a great deal of the time. He had an office here. Q. But the headquarters of the company were at Sacramento ? A. At Sacramento. Q. Please state what your connection has been with the company since 1803 to date *? A. For one year, about, I was book-keeper for the company. Since then I have been secretary continuously. Q. How many years have you been a director ? A. I think the whole time that I was secretary. I think I was elected director at the same time I was elected secretary. 3333 2334 U. S. PACIFIC RAILWAY COMMISSION. Q. Please state for what companies you have been secretary, indicat- ing at the same time the changes in the corporate title of the railway ? A. It has been the Central Pacific Eailroad Company of California, and then a change of title occurred. Q. That was from 1863 until 1870, was it not ! A. Yes, sir. THE CONSOLIDATION. Q. What happened in 1870 ? A. In 1870 a consolidation with two or three other companies took place. Q. Will you name them, please 1 A. There were several consolida- tions, and I cannot name them without reference to books. Q. Will you name what you can ? A. There was the Western Pacific Eailroad Company. Q. Kunning between what points ? A. Between San Jose" and Sac- ramento. The San Francisco, Oakland and Alameda Kailroad Com- pany, from Alameda, or including the line between San Francisco and Niles. No, I am mistaken ; it was between San Francisco and Oakland and Alameda. It was a branch. It had two lines, one to Alameda and one to Oakland. I will explain them. There was a ferry from San Francisco, both to the Alameda wharf and to the Oakland wharf, and then local trains ran out from Oakland and also from Alameda, which were two different points on the opposite side of the bay. By the CHAIRMAN : Q. Have you a map on which you can point those roads out ? A. Yes, sir ; I can furnish you one. THE CENTRAL PACIFIC INCLUDED. By Commissioner ANDERSON : Q. What other company was included in this consolidation in 1870 ? A. I do not remember. Q. Was the Central Pacific itself included ? A. The Central Pacific itself. I am not sure whether the California and Oregon was consoli- dated at that time or at a previous consolidation. There were three different times when the consolidations were made, and we are getting it in consecutive form. Q. I understand you remained secretary to the new company, as you had been to the old ? A. Yes, sir. PREVIOUS CONSOLIDATIONS. Q. How many consolidations were there ? A. The consolidations as they appear were several before these roads were consolidated with the Central Pacific of California, Several of them had had previous con- solidations with other roads. I cannot give it to you in consecutive form without getting a statement I need for that purpose. Commissioner ANDERSON. As I understand the method pursued, the several roads, consisting themselves of minor parts, had a species of integration among themselves, and then the whole was integrated into the Central Pacific Railway, about 1870. The WITNESS. Yes, sir. Q. And you do not remember how many of these consolidations took place? A. Yes, sir; I can remember how many, but I cannot give you the dates, I can name all the companies that were cousolidateci. EDWARD H. MILLER, JR. 2335 ARTICLES OF CONSOLIDATION. Q. Was the process of consolidation always by entering into articles of consolidation? A. I think so ; but as to some of the roads that had been consolidated previous to their coming into the consolidation with the Central Pacific, I do not know how they were consolidated with one another. Q. Of the records of these consolidations, what have you on hand ? A. I have the minutes of the Central Pacific Railroad Company (and possibly of some of the other companies that were consolidated), which show the dates and facts of the consolidation. Q. Have you the articles of consolidation ? A. Yes, sir. Q. Of the Central Pacific alone, or of some of these others also ? A. I think I have of some of the others, but I certainly have those of the consolidation of the Central Pacific. Q. Will you please produce for our information all the articles of con- solidation i A. Yes, sir. OFFICERS OF THE CENTRAL PACIFIC. Q. As to the present organization of the Central Pacific, who is the president ? A. Leland Stanford. Q. He resides here in San Francisco ? A. San Francisco. Q. Please state the other officers by name, or at least the principal officers ? A. Leland Stanford is the president, and C. P. Huntington is first vice-president. Q. Mr. Huntington residing in New York? A. Residing in New York. Charles Crocker is second vice-president. Q. Mr. Crocker also residing in New York? A. Residing in New York. Q. And he is now in Europe? A. Yes, sir. Q. Do you know when he will return ? A. I do not. Q. Can you ascertain for us ? A. I do not know how I can. Q. Can you tell us where we can have his deposition taken abroad, if desired? A. I do not know where he is in Europe. I can ascertain, probably. Q. Mr. Charles F. Crocker is his son, is he not ? A. Yes, sir. I can ascertain from him, probably. Q. What other officers are there ? A. Charles F. Crocker, third vice- president. Q. Is that Colonel Crocker ? A. Yes, sir. Q. Is he residing here? A. Residing in San Francisco. Q. Who else? A. E. H. Miller, jr., is secretary. Timothy Hopkins is treasurer. By the CHAIRMAN : Q. Where does he reside ? A. In San Francisco. By Commissioner ANDERSON : Q. Who is your land agent ? A. William H. Mills. Q. He is also residing here ? A. Yes, sir ; also residing in San Fran- cisco. RAILROAD COUNSEL. Q. Who are your present counsel? A. Col. Creed Haymond and Judge Harvey S. Brown. Q. Does Mr. Haymond reside here in San Francisco? A. Yes; in San Francisco. 2336 U. S. PACIFIC RAILWAY COMMISSION. Q. Where does Judge Brown reside ? A. He resides in Oakland. Judge L. D. McKisick is another. Q. Residing where ?- A. In San Francisco. John Foulds, residing in tSan Francisco. Q. What counsel have you in New York ? A. Charles H. Tweed. Q. Have you any other counsel elsewhere? A. No other counsel reg- ularly employed. ITS WASHINGTON COUNSEL. Q. Have you permanent counsel in Washington now? A. I do not think there is any one in Washington exclusively employed by the com- pany. When I say permanently employed I mean employed exclusively in the business of the company, to give their exclusive attention to the business of the company. Commissioner ANDERSON. You may give us the name of your Wash- ington occasional counsel, if there be one. The WITNESS. Henry Beard, I think it is. Q. Has he succeeded Mr. Sherrill and Judge Franchot ? A. No, sir. Q. In what respect does his employment differ from that of others ? A. His employment has been to look after the accounts of the company a great deal and to attend to general business. Q. That is, the adjustments between this company and the Commis- sioner of Railroads ? A. The Government ; yes, sir. THE BOARD OF DIRECTORS. Q. Of how many members does your board consist ? A. Seven. Q. Will you please give us their names as the board is constituted to-day? A. Leland Stanford, C. P. Huntington, Chas. Crocker, Chas. F. Crocker, W. Y. Huntington, Timothy JHopkins, and E. H. Miller, jr. Q. W. V. Huutington is what relation to C. P. Huntington? A. Nephew. Q. Where does he reside ? A. San Francisco. Q. Has your board always consisted of seven ? A. I am not sure. I have an impression that at one time it was five, but it was a long time ago. I do not recollect. The report of 1872, I think, will show that it consisted of seven. Q It has ever since 1872 consisted of seven? Do you remember whether there was any change prior to that ? A. I do not remember distinctly, but I am now inclined to think that there was never any change ; that it was always seven. COURSE OF CONSTRUCTION. Q. Will you please state the course of construction of this road in point of time ? The WITNESS. From the aided line ? Commissioner ANDERSON. In point of time ; yes, sir. A. I cannot do that without referring to some papers documents. Q. Will you state which portion was first constructed ? A. The line from Sacramento to Ogden was completed May 9, 1869. Q. But was that from Sacramento to San Jose constructed before the railroad east of Sacramento ? A. No, sir. Q. How far had the railroad east of Sacramento progressed when the line between Sacramento and San Jose was completed ? A. To Ogden* The line from Sacramento to Ogden was completed first. EDWARD H. MILLER, JR. 2337 Q. Before the road from Sacramento to San Jos6 ? A. Yes, sir. Q. Was any part of that road which lies southwest of Sacramento completed before the railroad east of Sacramento was completed ? A. Yes, sir. Q. Between what points! A. Between San Jos< and Mies. Q. Was it after the act of 1862 had been passed I A. Yes, sir. Q. How many miles is it from Sacramento to Mies ? The WITNESS. Allow me to refer to papers. The CHAIRMAN. Certainly. Eefer to anything that will give you the information. Commissioner ANDERSON. You will find it on page 5 of the report of 1872. The WITNESS. This gives only the total from San Francisco. By Commissioner ANDERSON : Q. I will put this map in evidence. Please examine the map now- shown you, and state whether the names of the roads and their lengths are correctly given ? The CHAIRMAN. You will find here, on this map, the consolidations, with the distances of the different roads given. The WITNESS. Yes, sir ; it is correct at the time of its date, May, 1878, but there may have been some little changes in the lengths of the lines since, although I do not see how there could be. The Southern Pacific Bail way Company has extended its line since the date of this map. Q. Your answer merely shows that it is correct at the time ? A. Yes, sir. THE WESTERN PACIFIC. Q. What is the corporate name of this railway constructed from Sac- ramento to Mies? The WITNESS. What is it now? Commissioner ANDERSON. What was it at the time ? The WITNESS. The Western Pacific Eailroad Company. Q. Which was built first that portion of the Western Eailroad Com- pany from Mies to San Jos6 or the portion from Niles to San Francisco ? A. The portion from Mies to San Jose, is my recollection. It was built before the portion between Mies and Oakland. Q. Was the portion between Mies and Oakland constructed before the consolidation of 1870 ? A. Yes, sir. Q. So that when the consolidation of 1870 took place the Western Pacific Eailway Company was substantially completed from Sacra- mento to San Jos6 and to Oakland, was it not ? A. Yes, sir. THE SAN FRANCISCO BAY RAILROAD. Q. What was the name of the company from Oakland to Mies 1 A. The San Francisco Bay Eailroad Company. Q. That was consolidated into the Western Pacific then, was it not ? A. No, sir ; that was consolidated into the Central Pacific. Q. Was that in 1870 u ? Was there more than one consolidation to which the Central Pacific was a party f A. Yes, sir. COMMENCEMENT OF CONSTRUCTION OF CENTRAL PACIFIC FROM SAC- RAMENTO. Q. When was the construction of the Central Pacific from Sacra- mento commenced! I do not refer to the day of the month, but with reference to the acts of Congress. 2338 U. S. PACIFIC RAILWAY COMMISSION. The WITNESS. Do you mean what year! Commissioner ANDERSON. The first act of Congress was passed in 1862. How soon after that was it that construction was commenced on the Central Pacific east of Sacramento? The WITNESS. The first actual work done on the construction was January 1, 1863, 1 think. Q. That was east of Sacramento ? A. At Sacramento. Q. And going east? A. Starting east ; yes, sir. METHOD OF CONSTRUCTION. Q. Under whose direction were the first contracts ? A. The board of directors. Q. How was it done, I mean. Was it a large contract for the whole railroad, or was it let out in small sections under specific contractors at first? A. The first contracts I think were in small sections, consid- ering 18 miles to be a small section, and then in subsections or other sections of from 2 to 4 or 5 miles. CONTRACT OF CHARLES CROCKER & COMPANY. Q. Who took the first large contract for any portion of the work ? A. Charles Crocker & Co. Q. Is that the same Charles Crocker who is now second vice-presi- deut ? A. Yes, sir. Q. Was he at the time a director in the company ? A. Not at the time he took the contract. Q. Who were the directors at the time he took the contract f A. I will have to look. Q. Will your book of minutes show ? A. Yes, sir. Q. Does your company keep a book of contracts ? A. No, sir. Q. What disposition do you make of contracts? A. We file them in the office. Q. Between what parties was this contract, the Central Pacific and Charles Crocker & Co ? A. Yes, sir. Q. Who were the members of the compauy besides Mr. Crocker ? A. I do not know. ITS TERMS. Q. Do you remember for how many miles this contract extended? A. I think it covered the first 18 miles from Sacramento. Q. Do you remember the rate per mile ? A. I do not. Q. Do you remember how frequently that contract was modified? A. I do not remember that it was ever modified ; it possibly was, but I do not remember it. Q. You remember nothing about the terms of that co n tract, or what do you remember about the terms ? A. 1 do not think the contract was specific per mile ; my recollection is that the contract was not specific, so much per mile, but that it was so much in the aggregate for the 18 miles, or else there were specifications which had prices fixed for grad- ing and other work, masonry, bridges, &c. I cannot remember dis- tinctly which it was. CUSTODY OF THE CONTRACT. Q. In whose custody was that contract ? A. In mine. Q. Has it always remained in your custody? A. No, sir. Q. In whose custody did it pass ? A. I do not know. EDWARD H. MILLER, JR. 2339 Commissioner ANDERSON. If it were in your custody you must have delivered it to some one. The WITNESS. I did not. Q. Where did you keep it? A. In a vault, or in the safe, at Sacra- mento. Q. When did you last see it ? A. That I cannot tell you ; a great many years ago. Q. More than ten years ago ? ^A. I cannot specifically say whether it was more than that, but it was more than seven. Q. How many copies were there ? A. But one that I remember. Q. Did not the contractors have one ? A. Yes, sir ; doubtless they did, but I do not remember. Q. Were there two copies? A. I do not remember. Q. Do you remember in whose handwriting it was ? A. No, sir. Q. Do you remember how many pages it covered ? A. No, sir. Q. You do not remember how many pages it covered ? A. No, sir. NOT ENTERED IN FULL ON MINUTES. By Commissioner LITTLER : Q. Was the contract entered on the minutes of the company ? A. Not in full, I think. By Commissioner ANDERSON : Q. Can you give us no further information as to its terms than you have heretofore given ? A. Not until I make an examination of the minutes ; there may be something in the minutes. Commissioner ANDERSON. We will ask you to do so. CONTRACT MISSING. By the CHAIRMAN : Q. Where is the contract now ? A. I do not know. Q. You do not know because you have not examined the safe for a number of years ? A. No ; I do not know because I have examined the safe and I cannot find it. Q. When did you make the last examination ? A. Within a few days. Q. When did you make an examination prior to that time ? A. I had made no special examination for the contract prior to that time. Q. Within a few days did you make a thorough examination f A. Yes, sir 5 it was called for by the general accountant of the Commission. NO MEANS OF ASCERTAINING ITS WHEREABOUTS. By Commissioner ANDERSON : Q. Has not this contract been called for in four or five litigations within the last four or five years ? A. I do not remember that it has, but I have no doubt that it has. Q. Was it not called for in the Colton suit ? A. I do not remember that it was. Q. Was it called for in the Stewart suit ? A. I do not remember. Q. Was it not called for in the Hopkins's accounting ? A. I do not remember. Q. Do you not remember, as a matter of fact, making several searches for it ? A. I do not remember, as a matter of fact, although I doubtless did. 2340 U. S. PACIFIC EAILWAY COMMISSION. Q Do you not remember talking with different persons as to this contract and its whereabouts ? A. No, sir. Q. Have you not talked with Governor Stanford as to its where- abouts? A. No, sir. Q. Have you not talked with Mr. Huntington as to its where- abouts'? A. No, sir. Q. Have you not talked with Mr. Charles Crocker as to its where- abouts'? A. No, sir. Q. Had you not, before Mr. Hopkins's death, talked to him as to its whereabouts'? A. No, sir. Q. And you declare positively and in good faith that you have no means of ascertaining anything as to the disposition made of this paper ? A. I do. Q. Have you any suspicion as to what has been done with it? A. No, sir. Q. Have you any idea as to what has been done with it I A. I have not. By Commissioner LITTLER : Q. Was anybody interested in its destruction? A. I do not know that there was. PAPERS MISSING OWING TO FREQUENT USE IN SUITS. By the CHAIRMAN : Q. Were you in the habit of missing papers from your vault? A. Yes, sir. Q. Did you miss other papers? A. Yes, sir. Q. How many other papers ? A. A great many. Q. What kind of papers? A. Papers that were taken in any lawsuit and given to the lawyers given to our lawyers or to the other lawyers. It became of very frequent occurrence that they never caine back. By Commissioner ANDERSON : Q. Did you give up such papers as these without taking a receipt for them ? A. Yes, sir, I did ; but we do not do it any more. Q. Who gave up the papers without taking a receipt for them ? A. I do not say anybody gave any specific papers up, but I mean those papers that went to court in lawsuits. We became very much annoyed in one case, the Winchester case. The same question was asked me if papers had been missing frequently, and I said "yes." The result of the examination brought out just what I am now saying, that probably they were in court or h,ad been taken to court. A gentleman who was pres- ent went to court, and among its files found the very document they were asking for. Commissioner ANDERSON. Somebody, on behalf of your company, must be in the habit of parting with these papers. The WITNESS. I myself do that. Q. You do not mean to say anybody could go in and get them, do you ? A. I was myself in the habit of giving them to our lawyers with- out taking receipts. Q. Who was the lawyer you gave such papers to ? A. Any one of our lawyers. PERSONS HAVING ACCESS TO VAULTS CONTAINING PAPERS. Q. Who had access to your vault and safe ? A. No one but clerks in our office and myself. EDWARD H. MILLER, JR. 2341 Q. Had the clerks unlimited access, except under your supervision ? A. They had unlimited access, to go in and out when they chose. Q. Had they any interest in taking these papers and losing them, or delivering them to any one without your knowledge or without confer- ring with you ? The WITNESS. Do you mean these contracts ? Commissioner ANDERSON. Yes. The WITNESS. No, sir ; not that I know of. Q. Had Governor Stanford access to your vaults ? A. I do not think he was ever in them. Q. Could he go there if he wanted to ? A. Certainly ; if he under- took to go there I should never attempt to prevent him. Q. And the safe was open all day long ? A. Yes, sir. Q. Who were these attorneys to whom you parted with these pa- pers ? A. They were the various attorneys of the company for all the time. COUNSEL EMPLOYED AT TIMES PAPERS WERE MISSED. Q. Give the names of those who were attorneys at the time you missed the papers ? A. Robert Kobinson. I cannot specify any particular time. Q. Give the names of all the attorneys, and their residence ? A. E. B. Crocker. Q. He is dead, is he not? A. Yes, sir. Kobert Eobinson, S. W. Sanderson. Q. Is he dead ? A. Yes, sir. Judge Eamage. His first name I do not remember. By the CHAIRMAN : Q. State if he is living, and where ? A. I do not know. He was a resident of Sacramento. I think he is dead, but I do not know. I can- not think of all of them. Commissioner ANDERSON. To limit this set of names, I think you stated you had seen this contract within seven years ? The WITNESS. No, sir. WHEN CONTRACT WAS LAST SEEN. Q. When did you last see it ? A. I do not remember. Commissioner ANDERSON. You know you saw it twenty-five years ago? The WITNESS. Yes, sir. Q. Can you come down from that date and say when you last saw it? A. It is very difficult to do that. I do not know that I have seen it within fifteen years. Q. Do you know that you did see it as far back as 1879, before the consolidation ? A. I saw it when it was made. Q. That was in what year ? A. That was in 1863 or 18G4. Q. Did you not see it frequently after it was made ? A. I probably did, during the time of the construction of the 18 miles. Q. How long did that last ? A. A little over a year, I think. Q. After it was completed do you not know that you frequently saw that contract, with other contracts, in your safe ? A. I cannot remem- ber that I did. I will say, doubtless I did but I do not remember hav- ing seen it. 2342 U. S. PACIFIC RAILWAY COMMISSION. Q. Do you remember the fact that the first time you \vere asked to look for it you found it had disappeared ? A. I do not remember that fact. Q. Do you not remember looking for that contract in the Colton case f A. No, sir. Q. Do you not remember being examined as to this contract and other papers in the Colton case ? A. I do not remember that I was exam- ined as to this contract. I was examined, of course, as to papers. Q. Do you not remember the fact that you were examined at great length in the Colton case ? A. Yes, sir. Q. Who else was examined on behalf of your company in regard to the custody of these papers ? A. I do not know that anybody was. OTHER CONTRACTS. Q. What was the next contract made after the 18 miles that you have referred to? A. There were contracts made with Cyrus Collins & Bros. ; C. D. Bates & Co., I think ; S. T. Smith ; and, I think, there was another, but I do not remember the name. Q. These were all small contracts, were they not f A. All small con- tracts ; yes, sir. Q. Were these contracts in your custody ? A. They were ; yes, sir. Q. What has become of them $ A. There is one of them I found the other day. [Producing it,] Q. Where did you find it"? A. I found it in the vault. Q. Just alone by itself, without companions ? A. Without any com- panions of that nature. CONTENTS OF THE BOX OF CONTRACTS. Q. Was it by itself or was it mingled with other papers that it did not pertain to ? A. No; it was in the box of contracts, or that which I call a box. Q. In a box of contracts ? A. In a file of contracts. Q. What other contracts did you find with the Cyrus Collins I A. I do not remember which one I found. Q. What other contracts did you find with the contract you did find ? A. I cannot specify, because I was not looking for any but the con- tracts for building, but there was quite a package. Q. Were they construction contracts ? A. No, sir. Q. Were they contracts that belonged to the Central Pacific Com- pany ? A. Yes, sir. Q. Were they of the same date as the one you have found, or were they more recent contracts ? A. No ; they were of all dates. Q. Were some of them as old as the one you discovered ? A. I think not. Yes ; about the same date. Contracts for iron, &c. Q. When did you make this discovery ? A. Within the last week, or within the last two weeks. Q. Did you go over any of those papers yourself personally ? A. Yes, sir. Q. All the papers in that box ? A. Yes, sir ; all the papers in that box. Q. Did you find any other contracts relating to the construction of this road f A. I did not. Q. You say you do not remember the name of the contractor as to the contract you found ? A. No, sir ; I do not remember which one it was. EDWARD H. MILLER, JR. 2343 Q. It was one of these small contracts ? A. Yes, sir. Q. As to all the others you have no information to give us I A. 1 have not. TIME NEEDED TO THOROUGHLY EXAMINE THE VAULT. By the CHAIRMAN : Q. Have you made such examination of the vault as to swear now that the missing contracts are not in the vault ? A. I could not posi- tively swear that, because the vault contains so many papers; but I can swear to the best of my knowledge and belief it is not there. Q. Will you make such an examination as to be able to swear posi- tively to this Commission that the missing contracts are not in the vault ? A. I will if you will give me a year. It will take at least a year to do that. By Commissioner ANDERSON : Q. Why "? A. The vault contains an immense number of papers, and we would have to go through every box and every paper to be able to swear it was not there. The CHAIRMAN. We will give you all the assistance needed by de- tailing men to aid in going over the contracts, if you will give us access to the vault and to the old contracts. The WITNESS. I have no objections to that. Commissioner ANDERSON. I suppose you refer us to the president in answer to that ; but we want to be perfectly satisfied that those papers are thoroughly examined. The WITNESS. You ask me to swear to something that I cannot swear to. If you ask me to swear that it was not in this room, I could not swear to it. POSITIVE CROCKER CONTRACT IS NOT IN THE VAULT. The CHAIRMAN. We want to know that when you swear that the missing contracts are not in the vault you swear with positive infor- mation to that effect, having made such an examination as to enable you to do so. The WITNESS. I have made such an examination that I am willing to state positively that it is not in that vault. Commissioner ANDERSON. That conclusion may be reached in two ways: one, by having searched the vault, and the other by having information as to where the contracts may be. The WITNESS. I tell you I have no information. By Commissioner ANDERSON : Q. Have you no direct or indirect information I A. No direct or in- direct information. THE NEXT LARGE CONTRACT WITH CROCKER. Q. What was the next large contract made after these small contracts you have referred to? A. The next contract, I think, was made with Charles Crocker & Co. (calling the sections about a mile each, although they were not exactly a mile), for sections from section 31 east. I do not remember how many miles. Q. Was it to Camp 24 that it went ? A. I am not sure of that. Camp 24 was named, I think ? but it is indistinct in my mind, 2344 U. S. PACIFIC RAILWAY COMMISSION. Q. How many miles was it ? A. I cannot remember specifically how many miles, but my impression is to about section 58. That would be about 25 miles. I am not positive about that, however. Q. When was that contract made ? A. I do not remember. Q, Was the second Crocker contract made after the completion of these small pieces 9 A. I think the second contract was made before they were entirely completed. They went on with the work beyond section 31. Q. Was this firm of Charles Crocker & Co. the same firm that had taken the prior contract ? A. So far as Charles Crocker was concerned it was. As to the company, I do not know. Q. You do not know anything about that ? A. No, sir. Q. Was there any company? A. Not that I know of. I do not know. Q. Charles Crocker was the only person you dealt with ? A. The only person I know. WHO COMPOSED THE BOARD OF DIRECTORS. Q. Who negotiated that contract ? A. The board of directors made it. Whether the negotiation was referred previously to any committee or not I do not remember. In some cases it was. Q. Who composed the board of directors at the time the Crocker con- tract No. 2 was made ? A. I will have to look to ascertain that. Q. Perhaps you had better look. You can ascertain that in a mo- ment, can you not I A. I can, by going into the office. I can bring the list of directors from the commencement. Commissioner ANDERSON. We would like to have that. Also bring the contract you found in the vault The Last Rose of Summer. The WITNESS (after returning). I can state now that the directors were nine instead of five for a certain time, if you care for that. Q. Will you give their names in 1864, 1865, and 1866 f A. In 1864, Leland Stanford, C. P. Huntington, Mark Hopkins, A. P. Stanford, E. H. Miller, jr., Chas. Marsh, arid E. B. Crocker. Those were elected Octo- ber 8, 1864. If you want those in office during 1864 I will have to go back. Commissioner ANDERSON. Give us those in office during 1864. The WITNESS. Elected July 14, 1863: Leland Stanford, C. P. Hunt- ington, Mark Hopkins, A. P. Stanford, James Bailey, T. D. Judah, Chas. Marsh, D. W. Strong, L. A. Booth, and John F. Morse. E. B. CROCKER. Q. What relation is E. B. Crocker, who appears in the year 1864, to Chas. Crocker 1 A. Brother. Q. What were their business relations ? A. They had no business relations together. One was a lawyer and one had been a merchant. Q. Was E. B. Crocker the lawyer 9 A. Yes, sir. Q. Did not Mr. Chas. Crocker become his assignee subsequently ! A. Yes, sir ; some time subsequently, though. Q. Did you not know enough of their relations to say whether they had business relations together or not? A I never knew that they had. Q. You say this second contract was made before the completion of the first con tract f A. I did not say that positively, but I think so. SECOND CROCKER CONTRACT ALSO MISSING. Q. Have you looked for that contract No. 2 ? A. Yes, sir. Q. When did you look for that contract 1 A. The same time I looked for the other one, two weeks ago. EDWARD H. MILLER, JR. 2345 Q. Have you not also looked for that contract on other occasions ? A I presume I have ; I do not remember. Q. When I asked you a few moments ago whether you had any suspi- cions as to who had removed these contracts you hesitated. Please tell me, did the name of any person occur to your mind at that time I A. No, sir ; I hesitated simply Q. (Interposing.) Wait a moment. Did anybody's name present it- self to you at that time ? A. No, sir. Q. You thought of no one ? A. I did not. I will explain that now. Commissioner ANDERSON. You may do so now. The WITNESS. I hesitated for the reason that I thought it was a proper question for me to decline to answer. That was the only cause for hesi- tation. By the "CHAIRMAN: Q. Did you ever talk to anybody about the missing contract ? A. A. No, sir ; except to Mr. Richard F. Stevens, your general accountant. Q. Prior to that time did it occur to you that it was an unbusiness like method to have contracts on so important a matter as the construc- tion of the road missing ! A. No, sir ; I do not think it was. Q. Did it make any impression on you at all ? A. You are getting by inference a statement that I have not made. STATEMENT AS TO MISSING CONTRACTS. Q. What is the statement that you have made"? A. The statement I have made is that I found the contracts missing within the last two weeks, and that I do not remember ever having searched for them be- fore. Q. When you discovered within the last two weeks that the contracts were missing did you discuss the question with anybody then? A. No, sir. Q. Did you not think it important to report it to your superior officers at that time ? A. I did not. Q. Do I understand you to swear that that was the first indication, two weeks ago, that you had that those contracts were missing ? A. I do not swear to anything of the sort. I do swear that I do not remem- ber ever having looked for them before, or ever having known that they were missing. Q. Why do you hesitate to swear that you had not information prior to two weeks ago that the contracts were missing ? A. Because I do not remembeir that I had. Q. Do you swear that the contracts were not called for in the Colton case ? A. I do not. I swear that I do not remember that they were. DOES NOT BELIEVE THE PAPERS ARE IN THE VAULT. Q. Then I understand, as you stated before, that you are not prepared to swear now that the contracts are missing ? A. I am prepared to swear that I have made an examination and a search for these contracts in the place where they ought to be, or the place where I supposed where they formerly had been, and that I do not find them, and I do not believe that they are in the vault ; that is, the vault in my office. Q. Are you prepared to swear that the contracts are not in your vault $ A. I believe I have answered that before. Q. I do not think you have, yes or no. I would ask you to answer that question yes or no. A. You know very well, Mr. Chairman, that 2346 U. S. PACIFIC RAILWAY COMMISSION. I cannot possibly answer that question yes or no, after the explanation I have previously made to the same question. The CHAIRMAN. I will repeat my question, and call for an answer. Mr. Stenographer, you will read it to Mr. Miller. The STENOGRAPHER (reading) : " Then I understand, as you stated before, that you are not prepared to swear now that the contracts are missing ? A. I am prepared to swear that I have made an examination and a search for these contracts in the place where they ought to be, or the place where I supposed where they formerly had been, and that I did not find them, and I do not believe they are in my vault; that is, the vault in my office." The WITNESS. Will you repeat the question ? By Commissioner ANDERSON : Q. Are you prepared to swear that the contracts are not in your vault ? Answer yes or no. A. If I understand that question there is nothing to it except whether I am prepared to swear whether the con- tracts are in my vault or not. Is that the way it reads ? Q. Are you prepared to swear that the contracts are not in your vault ? Answer yes or no ? A. No. I suppose I have a right to ex- plain ? The CHAIRMAN. Certainly. The WITNESS. I am not prepared to swear, because there is such a large mass of papers in my vault that I had not recently gone through all those papers. It would take a long time to do so. But I am pre- pared to swear that to the best of my knowledge and belief, after hav- ing examined thoroughly the place where those contracts should be, if they were in the vault, that I think that I said to the best of my knowl- edge and beliefthe contract is not in my vault- TERMS OF SECOND CONTRACT. Q. What do you recollect as to the terms of that second contract? A. The best of my recollection is that that contract was made under certain specifications which required payment to the contractor at a spe- cific price for grading per cubic yard, of all natures, rock work, &c., and for masonry and for iron, &c., furnished, to complete the road. ' I dp not mean the rails, but iron work necessary for bridges, &c., at speci- fied prices. Q. Not including the rails ? A. Not including the rails, I think, but it may have included the rails. HOW PAYABLE. Q. Do you remember whether the amounts payable under that con- tract were payable in dollars or in bonds or in stocks ? A. My recollec- tion is that it was payable, a portion in cash, a portion in bonds, and another portion in stock. Q. Can you give the percentages ? A. I think it was five-eighths cash and three-eighths in bonds and stock. Of that, however, I am not posi- tive. I do not recollect. Q. Do you remember whether the percentages were altered from time to time ? A. My recollection is that the percentages were not altered. Q. Will your minutes show ? A. I do not know whether the minutes will show or not, but the books of the company will show. The accounts will show. EDWARD H. MILLER, JR. 2347 Q. That is to say, the entries in the books of account of the company will show f A. The entries in the books of account of the company will show. METHOD OF KEEPING THE BOOKS. Q. What distinction did you make in the entry of an issue of bonds on these contracts, or a payment of cash f A. I do not quite compre- hend. Q. Did you debit in one case "cash 77 and in the other case u bonds," or what is the distinction made in your books I A. We opened an ac- count with the contractors, crediting them with the work done and charging them with the bonds and cash and stock when paid. Q. In what account will the counter-charges be made, showing from whence the bonds came and from whence the cash came and from whence the stock came ? A. The contractor being charged with cash, the cash would take credit ; and if with bonds, the bonds would be credited ; and if with stock the stock would be credited. CHANGES MADE IN CONTRACT. Q. So that by following the contract down from the inception of that contract to the end, if there were any changes in its terms they will ap- pear in your books ? A. Yes, sir 5 but I think I can explain it. Commissioner ANDERSON. We will take any explanation you can give. The WITNESS. This is the contract as I remember it. The stock was to be issued at 50 cents on the dollar, and there was a change made in the percentage to 30 cents. Q. In the percentage of cash or the percentage of stock ? A. No, sir ; the percentage of cash remained the same. The percentage of bonds, as I recollect it, remained the same. But as to the percentage of stock, the stock was not paid at par. First it was paid at 50 cents on the dollar and afterwards at 30 cents on the dollar. Q. Do you remember the aggregate amount of stock, bonds, and cash which this contract called for ? A. Eo, sir. Q. Can that be ascertained from your books ? A. Yes, sir. THE CONTRACT AND FINANCE COMPANY. Q. What was the next construction contract which this company entered into ? A. As I remember it, the next contract was with a cor- poration called the Contract and Finance Company. Q. When was that company organized ? A. My recollection of dates, especially of those so long ago, is so poor that I cannot give it. I will explain that I do not remember my own age, without counting back to the year I was born. Q. Was it organized shortly before taking this contract? A. Yes, sir. SPECIAL OBJECT OF ITS ORGANIZATION. Commissioner ANDERSON. It was organized especially for the taking of these contracts. I am quoting from Mr. Huntington. The WITNESS. That was its business. Undoubtedly it was. Q. Who were its officers ? A. That I cannot say. I knew at the time, but now I do not recollect. Q. Who were the principal stockholders ? A. I do not know. Q. Who kept the books of the Contract and Finance Company ? A, William E. Brown. P R YOL iv 2 2348 U. S. PACIFIC RAILWAY COMMISSION. Q. Where is lie ? A. He is here. Q. Is he president of the Southern Pacific Company 1 ? A. No, sir. Q. What is his office ? A. He is one of the directors of the Southern Pacific Company at present. Q. Does he reside in San Francisco ? A. His office is here in the building. Q. Is he present now ? A. I presume he is. Q. Can you obtain from him a list of the officers and stockholders of this company at the time it took the contract I refer to ? A. I think I can. Commissioner ANDERSON. We will excuse you for that. We would like to have that list now. The WITNESS (after returning). Mr. Brown does not recollect. He was secretary himself. He recollects that, and can give the names of two other directors, but whether there were mo re than three he cannot say. He will ascertain, however. ITS MEMBERS. Q. Who were the directors he named? A. Wm. E. Brown, T. J. Millikin, and B. K. Crocker. Q. As a matter of fact, were not Mark Hopkins, Leland Stanford, C. P. Huntington, and Chas. Crocker the holders of substantially all the stock of this Contract and Finance Company ? A. Not to my knowledge. Q. Have you not heard them say so in litigations? A. No; I do not think I have. I presume that to be the fact. But that is my presump- tion. Q. Have you not heard them say so 1 A. No, sir ; I never did. Q. Have you not heard them say that Mr. Millikin, Mr. B. F. Crocker, and Mr. William E. Brown were holders of small portions of the stock for the purpose of qualifying them to act as directors ? A. I never heard them say that. Q. You never heard any one say that ? A. I never heard any of them say that. Q. Have you ever heard anybody say that? A. I could only say for myself. That is my presumption. Nobody knew. Q. I will read for you from Mr. Huntington's testimony, taken before us, referring to this Finance Company: "The stock of that company was nearly all held by Governor Stanford, Mr. Hopkins, Mr. Crocker, and myself; there were some few stockholders, but I could not say who." Are you satisfied that that statement is correct ? A. Yes, sir. BOOKS OF THE CONTRACT AND FINANCE COMPANY. Q. Have you ever seen any of the books kept by the Contract and Finance Company ? A. Yes ; I saw them. Q. What books did you ever see ? A. I saw the day-book and ledger, or journal, I suppose; cash-book, day-book, and ledger, probably. Q. When did you see these books ? A. They had an office in the same building with me in Sacramento, and I saw them when I went into their office. Q. At Sacramento ? A. Yes, sir ; I saw them in use by their book- keeper. Q. That was while this contract was under way ? A. Yes, sir. Q. Have you never seen them since ? A. No, sir. EDWAKD H. MILLER, JR. 2349 THAT CONTRACT ALSO MISSING. Q. Where is that contract between the Central Pacific Company and the Contract and Finance Company ? A. That is missing. Q. How many miles did that embrace ? A. It embraced a large por- tion of the road east of the contracts that have been mentioned pre- viously. Q. When did you last see that contract ? A. I do not recollect. Commissioner ANDERSON. That contract embraces, as you say, a large portion of the construction of the Central Pacific ? The WITNESS. Yes, sir. Commissioner ANDERSON. It is a contract of great magnitude and importance. The WITNESS. Yes, sir. Q. You say you never observed that it was missing until within the last few weeks ? A. I do not remember that I ever did. THE COLTON CASE. Q. Do you not remember being examined particularly with reference to all the papers of the Contract and Finance Company in the Colton case ? A. 1 do not remember. Q. Do you not remember being asked if those books were in Lou- don? A. I do not remember that. Q. Or if they had been purposely destroyed ? A. I could not possi- bly know that. Q. I asked you if you remembered being asked that question 1 ? A. No ; I do not remember being asked that. Q. By Mr. Hayes ? A. No, sir. Q. You know Mr. Hayes ? A. Yes, sir. Q. You know he asked you a great many questions in the Colton suit three or four years ago ? A. Yes, sir. Q. Do you not know that it was a question of public talk as to the disappearance of the books of this company, at that time ? A. I say I do not remember. I do not remember anything about it. Q. You do not remember that the subject was discussed in San Fran- cisco at all at the time of the trial of the Colton case ? A. No, sir. Q. Will you swear that you and Governor Stanford did not talk this matter over, of the disappearance of these books, during the trial of the Colton case ? A. I will swear that I do not remember ever having spoken to him about it, or his having spoken to me about it. GOVERNOR STANFORD'S DEPOSITION. Q. Do you not remember Governor Stanford's deposition was taken at great length I A. Yes, sir. Q. Where was he when his deposition was taken ? A. In New York, I think. Q. When he came back here, did you have no conversation with ref- erence to that subject ? A. Not that I remember. Not only that I do not remember, but I do riot think I ever did. I do not believe I ever did. Q. Was no surprise expressed by any of the officers of the company as to the disappearance of such important papers as this contract? A. Not that I remember. Q. Was the subject never brought up in the board of directors when you were present ? A. No, sir. 2350 U. S. PACIFIC RAILWAY COMMISSION. Q. Has no fault ever been found with you for having permitted these papers to disappear ? A. No, sir. TERMS OF CONTRACT AND FINANCE COMPANY CONTRACT. Q. What do you remember about the terms of the contract made with tbe Contract and Finance Company ? A. I do not remember the details of it at all. Commissioner ANDERSON. From Camp 24 to Ogden ? That is, sub- stantially, from the boundary of the State to Ogden, through Nevada and Utah. The WITNESS. Does that say " Camp 24, the boundary of the State"? Commissioner ANDERSON. It was substantially. The WITNESS. Then I misstated the miles. Q. I read to you from Mr. Huntington's testimony. He was asked : Q. What was the subject of their contract? I want to know between what points ? A. It was Camp 24, if I remember right. I am not certain that I ever saw the contract. Q. It was the road substantially after leaving the State of California ? A. Yes, sir. Camp 24 I think is on the State line. It was a contractor's camp, you know, and it was from that point to the point of junction. In other words, the whole of this road in the State of Nevada and Territory of Utah. You can tell us nothing as to the terms of that con- tract ? A. No, sir ; only what appears upon the books of the company now. Q. Do you know whether it was an agreement at so much per mile ? A. I believe it was. Q. Do you know whether the rate per mile was the same throughout the entire length of the road from Camp 24 to Ogdeu, or to Promontory Point ? A. I do not recollect that. Q. Do you know whether the rate per mile was payable in money or in bonds, or whether it was mixed? A. I think it was mixed. Q. Do you know whether the payment included the Government bonds ? A. It did not. Q. Do you know, as a matter of fact, that none of the Government bonds went to the Contract and Finance Company ? A. Yes, sir. Q. They did not? A. They did not. GOVERNMENT BONDS SOLD FOR ACCOUNT CENTRAL PACIFIC. Q. How were the Government bonds disposed of? A. They were sold in New York by Mr. Huntiugton, almost wholly ; possibly a por- tion may have been paid out directly on contracts for locomotives, en- gines, iron, &c. Q. Do you know whether they were sold for account of the Central Pacific Company or on account of tbe Contract and Finance Company? A. They were sold for account of Central Pacific Railroad Company. Q. Do you remember that the price per mile was about $100,000 in the Contract and Finance Company's contract, payable in stocks and bonds ? A. 1 not remember that. I believe that was about the cost, as entered up on the books under that contract. COST PER MILE, IN SECURITIES AT PAR, $100,000. Q. Do you mean, when you say "cost," the amount of stocks and bonds issued at par ? A. The stocks and bonds paid to them. Q. Taken at par it would amount to $100,000? A. Yes, sir. The stocks, bonds, and cash, at par, amounted to about that amount. EDWARD H. MILLER, JR. 235 1 Q. Do you remember that the amount of bonds issued per mile was $64,000? The WITNESS. I do not think I understand your question. The amount of what bonds ? Commissioner ANDERSON. The amount of bonds issued to the Con- tract and Finance Company. The WITNESS. I do not remember that. CHARACTER OF SECURITIES ISSUED TO CONTRACT COMPANY. Q. What bonds were issued to the Contract and Finance Company ? What character of bonds'? A. The company's first-mortgage bonds, if any. Q. Are you positive that any bonds were given to them ? A. No, I am not positive. Q. Will your books show ? A. Yes, sir. Q. And you have never examined them for the purpose of ascertain- ing whether they received any bonds or not ? A. I know, but I do not remember. I know perfectly weil if 1 can look at the books. Q. Do you not know perfectly well that the Contract and Finance Company did get bonds'? A. No, sir; I do not. You are asking posi- tive questions. Commissioner ANDERSON. No, I do not ask positive questions. The WITNESS. Possibly I am technical in my answer, but I do not remember it. The books would show very plainly what they did get. Q. How much of this contract with the Contract and Finance Com- pany is entered in your books of minutes ? A. I do not know that any of it is. THE WESTERN DEVELOPMENT COMPANY. Q. What other large construction contracts has the Central Pacific made? A. They made a contract for constructing the Q. (Interposing.) Well, I will follow my own order. Did it make a contract with the Western Development Company? A. I do not think it did. Q. Was the Western Development Company subsequent in time to the Contract and Finance Company ? A. Yes, sir. WHAT BECAME OF CONTRACT AND FINANCE COMPANY. Q. What became of the Contract and Finance Company? A. It was disincorporated, I think. Q. Was it wound up by judicial proceedings? A. Not that I know of* Q. Where was it last located? A. At San Francisco, I think. Q. In what building? A. This building. Q. In what room? A. Room No. 1, on the first floor, at the side en- trance. Q. When did you last see that room occupied by the Contract and Finance Company ? A. By the book-keeper. Q. When? A. I think in 1874. JOHN F. MILLER. Q. Whom did you see there then? A. John F. Miller. Q. Is he a relation of yours ? A. No, sir. Q. Where does he live? A. He lives somewhere on the Sacramento River, in Sacramento County, I think. 2352 U. S. PACIFIC RAILWAY COMMISSION. Q. Can you identify it a little better than that? A. No, sir ; I really do not know. Q. Who knows him here in this office? A. Almost everybody con- nected with the office. Q. So that we can find him ? Does Mr. Brown know where he can be found ? A. I presume he does. Q. You refer us to him ? A. Yes, sir. By the CHAIRMAN : Q. What is his business now ? A. Farmer. BOOKS AND PAPERS OF THE CONTRACT AND FINANCE COMPANY. By Commissioner ANDERSON : Q. Were the books and papers of the Contract and Finance Company in that room when you saw.it in 1874 ? A. I never saw the books there. Q. You only saw Mr. Miller there ? A. Yes, sir ; I saw him. Q. He had some books, I presume? A. Well, he was connected with some other company Western Development Company I think ; and whether he had any books of the Contract and Finance Company there, I do not know. I never saw them. THE WESTERN DEVELOPMENT COMPANY. By the CHAIRMAN : Q. Who composed the Western Development Company ? A. I do not know. By Commissioner ANDERSON : Q. Who was its president I A. That I do not know. Q. Do you know the names of any of its officers 1 A. F. S. Douty was one of its officers. He was either president or secretary ; I do not know which. Q. Where is Mr. Douty ? A. His office is in this building. Q. What position does he now hold? A. He is president, I think, of the Pacific Improvement Company, or secretary of it. CONTRACT FOR ROAD FROM SACRAMENTO TO NILES. Q. What was the contract with the Western Development Com- pany? A. I do not remember whether the contract for building the Western Pacific Railroad from Sacramento to Niles was with the Pacific Improvement Company or the Western Development Company. Q. It was with one or the other ? A. I think so. Q. When was that contract made ? Was it before the Contract and Finance Company or after ? A. I think it was made very soon after the completion of the Central Pacific road to Ogden. Q. That is, soon after May, 1869 ? A. Yes, sir. THAT CONTRACT ALSO MISSING. Q. Where is that contract ? A. It is missing. Q. Have you looked for that recently ? A. I have looked for all of them. Q. What can you tell us in regard to the terms of that contract? A. My recollection of the terms is very indefinite. Q. Can you refer us to any entries in your books, or the minutes, that will furnish us with the terms of that contract? A. The entries on the I EDWARD H. MILLER, JR. 2353 regular books of the company will show the terms of that contract, but not in detail. I do not think there is anything in the minutes of the company in detail. Q. How long did the Western Development Company continue to work this contract ? The WITNESS. In building that road "? Commissioner ANDERSON. Yes ; from 1869 until when ? The WITNESS. They finished it in about a year. Q. What became of the company ? A. I do not know. OFFICES OF WESTERN DEVELOPMENT COMPANY IN SACRAMENTO. Q. Where was their office ? A. At that time I do not remember the date of the organization of the Western Development Company, but if I am right, their office must have been in Sacramento. Q. Why do you say " must have been 9 " Is it because they were all kept together ? A. Because there were no offices here. Q. Is it not also because the whole business of the Central Pacific was at Sacramento at that time ? A. Because the Western Develop- ment Company, as I understand it, was successor to the Contract and Finance Company, and they held their offices in the same place until we moved from Sacramento to San Francisco, which was in 1873. Q. Do you know who the stockholders of the Western Development Company were ? A. No, sir. Q. Do you not know that they were substantially the same persons who were the stockholders of the Contract and Finance Company ? A. I do not know ; but I presume they were. That is all I can say. Q. You presume they were ? A. I think they were. CONSTRUCTION OF CALIFORNIA AND OREGON BRANCH. Q. What subsequent contract did the Central Pacific make with the Pacific Improvement Company ? A. They made a contract I will not say it was the Pacific Improvement Company, because I am not sure ; but they made a contract with one of the three companies for building the California and Oregon Branch road. Q. It was the Pacific Improvement Company, was it not ? A. Prac- tically the successor. Q. That is, the north part of that road ? A. Yes, sir. Q. From what point; from Bedding to the State line? A. No; Eoseville was the beginning. I think they had a contract for building some portion of the road between Eoseville and Bedding. Q. Did they not have the contract for building the northerly 200 miles of that road ? A. Yes, sir. THE PACIFIC IMPROVEMENT COMPANY. Q. Who was the president of the Pacific Improvement Company ? A. F. S. Douty, I think. Q. When was this contract made ? The WITNESS. The contract for building the northerly 200 miles, you are speaking of ? Commissioner ANDERSON. Yes. The WITNESS. Last year. Q. Was it not longer ago than that f When was that finished ? A. It was just finished. Q. Last year ? A. No, sir. 2354 U. S. PACIFIC RAILWAY COMMISSION. Q. Finished this year ? A. Just finished within a month. Q. Y/ho are the directors of the Pacific Improvement Company f A. I do not know. Q. Can you ascertain ? A. I presume that I can from Mr. Douty. Q. Who are the stockholders ? A. I do not know that. Q. Are they not substantially the same persons who were stockhold- ers in the Contract and Finance and the Western Development Com- panies ? A. I think so. Q. Who keeps their books ? A. F. S. Douty. Commissioner ANDERSON. I think you said he was president. The WITNESS. He keeps the books also. They are in his charge, in one office. Q. Where is the office of that company I A. That is in room No. 3, on the first floor of this building. Q. What other persons are in that room besides Mr. Douty ? A. There is Judge Underbill. Q. What position does he hold f A. He is a lawyer. Q. Is he the lawyer of the Pacific Improvement Company? A. He does and has done considerable business for the Central Pacific Rail- road Company, and now does for the Southern Pacific Company. ITS CONTRACT PRODUCED. Q. Where is this contract with the Pacific Improvement Company ? A. I think I have it. At any rate it is entered in full on the minutes. Recently I have adopted the plan of entering everything in full on the minutes. Commissioner ANDERSON. Please see if you can produce the con- tract. (The witness produced the contract between the Central Pacific Rail- road Company and the Pacific Improvement Company, dated October 11, 1886. It is marked Exhibit No. 2, July 25, 1887," and is as follows :) CONTRACT BETWEEN THE CENTRAL PACIFIC RAILROAD COMPANY AND THE PACIFIC IMPROVEMENT COMPANY. This agreement, made and entered into on the eleventh day of October, 1886, be- tween the Central Pacific Railroad Company, party of the first part, the Pacific Im- provement Company, party of the second part, and the Southern Pacific Company, party of the third part, witnesseth : That whereas the Central Pacific Railroad Company is the successor in interest of the California and Oregon Railroad Company, mentioned in the act of Congress of July 25th, 1886, entitled "An act granting lands to aid in the construction of a rail- road and telegraph line from the Central Pacific Railroad, in California, to Portland, in Oregon ;" and Whereas the said Central Pacific Railroad Company has constructed a portion of the line contemplated by said act of Congress, to wit, that portion between Rose- ville Junction, on the Central Pacific Railroad, and the town of Delta ; and Whereas about one hundred and four miles of the line between Roseville Junction and the southern boundary line of Oregon, as contemplated in said act of Corigress, has not been constructed ; and Whereas the Oregon and. California Railroad Company, charged by said act of Con- gress with the construction of that portion of the said lino of railroad between Portland, in Oregon, and the northern boundary line of California, has been in an embarrassed condition and has been unable to complete its road to said boundary line; and Whereas until the whole of said line is completed, making a through connection between Portland, in Oregon, and the city of San Francisco, in California, no part of said line can be advantageously or profitably operated, nor the act of Congress in re- lation thereto be carried into effect according to the spirit and intent thereof, to wit, the construction and maintenance of a continuous railroad between the said cities, which the Government of the United States may use for the transportation of its EDWA&D H. MILLE&, JK. 2355 property, troops, and munitions of war when necessary, and to aid in the construc- tion of which it has granted quantities of the public lands ; and Whereas the completion by the said Central Pacific Railroad Company of its own road to the southern boundary line of Oregon without assurance of the comple- tion of that portion of the road from Portland to said boundary line would be a waste of money, the road having to be constructed through a rugged and mountainous country at great expense and without sustaining local traffic ; and Whereas it is of the greatest importance to the Central Pacific Eailroad Company that it should have an opening into Oregon, both for local traffic and the through busi- ness of the two cities, and also to furnish business for its entire line from Ogden: Now, therefore, for tho purpose of completing its said road, and of securing the com- pletion of the road between the California State line and Portland, Oreg., thus making a through line between said cities of Portland and San Francisco and a con- nection with the Union Pacific Railroad at Ogden, and in order to secure the business of the northern portion of the State of California and as much as possible of the busi- ness of the State of Oregon, and to bring such business to its line from Ogden, and for the purpose and with the intent of carrying into effect the provisions of said act of Congress, the said Central Pacific Railroad Company hereby convenants and agrees with the said Pacific Improvement Company First. That the said Pacific Improvement Company shall, in a good workmanlike manner, construct, finish, furnish, and complete the railroad and telegraph lino of the said Central Pacific Railroad Company, commencing at a point near the said town of Delta and running thence in a general northerly direction by the most practicable route to a point on the southern boundary line of Oregon, there to connect with the road of the said Oregon and California Company, a distance of 104 miles, as near as may be, together with the rolling-stock, buildings, instruments, and fixtures thereof; that is to say, to construct, finish, and complete all the clearing, grading, excava- tions, embankments, ditches, drains, masonry, culverts, bridges, trestling, and nec- essary fencing, and furnish all the ties, timber, rails, all the chairs, fish-plates, spikes, frogs, and switches, lay and complete all the main line of track and all the side-tracks, spur-tracks, and turnouts necessary, usual, and proper for a single-track railroad; also all necessary and proper buildirgs and erections for stations, freight and pas- senger depots, water-tanks, turn-tables, engine-houses, section-houses, work and re- pair shops, with all the tools, furniture, and implements necessary and proper there- for; also to furnish and place on said railroad all necessary and proper rolling stock, instruments, and equipments, including locomotives, passenger, box, freight, baggage, platform, dump, and hand cars for the proper and successful working and repairing of said railroad and telegraph line, said rolling-stock to be furnished and delivered as the same may be required by the said Central Pacific Railroad Company, not to. exceed the following quantity and proportion, namely: One locomotive for every eight miles of road constracted under the contract ; one passenger car for every five miles of road ; three box and flat cars for every mile of road, the proportion of each to be determined by the said Central Pacific Railroad Company ; one hand car for every six miles of road ; such number of dump cars as may be required for maintain- ing the line; said railroad to be constructed and completed to a point at or near the Klamath River within twelve months from the date hereof, and to the southern boundary line of Oregon as soon as the said Oregon and California Railroad is com- pleted to said line. Second. That the said Pacific Improvement Company shall furnish and pay for all the engineer service necessary or requisite for the location and construction of said railroad and its appurtenances, &uch location and construction to be subject to the approval of the president or chief engineer of said Central Pacific Railroad Com- pany, who may direct such changes to be made as they may deem proper, but the sal- ary of the chief engineer shall be paid by said Central Pacific Railroad Company. Third. That the said Pacific Improvement Company will pay all the costs, dam- ages, and other expenses incurred in obtaining right of way for the construction of said road, and to that end the Central Pacific Railroad Company agrees that it may use the name of the said company in any legal steps found necessary to be taken in securing such right of way. Fourth. That the said Pacific Improvement Company will, within a reasonable time and as soon as it can be done to the best advantage, purchase, obtain possession and control of the said Oregon and California Railroad, or that it will, within a reason- able time, purchase the whole of or a majority of the shares of the capital stock of said Oregon and California Railroad Company, and in either event will within a rea- sonable time complete or cause to be completed the said Oregon and California Rail- road to a connection with the Central Pacific Railroad at a point on the boundary line between California and Oregon, and, as the case may be, will enter into, or will cause the said Oregon and California Railroad Company to enter into, a contract per- petual with the said Central Pacific Railroad Company, its successors or assigns, that the said Oregon and California Railroad shall be operated in harmony with the said 2356 U. S. PACIFIC RAILWAY COMMISSION. Central Pacific Railroad, prorating for services and covenanting therein never to give to any other railroad company any better terms for through traffic and for the inter- change of business than it gives to the Central Pacific Railroad Company, its succes- sors or assigns. Fifth. That the said Pacific Improvement Company shall and will repay to the said Central Pacific Railroad Company, within one hundred and twenty days from the date hereof, all sums of money, with interest thereon at the rate of 6 per cent, per annum, heretofore by the said railroad company expended upon that portion of its aforesaid line of railroad and telegraph line lying north of Delta, and that if said railroad com- pany has not fully paid all the costs and expenses incurred as aforesaid, the said im- provement company will assume the whole thereof, and will, upon demand, pay oif and discharge the same ; or that if the said railroad company is compelled to pay the same or any part thereof, then the said improvement company will, within one hun- dred and twenty days after notice thereof, pay to the said railroad company the full amount of any such payments, with interest at the rate aforesaid. And the said Southern Pacific Company, lessee of the said Central Pacific Railroad Company, hereby covenants and agrees with the other parties to this contract that, in consideration of the advantages to be derived by it from the bringing of business to the main lines of the Central Pacific Railroad, it will, when said through line is com- pleted, finished, and ready for operation, enter into an agreement in writing with the said Central Pacific Railroad Company whereby it shall lease from said company that portion of said line between Roseville Junction and the State line not now in- cluded within its lease, and will increase the consideration of twelve hundred thous- and dollars, guaranteed rental mentioned in the existing lease, as much in proportion as 80,000 shares of the capital stock of said Central Pacific road shall bear to the whole amount of capital stock of said company now issued, and will also increase the limit of the maximum rental of thirty-six hundred thousand dollars therein provid- ed for in like-proportion ; and that it will transport and convey, free of charge, over the lines operated by it in California, north of San Francisco, all agents, laborers, and employe's, and all provisions, tools, iron, and other materials, and all other property employed or used, or to be employed or used, in and about the construction of said railroad and telegraph line and their appurtenances by or for said Pacific Improve- ment Company. And the said Central Pacific Railroad Company hereby covenants and agrees to and with the said Pacific Improvement Company that, in consideration of the premises and of the faithful performance of the covenants herein contained to be kept, observed, and performed by said Pacific Improvement Company, it will, upon the execution of this agreement, issue and deliver to said company eighty thousand shares of its capital stock, and in addition thereto it will pay to said Pacific Improvement Com- pany four million five hundred thousand dollars in mortgage bonds, as follows : When one-half of the work on said road between Delta and the Oregon line is completed, it will pay and deliver to said Pacific Improvement Company all of its first-mortgage bonds now unissued, part of an issue by it heretofore provided for, to be used toward the construction of its railroad between Roseville Junction and said Oregon line, and that it will pay to said Pacific Improvement Company the balance of said four million five hundred thousand dollars of bonds, in its mortgage bonds, part of an issue by it provided for in an indenture of mortgage by it made to William E. Brown and Frank S. Douty, bearing date October 1, 1886, and that it will make said last-mentioned payment as the work on said road progresses, and as sections of not less than ten miles between Delta and the Oregon State line are completed, and in the proportion which the completed section shall bear to the whole length of the road between the points last aforesaid : In testimony whereof the parties hereunto have caused these presents to be signed by their respective presidents and secretaries and their corporate seals to be hereunto affixed. Done in triplicate the day and year first herein written. LELAND STANFORD, President of the Central Pacific Railroad Company. [SEAL.] E. H. MILLER, JR., Secretary of the Central Pacific Eailroad Company. LELAND STANFORD, President of the Southern Pacific Company. [SEAL.] E. H. MILLER, JR., Secretary of the Southern Pacific Company. J. H. STROBRIDGE, President of the Pacific Improvement Company. [SEAL.] F. S. DOUTY, Secretary of the Pacific Improvement Company. (Indorsed on back :) Executed copy agreement between Central Pacific, Pacific Im- provement Company, and Southern Pacific Company. Pacific Improvement Company to finish construction of California and Oregon Extension. October 11, 1886. " Exhibit No. 2, July 25, 1887." EDWARD H. MILLER, JR. 2357 The WITNESS. I can furnish you with the printed copy of that, cer- tified, if you wish it. By Commissioner ANDERSON : Q. We were so rejoiced to get hold of a copy of any paper that we thought we would have it copied. Haveyou enumerated all the construc- tion contracts that you recall? A. Yes, sir. Q. They, then, represent substantially all the contracts under which the aided portion of the Central Pacific was constructed ? A. Yes, sir ; more than that. Commissioner ANDERSON. That is, the Crocker contract, the Con- tract and Finance Company contract, the Western Development Com- pany contract, and the Pacific Improvement Company contract. The WITNESS. Yes, sir. Commissioner LITTLER. As I understand, the contract you found was a subcontract between Crocker and somebody else, who built a few miles of the road. The WITNESS. No, sir ; you are referring now to one of the original contracts'? Commissioner LITTLER. Yes. The WITNESS. I found one of the original contracts for 2 miles. By Commissioner LITTLER : Q. Where is that? A. I think Mr. Stevens has it. I will send forit. REPORTS MADE BY STANFORD, HUNTINGTON, HOPKINS, AND CROCKER. By Commissioner ANDERSON : Q. Were Mr. Huntington, Governor Stanford, Mr. Crocker, and Mr. Hopkins in the ha,bit of making reports to the company, from time to time, of the transactions effected by them in their respective depart- ments? A. I do not think Mr. Hopkins ever made a report. Yes, sir; he did, too, as treasurer ; yes, sir ; they all did. Q. Where are those reports? A. I have them, I think. Q. How frequently were they made? A. Mr. Huntington's were made in the form of a statement of accounts practically monthly. Q. Have you all of these in your possession ? A. Yes, sir. Q. Will you please produce them at the convenience of the Commis- sion f A. Yes, sir ; I will do so. I beg to say that Mr. Stevens is using them right along, however. Q. Mr. Stevens has access to them? A. He has as he calls for them. Q. Do you mean to say^that Mr. Huntington has made monthly re- ports always ? A. Practically, monthly, yes, sir, except for the very first year or two. Q. In the shape of statements of accounts ? A. Since 1865, as state- ment of accounts, monthly. Q. What subject did Governor Stanford report on ? A. Governor Stanford did not make any report or statement of account. Governor Stanford's habit was, when he was in San Francisco, to draw his checks for anything and everything from his private account at the bank. When at Sacramento he handed me his check book, and from that I made up a statement of account, which I call his report. Q. Explaining the application of these moneys ? A. Yes, sir. Q. What was the subject of Mr. Crocker's reports f A. I do not re- member that Mr. Crocker ever made a report. Q. What was the subject of Mr. Hopkins's reports ? A. The business of the treasurer. 2358 U. S. PACIFIC RAILWAY COMMISSION PUECHASE OF SAN FRANCISCO AND SACRAMENTO STEAMERS. Q. Do you recollect the fact that the Central Pacific made a purchase of the steamers plying between San Francisco and Sacramento, I think it was ?- A. Yes, sir. Q. Was that purchase made by a contract ? A. No, sir ; I do not think it was. Q. How was it effected ? A. I think the negotiation was carried on by Governor Stanford. Q. And Mr. Huntington ? A. I do not think Mr. Huntington was here at the time, but I presume he knew all about it, and was a part of it, probably, but I do not think there was any written contract. Q. Do you know how the price was negotiated ? A. No, sir ; I do not. Q. Do you know whether Mr. Stanford and Mr. Huntington were inter- ested in those steamers before the Central Pacific acquired them ? A. I have never understood that they were. OWNED BY THE CALIFORNIA PACIFIC. Q. Do you know whether they w^ere interested I mean Mr. Hunting- ton and Governor Stanford in the stock of the corporation which owned these steamers'? That was the California Pacific Eailroad Com- pany, I think. A. Yes, sir ; I believe so. Q. The California Pacific, it was called ? A. Yes, sir. Q. They were stockholders? A. m Yes, sir. THE MINUTES WILL SHOW THE PRICE PAID. Q. Do the minutes of this company show how the price to be paid for these steamers was determined ? The WITNESS. The minutes of the Central Pacific ? Commissioner ANDERSON. Yes. The WITNESS. Is that Mr. Huntington's testimony. Commissioner ANDERSON. Yes $ Mr. Huntington's testimony. The WITNESS. The minutes may show that. The minutes possibly show the price that was to be paid ; bat how that price was determined is more than I think is in the minutes. Q. Could it be determined in any way except by a vote of the direct- ors f The WITNESS. I beg pardon ; I had an idea that you meant how the actual amount to be paid was determined the negotiations. Commissioner ANDERSON. That is tf hat I mean. Whether they were to pay $1,000,000 or $2,000,000 or $100,000 ? A. Yes, sir. I misappre- hended the question. Q. What is your answer? A. Yes, sir. The minutes of the books will show it. The books of the company show the amount they paid. Q. Do you know who was present and voted as to whether the price should be approved or not? A. !Nb, sir; I do not remember that. Q. Do you know whether Mr. Huntingtou voted in favor of paying the price ? A. I do not remember. Q. Or whether Governor Stanford did ? A. I do not remember. It is easily ascertained. Q. The minutes will show ? A. Yes, sir. That is, if it appears, the minutes would show it. Q. Do you know the price that was paid ? A. No, sir ; I do not re- member exactly. EDWARD H. MILLER, JR. 2359 PURCHASES OF OFFICERS SUBSEQUENTLY RATIFIED BY BOARD. Q. Do you know whether the officers of the Central Pacific were in the habit of making such purchases without any vote of the board of directors, and of their own motion ? A. I think they frequently made purchases to that extent, which were ratified by the board of directors afterward, or assumed to be ratified. Q. Of properties where they were stockholders in the selling com- pany? A. No. Commissioner ANDERSON. That is this case. The WITNESS. Yes, sir ; that is this case ; but I did not gather that from the form of your question. For instance, Mr. Huntington pur- chases and has purchased from time to time large amounts of iron with- out any action of the board of directors. Q. And procured its ratification subsequently? A. No, sir; nevei procured any ratification. Q. Simply did -the business of his own accord ? A. Yes, sir. Q. To very large amounts ? A. Very large amounts. HUNTINGDON HAD FULL POWERS OF ATTORNEY. Q. Who would then fix the price at which the iron was to be sold or paid for? A. Mr. Huntiugton, I will add to that, however, that Mr. Huntington had full power of attorney. Q. From whom? A. From the company. Q. Approved by the board ? A. Yes, sir ; adopted by the board. By the CHAIRMAN : Q. Did the company keep a copy of the power of attorney ? A. Yes, 'r. Q. Have you a copy of it ? A. It is entered in the minutes. I pre- sume I have a copy. I have the original, I presume. I have no doubt I have. Q. Will you produce the original ? A. Yes, sir. BOOKS KEPT BY THE CENTRAL PACIFIC. Commissioner ANDERSON. Please describe in general the set of books which are now kept by the Central Pacific Company. The WITNESS. You only mean the general books, of course ; not the operative detail books. Commissioner ANDERSON. Yes. The WITNESS. They are the cash book, in the treasurer's office ; a journal and ledger, in the secretary's office; and the minute book of the company. The stock journal, the transfer book and ledger. Q. Are they all kept under your supervision ? A. Yes, sir. Q. How many clerks do you employ under you ? A. in that imme- diate department there are seven. They are not employed now by the Central Pacific. There is only one in employ of the Central Pacific. Q. You have not named all the books, have you ? A. I have named sir. the general books. GENERAL AUDITOR'S BOOKS . Commissioner ANDERSON. I^ow, in regard to the books relating to the operation of the road, the receipts for freight and passengers ? The WITNESS. They are kept in the general auditor's office. Q. What is the general auditor's name ? A. E. C. Wright. 2360 U. S. PACIFIC RAILWAY COMMISSION. Q. Where are his books f A. They are now in room No. 1 of this building. Q. What books does he keep, describing them generally ? A. He keeps a day-book and ledger and distribution book. That is about all the regular books that are kept. FREIGHT AUDITOR'S BOOKS. Q. Does he keep all the operating accounts, both the receipts from freight and passengers, and of operating expenses'? A. No, sir. Q. Who keeps those? A. Those books are kept for the freight de- partment by C. J. Wilder, the freight auditor, and for the passenger department they are kept by A. G. W. McOullough. Q. Where are these gentlemen ? A. They are here in this building. Q. Take the freight department first. Is C. J. Wilder your freight auditor ? A. Freight auditor. Q. Does he keep all the accounts of the Central Pacific receipts for freight? A. Yes, sir. Q. The form of the business, as I now understand it, is that the Cen- tral Pacific is leased to the Southern Pacific for the rent of its road, for the actual receipts 1 A. Yes, sir. Q. That is the amount they pay ? A. Well, a guaranty. Q. Therefore the auditor keeps an account of the business done on the Central Pacific, just as he did before the lease ? A. Yes, sir ; they are kept in just the same way. Q. Does Mr. Wright receive reports from all your freight agents at different stations along your road ? A. No, sir. Q. How does he get his receipts ? A. Mr. Wilder receives reports from all the freight agents on the road. REBATE AND REFUND BOOKS. Q. Do you know whether Mr. Wilder keeps rebate books or refund books ? A. No, sir ; they are not in his charge. Q. In whose charge is that subject ? A. That is kept by the general freight agent. Q. What is his name ? A. His name is Richard Gray. Q, Is he also in this building ? A. Yes, sir. Q. And has he a book of the description I have mentioned, of refunds or rebates? A. I do not know whether he has such a book or not, be- cause those rebates are paid and go into the general auditor's office, Mr. Wright's office. Mr. Wright mav have that book instead of Mr. Gray. Q. They are paid on regular vouchers or receipts ? A. Yes, sir. Q. Who has the custody of those vouchers ? A. Mr. Wright, the general auditor. Q. Has Mr. Wright the general control of the whole subject as to whether rebates shall be allowed, and how much? A. He has no con- trol whatever. Q. Who has control of that subject? A. Mr. Stubbs, the general traffic manager, and Mr. Gray^ the freight agent. THE DISTRIBUTION BOOK. Q. Is Mr. Stubbs also in this building ? A. Yes, sir. Q. Do you keep a register called the expense-voucher register ? A. No -, no register called expense-voucher register, but there may be such EDWARD H. MILLER, JR. 2361 a book kept in the general freight office. It will appear on the distri- bution book in the general auditor's office, under the head of " expense account," which I can explain. Commissioner ANDERSON. Explain it. The WITNESS. We have a very large book which we call the " distri- bution book." Every item paid that goes into the account of the audi- tor is entered under name, with the total amount. Then, if it is an ex- pense, a portion of it, it is entered in the column of expense. If the voucher contains two or three items they are distributed along through the book under the various headings to which they belong. Instead of keeping several books we keep one of that kind. By Commissioner LITTLER : Q. Were all those books prescribed by you as secretarv of the com- pany? A. Yes, sir 5 practically. Q. Are they all made up and approved by you, and under your di- rection ? A. The blank books are. The voucher comes to me as audi- tor of accounts and I allow it ; then it goes to the general auditor to be entered on his books. When it is so entered it comes to the paymaster to be paid, and the paymaster returns it to the general auditor, so that he can get credit for that amount of money. REBATES ON VOUCHERS SEPARATE AND DISTINCT. i By Commissioner ANDERSON : Q. Is the refund or rebate made out on a voucher separately by itself and without any necessity for following it in the distribution book ? Can we recognize rebates simply from the voucher, or is the ac- count mixed up with other payments ? A. No, sir ; the rebates will appear on a voucher separate and distinct from anything else. Q. Is there a separate book also ? A. No, sir ; I think not. There may be a separate book kept in the general freight office. Commissioner ANDERSON. We have the names and we will find them. What we desire to see is a statement of the course pursued by this com- pany in allowing rebates or refunds to any of the persons with whom the company has dealt, and we will ask you to produce the book which will most readily give us that information. The WITNESS. The distribution book will ; you can have it. RECEIPTS AND PAYMENTS OF POOL CONTRACTS. Q. In what books do the receipts of the Central Pacific Kail way Company and the payment by it on pool contracts appear ? A. They all appear on the auditor's books. Q. How many pool contracts had this company prior to the act of last April, or, rather, of how many pools was it a member 1 The WITNESS. Just at that time, or altogether f There were various pools from time to time. Commissioner ANDERSON. Tell us of the various pools. The WITNESS. I cannot do that. I do not know. There were sev- eral, but I cannot give them all. Q. Have you the pool contracts $ A. No, sir ; I do not think I have all of them. I think some of them are in the general freight office. Commissioner ANDERSON. Tell me what pool contracts you remem ber. 2362 u. s; PACIFIC RAILWAY COMMISSION. THE TRANSCONTINENTAL POOL. The WITNESS. There is one that we call the Gould-Huutington con- tract. Commissioner ANDERSON. The Gould-Huntington pool ? The WITNESS. Yes, sir. There was a contract with the Pacific I do not know the name of it the Pacific Coast Steamship Company, I think. Commissioner ANDERSON. The transcontinental pool ? The WITNESS. Yes, sir ; there is one called the transcontinental pool. But I am not familiar with those pools. Q. Who is familiar wit-h them ? A. The general freight agent and the general traffic manager. Q. Mr. Wilder f A. No; Mr. Stubbs and Mr. Gray. Q. Are those pool contracts in your possession ? A. I think I have one, or perhaps all. I do not think I have, though. LAND-ACCOUNT BOOKS. Q. We will ask you to look for them. Who keeps your land accounts ? A. William H. Mills is the land agent. By Commissioner LITTLER : Q. Does he keep the books ? A. They are kept under his charge. By Commissioner ANDERSON: Q. Where is his office? A. I forget the number of the room. Q. It is in this building ? A. Yes, sir. Q. Do you know anything of the number of books kept by him, and what books they are ? A. Yes, sir. Q. What books does he keep ? A. I cannot give you the details of just what he does keep. Q. You refer us to him for all the books relating to land? A. Yes, sir. LAND-GRANT MORTGAGES. Q. Who is the trustee of your land-grant mortgage? The WITNESS. At present ? Commissioner ANDERSON. Yes. A. William E. Brown and J. O ? B. Gunu. Q. Where is Mr. Gunn ? A. He is in San Francisco. Q. How many land-grant mortgages has your company made? A. Two. Q. Have you copies of those mortgages ? A. Yes, sir, We liave printed copies, I think. Q. Can you furnish us with a complete printed copy of ail the mort- gages made by this company ? A. Yes, sir. I can have them printed by type- writer. Possibly I may have them all. Commissioner LITTLER. We supposed.you had them already. The WITNESS. I think I have, but if I have not I can furnish them. By the CHAIRMAN : Q. Have you named all the books kept by the company in the ac- counting department ? A. No, sir. AUDITOR OF MOTIVE POWER AND MACHINERY. By Commissioner ANDERSON : Q. Please tell what you have omitted ? A, There is an auditor of motive power and machinery. EDWARD H. MILLER, JR. 2363 Q. What is his name ? A. His name is C. fl. Foster. Q. He keeps the statistics relating to motive power and machinery $ A. Yes, sir. By Commissioner LITTLER : Q. Does that department include fuel ? A. Yes, sir. THE TREASURER'S BOOKS. By Commissioner ANDERSON : Q. What other books are there, if any ? A. I mentioned the treasurer's office. Those books are a part of the general books. They keep simply a cash-book. Commissioner ANDERSON. You mentioned that at the beginning. The WITNESS. I think I mentioned that. I do not think of any others; that is, any other general books. Of course the agents at each shop have a set of books kept. They all come here for final collation. LEASED LINES. Q. Now in regard to leases : What companies have the Central Pa- cific Eailroad Company operated under lease 9 A. The Stockton and Copperopolis, the California Pacific, the Northern Railway, the San Pablo and Tulare, the Southern Pacific of California, Southern Pacific of Arizona, Southern Pacific of New Mexico, the Los Angeles and Inde- pendence, the Los Angeles and San Diego, and the Amador branch. Q. Up to what period were those roads leased to the Central Pacific? A. The leases of all except the Stockton and Copperopolis were trans- ferred to the Southern Pacific Company in October, 1886. I may be mistaken as to the month, but it was about that no, they were not transferred, but those leases were canceled. Q. When? A. In October, 1886. Q. Have you those leases ? A. Yes,sir. Q. Will you plesse hunt them up and produce them to the Commis- sion ? A. Yes, sir ; that is, the leases of the roads that were leased to the Central Pacific. LEASE OF CENTRAL BY SOUTHERN PACIFIC. Q. Yes. When was the Central Pacific leased to the Southern Pa- cific ? A. The date of the lease was in February, 1885, to take effect April 1 9 1885. Q. Will you furnish a copy of that lease 1 A. Yes, sir. (The lease will be found in the testimony of E. H. Miller, jr., given on August 16, 1887.) CIRCULAR LETTER OF COMMISSION. Q. Have you a copy of the circular letter issued by this Commission to this company? A. Yes, sir. Q. Have you prepared answers to the questions contained in that letter ? A. Yes, sir ; I have prepared some. You mean the letter ad- dressed to Governor Stanford ? Commissioner ANDERSON. Yes. The WITNESS. I have prepared answers to such as Governor Stan- ford referred to me, but the answers are not complete. They are now in the hands of the type- writers, to be printed. Q. Have you received another circular letter calling for answers to various other matters ? A. I have not got it here, but what you call p R VOL in 3 2364 U. S. PACIFIC RAILWAY COMMISSION. the circular was a letter addressed by the Commission to President Stanford. Commissioner LITTLER. I call that a letter directed to the company, and not a circular letter. The WITNESS. Yes, sir ; that is so. Q. Was that the one you refer to? A. Yes, sir. Q. You received another letter ? A. Yes. sir. Q. Have you prepared answers to that? A. I have not, assuming that the letter to Governor Stanford would take the place of the circu- lar. They covered the same ground, as far as I understand it. This is the one I referred to [producing the printed circular letter of the Com- mission for public circulation]. This is practially a copy of the letter sent to Governor Stanford. The previous one, I think, covered only ten or eleven questions. CONSTRUCTIVE MILEAGE ACCOUNT. By the CHAIRMAN : Q. Have you a constructive mileage account ? A. Yes, sir ; your ac- countants are making it out. We had a constructive mileage account only from 1880 to one or two months in 1883. MINUTE-BOOKS OF BOARD OF DIRECTORS. By Commissioner ANDERSON : Q. Where are your books of minutes of the board of directors ? A. They are in my office. Q. How many books are there ? A. I think there are four. Q. Will you inquire of the president of the company whether there is any objection to our having them moved to the hotel for convenient ex- . amination there this afternoon ? A. I will. NO MINUTES KEPT BY EXECUTIVE COMMITTEE. Q. Are there minutes of the meetings of the executive committee ! By Commissioner LITTLER : Q. Are they kept in a regular book of minutes ? A. No, sir. Q. Have you a different book of minutes of the executive commit- tee ?-^-A. No, sir ; the executive committee never kept any minutes. By the CHAIRMAN : Q. How did they report to the general board ? A. They did not re- port. Q. How often did they meet ? A. Occasionally. Q. How occasionally ; once in three or six months ? A. I do not know. PERSONNEL OF EXECUTIVE COMMITTEE. By Commissioner ANDERSON : Q. Who composed the executive committee ? A. Charles F. Crocker, Timothy Hopkins, and S. T. Gage. Commissioner ANDERSON. I do not remember Mr. Ga^e as being a director. The WITNESS. Yes, sir. EDWARD H. MILLER, JR. 2365 INFORMAL VERBAL REPORTS TO BOARD OF DIRECTORS. By the CHAIRMAN : Q. How do the board of directors get information as to the work of the executive committee ? A. I am sure 1 do not know that they got any information from the executive committee, except as the individuals of the executive committee at the meeting of the board stated. Q. Who was chairman of the executive committee ? A. I do not think they ever organized. Q. Were you present at the meeting of the board of directors when any individual of the executive committee reported ? A. Only as I state, when they reported verbally. Q. Did you take down the report as secretary? A. No, sir. Q. Were you present when any action was ever taken on a report of the executive committee ? A. There never was a report made by the executive committee as an executive committee. METHOD OF ACTING ON SUCH REPORTS. Q. Ware you present when any action was taken on a report of any individual member of the executive committee ? A. Yes, sir. Q. How did the board act ? A. Sometimes they adopted the action proposed by the executive committee, or by the members of the exec- utive committee, to be adopted. Q. How would the secretary of the board enter it upon the min- utes ? A. He would enter it as the action of the board of directors. Q. Would any intimation be given as to the report of an individual member of the executive committee? A. No, sir. Q. Then if they approved of the course of an individual member of the executive committee, it would take the shape of a resolution of the board of directors, would it ? A. No, sir. Q. How would it appear on the directors' minutes ? A. The execu- tive committee would not appear at all. As a member of the board of directors one of them would perhaps offer a resolution that certain things should be done in the board, and it was either adopted or not. Q. Then where the individual members of the executive committee appear in the meetings of the board of directors as offering a resolution, and the board approved of it, that is the result of the action of an indi- vidual member of the executive committee approved by the board ? A. No, sir ; I do not understand that they appeared before the board as an executive committee at all, but they appeared before the board as in- dividual members of the board. If they, as members of the board, offered a resolution, and if the board approved it, it is adopted. But as an executive committee they never made any proposition to the board of directors, or offered a resolution to be adopted. Q. Did the board of directors ever act upon any action of the execu- tive committee? A. I think not; no, sir. Q. Was there ever any action on the part of the executive commit- tee ? A. Not to my knowledge. OBJECT OF THE EXECUTIVE COMMITTEE. Q. What was the use of the executive committee ? A. I do not know, really. Q. Had it any purpose ? A. Yes, sir 5 I think it had this purpose, that those three were to talk matters up and consult together, and then, if they agreed upon a certain proposition, it would be presented to the 2366 U. S. PACIFIC EAILWAY COMMISSION. board, not by the committee as an executive committee, but it would be presented* to the board for its action. Q. Would not that be the result of the executive committee, if they agreed upon it? A. No, sir. They took no action. It was submitted entirely and always to the board of directors for their action. Q. Was it after consultation by the executive committee ? A. I do not know about that. Q. I understood you to say that after consultation the executive com- mittee, reaching a point of agreement, then had one of the individual members report, and then, if approved by the board of directors, it went upon the minutes. Is that true ? A. No, sir ; I did not intend to be understood in that way. Q. Will you explain ? A. You asked me what was the use of the ex- ecutive committee, and I explained it as well as I could, that they would perhaps get together and consult among themselves on what action, if any, in certain matters ought to be adopted by the company. When they came before the board of directors they did not come at all as an executive committee. They came just as individual members of the board of directors would come, and offered such a resolution. It was done in open board. If it was adopted, all right. It was the action of the board of directors, the executive committee having taken no action whatever on it ; only, as I take it, every resolution offered before the board of directors of any company is always considered by somebody before it is offered. Q. What I want to know is, after having ascertained the views of a member of the executive committee, and there having appeared on the minutes a resolution with the approval of the board of directors, whether that was the course of the executive committee as approved by the board of directors ? A. No, sir ; it was not, in any case. E. H. MILLEE, JR. The Commission then adjourned to meet on Tuesday, July 26, 1887, at 10 a. m. OFFICES OF THE CENTRAL PACIFIC EAILROAD COMPANY, San Francisco, Cal, Tuesday, July 26, 1887. The Commission met pursuant to adjournment, all the Commissioners being present. EDWAKD H. MILLEE, JR., being further examined, testified as follows : The W JTNESS - I did not give you yesterday, by oversight, the index to the minute books. The CHAIRMAN. We would like to have that. The WITNESS. It is a separate book, and I ought to have handed it to you, but I overlooked it. FURNISHING INFORMATION PREVIOUSLY CALLED FOR. By Commissioner ANDERSON : Question. Will you inform us what you have that we called for yester- day ? Answer. Ail the articles of consolidation. I have not had time to arrange them, but they are in this pile. Charles Crocker's whereabouts I do not know anything about. EDWARD H. MILLER, JR. 2367 I have the list of directors at the time of the Crocker contract. I now furnish a complete list of the directors from the organization to the present time, as you will see. As to the members of Crocker & Co., I answered that yesterday. Commissioner ANDERSON. You said you did not know. The WITNESS. I did not know. As to Crocker's contracts, 1 and 2, 1 answered yesterday that they were missing. As to the contract with Collins & Bro., I believe that is here, but I am not certain, I have been in such a hurry to get them up. As to the contracts with the Contract and Finance Company and the Western Development Company, I answered yesterday that they were missing. The copy of contract with the Pacific Improvement Company the Com- mission had yesterday. Eeports of Messrs. Stanford, Huntington, and Hopkins are not all here; but the reports of Mr. Stanford, so far as I have found them, and of Mr. Huntington up to 1878, are here. Your accountants are using the reports for 1879. The reports of Mr. Hopkins, as treasurer, are all here, that I can find. The powers of attorney to C. P. Huntington are here. The refund book has not come in. I have here the distribution book and books showing pool payments and receipts, which will appear also upon the distribution book. All pool agreements and leases are here that I have ever had in my charge. I believe copies of all mortgages are here. Q. Including the one of February, 1886 ! A. Including the mort- gage of February, 1886. Commissioner ANDERSON. The mortgage that was given to secure the last $10,000,000 issue. I think that is the date. The WITNESS. That is the mortgage October, 1886, I think. That is $16,000,000. They are all here, I think. The minutes the Commission have. PRODUCTION OF PAPERS. The withess produced the following papers : Articles of association, of amalgamation, and consolidation between the Western Pacific Rail- road Company and the San Francisco Bay Eailroad Company, dated October 28, 1869. (It was marked Exhibit No. 1, July 26, 1887.") The resolution agreeing to consolidate between the California and Oregon Eailroad Company and the Yuba Railroad Company, dated De- cember 15, 1869. (It was marked "Exhibit No. 2, July 26, 1887") Articles of consolidation between the Central Pacific Railroad Com- pany and the Western Pacific Railroad Company, dated June 22, 1870. (It was marked "Exhibit No. 3, July 26, 1887.") Articles of consolidation between the San Francisco and Oakland Railroad Company and the San Francisco and Alaineda Railroad Com- pany, dated June 28, 1870. (It was marked " Exhibit No. 4, July 26, 1887.") Articles of consolidation between the Central Pacific Railroad Com- pany, the California and Oregon Railroad Company, the San Francisco, Oakland and Alameda Railroad Company, and the Joaquin Valley Rail- road Company, dated August 20, 1870. (It was marked "Exhibit No. 5, July 26, 1887.") 2368 U. S. PACIFIC RAILWAY COMMISSION. ORGANIZATION OF CENTRAL PACIFIC. Commissioner ANDERSON. It appears from the first article of Exhibit 5 of to-day that the four companies mentioned in the last-named articles of consolidation became known by the corporate title of the Central Pa- cific Railroad Company. By Commissioner LITTLER : Q. Was the first corporation, the Central Pacific Railroad Company, organized under the statute of the State of California? A. Yes, sir. Q. Under a special act? A. I think not. Q. Was it under the general law ? A. I think it was under the gen- eral law. Q. Where is the certificate of incorporation of that company ? A. I think I have it. By Commissioner ANDERSON: Q. That is filed here in your county clerk's office, and you have a cer- tified eopy^ A. Yes, sir; filed in the office of the secretary of state, I think. ARTICLES OF INCORPORATION RECORDED IN MINUTE-BOOK. By Commissioner LITTLER : Q. Have you not in your minutes the record of the proceedings by which you became a corporation ? A. I think the articles of incorpo- ration are in there. Q. In this first book of minutes ? A. I think so. I think they are copied in there, but I am not sure of that. But I have a copy of it if it is not here. [After examination.] No, sir ; I am mistaken. Commissioner LITTLER. I wish you would furnish the date of the certificate of organization of the Central Pacific Company ? The WITNESS. I can get it now. MORTGAGE OF JULY 5, 1865. (The witness also produced a mortgage dated July 5, 1865, of the Central Pacific Railroad Company, of California, to D. O. Mills and William E. Barron, trustees. It was marked " Exhibit No. 6, Julv 26, 1887.") By Commissioner ANDERSON : Q. What was the amount of that mortgage of 1865 ? What was the authorized issue? A. Series A, 3,000 bonds ; series B, 1,000 bonds. By Commissioner LITTLER : Q. What is the denomination ? A. $1,000 each. Series C, 1,000 bonds. Series D to be of bonds for f 1,000 each, and to include the re- mainder of said bonds authorized to be issued on said portion of said railroad line. Q. How long do these bonds run, respectively, and what are they payable in, and how much interest do they pay per annum ? A. They were 6 per cent, thirty-year bonds. Q. Each and all of them ? A. Yes, sir. Q. What are they payable in, principal as well as interest? A. In lawful money of the United States. EDWARD H. MILLER, JR. 2369 AMOUNT OF BONDS OUTSTANDING. By Commissioner ANDERSON: Q. What is the amount now outstanding? A. The report of 1885 will tell. The amount of bonds to be issued was not definitely fixed by the mortgage. Q. But it was to be equal to the amount of Government bonds ? A. Yes, sir. By Commissioner LITTLER : Q. Were all the bonds issued that were authorized by that mort- gage ? A. Yes, sir. Q, Are they all outstanding? A. No, sir. The amount outstand- ing of Series A is $2,995,000; of Series B, $1,000,000: of Series C, $1,000,000; of Series D, $1,383,000. By Commissioner ANDERSON : Q. Making a total of how much? A. Six million three hundred and seventy-eight thousand dollars. ANTICIPATED TERMS OF RENEWAL AT MATURITY. Q. Those mature in 1895 ? A. They mature at different dates ; they were issued at different dates. Q. Between what years do they mature ? A. Series A matures July 1, 1895 ; Series B, C, and D mature July 1, 1896. Q. From your knowledge of the financial markets, at what rate of interest can that mortgage be renewed when it matures ? A. It de- pends entirely upon the security. Q. It is absolutely the first lien on your road, is it not? A. It is now. Q. Assuming that it so remains, what is your answer ? A. I think 3 J ; they would sell at par ; possibly at 3 per cent. HOW SECURED. By Commissioner LITTLER: Q. How many miles of road stand as security for that indebtedness ? A. About 125, 1 think. Commissioner LITTLER. I wish you would give the number of miles. The WITNESS. It is estimated here at 125 miles ; I cannot give it to you exactly. (The witness also produced a mortgage of the Central Pacific Bail- road Company of California to D. O. Mills and William E. Barron, trustees, dated January 1, 1867. It was marked " Exhibit No. 7, July 26, lbS7.) MORTGAGE OF JANUARY 1, 1867. By Commissioner ANDERSON : Q. Please tell us the amount of that mortgage, and the rate of in- terest and other particulars ? A. There was, by the mortgage, no spe- cial number authorized ; but they were to cover the railroad line lying eastwardly of the eastern boundary line of the State of California, and to the extent and distance that the company might construct the said railroad eastwardly of said eastern boundary liae. Q. Is the amount per mile specified ? A. I do not think it is in dol- lars and cents. It was to be to an amount equal to, but not exceeding, 2370 U. S. PACIFIC RAILWAY COMMISSION. the amount of United States bonds which might be issued to said com- pany under and in pursuance of said several acts of Congress hereto- fore mentioned, and such acts of Congress as might thereafter be en- acted. BONDS ISSUED UNDER IT. Q. That is sufficient. Please state from the report the amount of bonds issued under that mortgage and the amount outstanding. A. Series E, amount authorized, $4,000,000 ; amount outstanding,$3,997,000 ; due January 1, 1897. Series F, amount authorized, $4,000,000 ; amount outstanding, $3,999,000 ; due January 1, 1898. Series G, $4,000,000 authorized; $3,999,000 outstanding ; due Janu- ary 1, 1898. Series H, $4,000,000 authorized; amount outstanding, $3,999,000; due January 1, 1898. Series I, amount authorized, $3,525,000 ; amount outstanding, $3,511,000; due January 3, 1898. Commissioner ANDERSON. I notice you are giving these figures from the report of 1885 ? The WITNESS. Yes, sir. Q. Has the report of 1886 not yet been printed? A. No, sir; it is in the hands of the printer. Q. Can you have it very shortly ? A. I think we will have it within a few days. Q. What is the total amount outstanding of these mortgages ? A. $19,505,000. ANTICIPATED TERMS OF RENEWAL AT MATURITY. Q. Is this mortgage also an absolute first lien on that part of the road east of California and extending to Ogden ? A. That is as I un- derstand it. Q. At what rate could that loan be renewed in 1898, when it ma- tures ? A. On the same terms with the other one. Of course the time of the bonds would make a difference. Q. How do you mean ? A. The time for which the bonds were issued. If they were 30-year bonds they would not sell for as much as they would if they were 50 -year bonds. NO DEFAULT IN PAYMENT OF INTEREST. By Commissioner LITTLER : Q. Has there been any default in the payment of the interest on these series of bonds? A. No, sir. Q. Is the interest all paid to date ? A. All that has been presented. There are a few coupons always that do not come in at the time. By Commissioner ANDERSON : Q. They sell for about $113, do they not? A. I do not know. (The witness also produced a trust mortgage, dated January 1, 1868, of the California and Oregon Eailroad Company of California, to David S. Dodge and Eugene Kelley, trustees. It was marked " Exhibit No. 8, July 26, 1887.") MORTGAGE OF JANUARY 1, 1868. Q. Please look at this mortgage and state the amount of bonds au- thorized, the amount issued, the nature of the security, the period when EDWARD H. MILLER, JR. 2371 due, and the rate of interest ? A. This is a mortgage made by the Cal- ifornia and Oregon Eailroad Company. The amount authorized under it is $6,000,000. The amount outstanding is $6,000,000. The maturity of the bonds is January 1, 1888. The rate of interest is 6 per cent. It is secured by a first mortgage executed by the California and Oregon Eail- road Company upon the whole of its railroad from the Central Pacific Eailroad in the Sacramento Valley in the State of California to the southern boundary line of the State of Oregon. O. That matures next January f A. Yes, sir. Q. Has any provision been made for the renewal of that $6,000,000 1 A. No, sir $ not that I know of. ANTICIPATED TERMS OF RENEWAL AT MATURITY. Q. At what rate, in your judgment, can that loan be renewed, or the amount borrowed on the same security? A. I could not give an opinion on that. Q. It is the first mortgage on the road, is it not ? A. Yes, sir ; there are subsequent mortgages, though. Q. Assuming that the mortgages Can be extended, is it your judg- ment that they can be extended at 4 per cent., the security remaining undisturbed and the term being as long as 30 years ? A. If they could be; yes, sir. LAND-GRANT MORTGAGE OF OCTOBER 1, 1870. (The witness also produced a copy of the mortgage, dated October 1, 1870, by the Central Pacific Eailroad Company to Charles Crocker and Silas W. Sanderson, trustees. It was marked " Exhibit No. 9, July 26, 1887.") Q. Please look at this mortgage and state the amount of bonds authorized, the amount outstanding, the nature of the security, the rate of interest, and the period when due. A. The amount authorized was $10,000,000; the amount outstanding, $4,630,000, as of December 31, 1885, and the date of maturity, October 1, 1890 ; the rate of interest, 6 per cent. The security is upon the lands granted to the Central Paci- fic Eailroad Company, and also on the lands granted to the California and Oregon Eailroad Company by the United States Government. Q. As to the first land-grant mortgage, on which you state there is still remaining due $4,630,000, as of December 31, 1885, do I under- stand that the proceeds of all lands sold are applicable to the payment of these bonds 1 A. Yes, sir. Q. Is it your judgment that the amounts due on contracts for lands sold, and the amounts to be collected for lands sold, will provide for the amount of bonds outstanding between now and 1890, and the time of their maturity ? A. Not in the form you put the question, I think the lands already sold and the amounts coming from contracts. Q. I mean will all the resources of the trustees pay those bonds -by the time of their maturity ? The WITNESS. The future sales of land, as well as those already sold? Commissioner ANDERSON. Yes. A. I will have to make an estimate of that. It depends altogether upon the future sales. There is not enough now in the hands of the trustees, and amounts due on unpaid contracts, to take up the bonds at maturity. 2372 U. S. PACIFIC RAILWAY COMMISSION. By Commissioner LITTLER : Q, Where do these trustees reside? A. Here in San Francisco. The trustees have been changed by death. One of them, Mr. Sanderson, is dead. Charles Crocker has resigned. By Commissioner ANDERSON : Q. Who are the present trustees ? A. William E. Brown and J. O ? B. Gunn. MORTGAGE OF JANUARY 1, 1872. (The witness also produced a mortgage, dated January 1, 1872, made by the Central Pacific Railroad Company to Eugene Kelley and Philo C. Calhoun. It was marked " Exhibit No. 10, July 26, 1887.") Q. Please look at this instrument and state the amount of bonds authorized, the amount outstanding, the rate of interest, the date of maturity, and the security. A. The amount of bonds authorized is $7,200,000 ; the amount outstanding December 31, 1885, was $3,680, The effect of tlie WILLIAM H. MILLS. 2413 policy of the Government in delaying to issue the patents has been to keep the people who occupy the land out of their titles and in a very unsettled and uncertain condition. Q. Is not the effect of waiting for the settler to make application be- fore the selection of land is made to place the local tax at once upon the settler by giving him the immediate title instead of the company taking the title'? COMPANY INTERESTED IN TRANSPORTATION SIDE OF ACCOUNT. A. The effect of taking title where there is a probability of the early use of the land is to accommodate L the settlement; the policy of mak- ing a general application wherever applications might be made would be to fill the Department at Washington with applications and lists of selections to the exclusion of lists of selections where the land would be likely to be needed by applicants for actual settlement. That would be the effect of that policy, and that effect would be disastrous upon the settlement of the lands and the opening up of the country imme- diately along the line of the roads. The company, of course, is very anxious to settle the land in such a way that there would be a large amount of money to the transportation side of the account. Here is an instance where the owner of the land is interested in the progress of the settlement. The land pays the company, perhaps, much better after it is settled than it does by the price of it. The income from a settled piece of land is a continuing source of revenue to the road and they are therefore very desirous of settling the land along the line of the road. WHEN TAXES ARE DUE ON PATENTED LANDS. Q. When are the local taxes due upon the lands that are patented? A. The taxes in California attach and become a lien on all property on the first Monday of March of each year. If the patents were issued prior to the first Monday of March in any year, it would be taxable. However, you will understand me that we have also possessory rights that in the State of Nevada possessory rights are taxable, and so they are in California. And it has been held that a possessory right is a taxable entity, as I understand it. I know it is so in Nevada. LOCAL TAXATION THEREON. Q. How much has the company paid upon patented lands in local taxation in the several counties through which it passes ? A. The taxes of this company are managed and controlled by a tax auditor. I have no charge whatever of the taxation on land. There is a department which has charge of that matter. I have no figures on the subject, none whatever, nor have I any in my department. Q. What is the name of the gentleman who has charge of that ! A. Mr. E. B. Kyan. Q. Is he subordinate to you or under your control ? A. No, sir; he attends to all tax matters relating to the company, and of course attends to the tax upon lands. And those figures can very readily be obtained at his office. By Commissioner ANDERSON : Q. He attends to the tax on the lands ? A. Yes, sir; that is the only matter connected with the land over which I have no jurisdiction at all, I have no jurisdiction in that case at all, 2414 U. S. PACIFIC RAILWAY COMMISSION. By the CHAIRMAN : Q. Have you any tax accounts whatever connected with the land granted by the Governmet? A. The lists of lands patented to the company and subject to taxation are made up in my department each year and sent to Mr. Ryan's office, and that is the last I know of them. Q. He can furnish that list to the Commission, with the amount of taxes paid to date ? A. Oh, yes, sir ; he keeps all those matters sepa- rately. AMOUNT OF ORIGINAL GRANT TO THE CENTRAL PACIFC. Q. How many acres of land of the original grant are yet due to the Central Pacific Company ? A. The grant to the Central Pacific Com- pany at first, I find in the reports before I administered the department, was theoretical in quantity. It was made up by assuming that there was a grant of 12,800 acres to the mile. There having been a grant of twenty sections to the mile of 640 acres each, the amount would be 12,800 acres per mile. The theoretical acreage was, therefore, deter- mined by multiplying the whole number of miles by 12,800 ac res, be- cause that would be the quantity that would be granted ; but by reason of the sinuosities of the road there are a great many miles which get no land. If we take, for instance, in the vicinity of the mountains, where the road is very crooked, there may be 2 miles of road constructed upon one tier of sections. You are only making progress east and west in your land grant 1 mile to 2 miles of your road. The theoreticalq uan- tity, according to my recollection, is 9,000,000 acres on the main line. REDUCED BY GOVERNMENT DELINEATIONS. Q. That is the total amount? A. Yes, sir; but when the Govern- ment delineated the grant by fixing definite exterior limits, plats of which I can furnish you, with the certificate of the General Land Office; that is, the governmental delineation reduces the quantity to something like 7,500,000 acres, and from that there is another deduction to obtain the actual result. Now, we have dealt with the grant in California, and know pretty well just what we will get; that is, we have the materials upon which to form a judgment. Theoretically we obtained the result by multiplying the mileage by 12,800 acres, and it gives 1 ,992,000 acres for California. The Government delineation gives about 1,222,000 acres, while the actual result is 774,000 acres. Now, out of a grant of 1,992,000 acres, theoretically, the company will receive about 774,000 acres of patented land. That deduction arises from the fact that the delineation of the Government does not take into account the crookedness of the road ; it makes the general exterior limits almost straight ; that is, it follows the general course of the road. Within that delineation made by the Government there are about 1,222,000 acres. By Commissioner ANDERSON : Q. What would make the second deduction to 774, 000 acres ? A. The second deductions are the subtractions from the grant, prior dis- posal, mineral lands, and the lands generally excepted out of the grant. The land was granted in categories. By Commissioner LITTLER : Q. Would you be allowed to go beyond the limits for the purpose of making good that grant? A. No ? sir ; not upon the main line. WILLIAM H. MILLS. 2415 THE CALIFORNIA AND OREGON GRANT. If you are now referring to the California and Oregon grant, I will say that that was a grant of quantity and not a grant in place. That was a grantof 12,800 acres, to be found within 20 miles each side of the line, and if there was land lost in the odd-numbered sections of the lands granted, indemnifying lists were provided 10 miles on each side of the land granted for the purpose of indemnifying them for the loss in the granted limits. In that case below Redding, from Redding to Roseville, the company never acquired the full amount granted ; that is to say, there was not enough land in the odd-numbered sections both in the granted limits and in the indemnity limits to make the 12,800 acres to the mile, which was the quantity granted in that case. It was an absolute grant of quantity, amounting to 12.800 acres to the mile, but there was not enough undisposed of to satisfy the grant for that distance. AMOUNT OF LAND DISPOSED OF. By the CHAIRMAN : Q. Will you please repeat how many acres of land, estimating to date, on the main line, the company has disposed of? A. The company has received on the main line The CHAIRMAN. No; I say disposed of sold ? The WITNESS. Well, I can only do that, Governor, by subtracting. The company has received in patents on the main line 1,666,000 acres. There remains patented and unsold on the main line about 345,000 acres. If you will subtract one figure from the other you will see how much has been disposed of. The difference must have been disposed of, of course. AMOUNT RECEIVED THEREFOR. Q. How much money has the company received from the land dis- posed of to that date? A. I could not answer that question without examination ; that is, not anything like accurately. I might approxi- mately. Q. Will you approximate now, and then subsequently furnish the fig- ures to the Commission ? A. Well, there were bonds for $10,000,000, including the interest; there are several elements entering into the question of reduction of the bonded indebtedness. There was the in- terest account and the sale of stumpage, and there are various things of that sort. What you wish to arrive at, I presume, is what the land sold for. The CHAIRMAN. I want to know how much money the Central Pacific has received from land disposed of to date on the main line. The WITNESS. Approximately I should think, altogether from all sources on the main line? The CHAIRMAN. Yes. The WITNESS. Well, I would have to venture an opinion on that, because a segregation would have to be made. The fund is all kept as one. I would say $2,000,000. Q. Will you furnish the Commission with an accurate statement of the sum received from lands disposed of? A. With pleasure. I will furnish the Commission any statistical facts derivable from my books, if the Commission will give me a list of the things which they wish. VALUE OF LAND REMAINING UNDISPOSED OF. Q. What do you estimate, as the land agent of the Central Pacific, is the value of the land on the main line undisposed off 2416 U. S. PACIFIC RAILWAY COMMISSION. The WITNESS. Patented and unpateuted? The CHAIRMAN. Yes ; patented, or yet to be taken up. Allowing for the deductions which you have made, what do you, as the lanji agent, estimate to be the value of the land undisposed of along the main line of the Central Pacific ? The WITNESS. That is, the land that can be disposed of, excluding from that computation the money already obtained for the sale of land ? The CHAIRMAN. Yes. The WITNESS. Well, I should estimate it to be $4,000,000. That estimate is very general. There will remain, after the present deduc- tions, probably six millions of acres, or five and one-half millions of acres, in that grant. SETTLERS INVITED TO GO UPON UNPATENTED LANDS. Q. When you make a selection of land at the suggestion of a settler, do you allow him to go upon it at that time ? A. Oh, the company in- vited settlers upon its lands from the very outset. That is, upon the uupatented lands of the company. You will understand that within the limits of the grant every alternate section granted would remain uuoc: cupied if the grant itself would constitute an obstruction to its settle- ment. To prevent the lands from being a displacement of settlement, the company at once invited settlers upon the unoccupied lands of the company. They invited them to take possession of the lands and cul- tivate them and live upon them, and they have done so, and they are doing so. There are scarcely any lands granted to the company that are not in the use of somebody to-day, and that have not been free from first. LEASES OF UNPATENTED LANDS. Q. Have you made leases with the persons using the lands ? A. Only in a very few instances, and within the last eighteen months. Formerly leases were not made at all, except upon patented lands suitable for cul- tivation. Lands patented to the company and fit for cultivation were leased, but we did not charge the settlers anything for occupying the land. Q. How many acres of land unpatented and selected by you have you leased as the land agent ? A. Three or four hundred thousand acres, perhaps. INCOME DERIVED THEREFROM. Q. What income does the company derive from the leased lands se- lected and yet unpatented? A. Up to two years ago the company had never derived any benefit from leases of that kind. About two years ago I inaugurated a policy, owing to the destruction of the ranges in Nevada ; this was chiefly a matter in Nevada and Utah ; we have leased very little or no land in California. The sheep are very destruc- tive to the pasture, and the cattlemen object very strongly to the lands being occupied by them. We have leased the lands as much as possi- ble to cattle men, preferring that class of stock upon the lands to sheen, because sheep destroy the range. One lease was executed this year of 181,000 acres for $1,200 per annum, and there is a lease executed for 320 sections. These are the two largest leases, and comprise nearly all the land that is under lease. There are 320 sections for $10 a section. That is, $10 for 640 acres. The price is almost nominal ; $1,200 a year for 181,000 acres of land would be a very small rate per acre. A gen- eral lease was executed, and the entire territory of Utah embraced in I WILLIAM H. MILLS. 2417 it, to one individual, so as to distribute the leases among the people over there. That was about three years ago. 1 think that was perhaps the first lease of that kind that was made. Q. What expense is the company put to either in taxation or the maintenance of lands selected and unpatented ? A. The company is not put to any expense, unless it is necessary to protect the timber from depredations; in that case it is very expensive, 'in California the lands left to the company now are chiefly timber lands. MAP OF LAND GRANT IN NEVADA. Q. Did you issue a map concerning grazing land a year or so ago? A. We have issued a map of the whole grant in the State of Nevada ; yes, sir. Q. What was the character of the map ? A. Well, I will exhibit a copy of it here. Q. Will you produce a copy of it to the Commission? A. Yes, sir. Q. Did you issue an order in connection with the map ? A. No, sir ; I do not remember of any order. I have issued a notice several times, requesting people to rent the lands, to lease the lands, so that they might have possession of them. Q. Could you produce a copy of the map here now I A. Yes, sir. (The witness sent for the map.) COMPANY'S TITLE TO UNPATENTED LANDS RIGHT OF POSSESSION. Q. How do you get a sufficient title to the land to warrant you in making your leases I Commissioner LITTLER. That is, as to unpatented lands. The CHAIRMAN. Unpatented lands. The WITNESS. The court has decided recently in Utah that the right of possession of unpatented lands is in the company. That question arose in a case between the Promontory Stock Company as plaintiff against Adams and Schilling. Q. What title does such possession give you ? A. It gives us the right of possession ; that is to say, the ground. The CHAIRMAN. I want to know the effect of such a title. The WITNESS. Well, the effect of the decision iu that case was to give .judgment tor the restitution of the land. There was a quantity of un- pateuted land in the possession of Adams and Schilling. The right to that land was sold to the Promontory Stock Company, and they brought suit for the restitution of the land for the right oi possession ; and the court decided that they had the right of possession. I have the decis- ion of the court up-stairs in that case, and the charge of the judge to the jury, which sets forth the whole story. Q. Will you produce that ? A. Yes, sir 5 I have it printed in a little circular form. - CONFIRMATION OF SALE TO PROMONTORY STOCK COMPANY. Q. Do I understand you to say that the court in that case confirmed the sale to the parties ? A. It confirmed the right of the company to the possession of the land. Q. What is the name of the company? A. The Promontory Stock Company, but they were the grantees of the Central Pacific Railroad Company, so that it was a confirmation of the right of possession iu the Central Pacific Railroad Company, 2418 U. S. PACIFIC RAILWAY COMMISSION. By Commissioner ANDERSON : Q. And of the right to transfer that possession to the grantee'? A. Yes, sir; and I wish to say in that respect that if patents could be ob- tained with facility no measure of that sort would ever have been re- sorted to. But the patented land of the company has been in the pos- session of everybody without lease for years. We have 214,000 acres patented in the State of Nevada that have been in the free use of the people of that State for a great many years without rent. TERMS OF LEASES. By the CHAIRMAN : Q. How long dp you make your leases ? A. The leases are made for one year, with the privilege of sale. That is, they can be renewed from year to year, if the lands are not sold in the mean time. The leases more frequently than otherwise include patented lands. They include a large range of country. If you saw that country as you came over it you will be prepared to understand that it takes a large quantity of it to be useful to a herdsman. It is leased in large ranges ; lands convenient to water. Q. What is the length of the term of your large that leases you spoke of two or three years f A. One year. (The map already referred to was here produced.) DIVISION OF NEVADA LANDS INTO GRAZING RANGES. The WITNESS. Here is a map of the grant of lands in Nevada. There is a good deal of green on the map. The CHAIRMAN. I call your attention to the order signed by you dated July 31, 1885, and printed upon this map, of u Lands granted by the United States to the Central Pacific Railroad Company in the State of Nevada." That order states : Hereafter land belonging to the Central Pacific Railroad Company in Nevada be sold only in grazing ranges. The grant -Las been divided into ranges as set forth below. The ranges will be sold or leased to stockmen on easy terms. The attention of stockmen in Texas and Wyoming is respectfully called to these ranges and the lib- eral terms upon which they may be secured. Will- you please state to the Commission why a special description and division of the land was made by the company and by your order into grazing ranges ? THE REASON OF SUCH DIVISION. The WITNESS. It was because the sale of land immediately contig- uous to water destroys the use of the land lying behind that water. If you look upon this map you will see that it is divided into ranges, that is, approximating somewhat the water. There, for instance, is water through that range, and here is some water in this range. The lands granted to the company, if they are ever to find sale, must have the use of water. To begin with, this land will find its highest use for hundreds of years to come in grazing. It is distinctively grazing land. Nearly all the land left now to the company is grazing land or timber land. There is some foot-hill fruit land left. The former practice was to sell land in 160 or 640 acre tracts. Some lands of the company were sold along the margin of streams by 40-acre tracts. The order that you see there, that is, the notice that you see on the map, was that all the land used by a herdsman must be purchased by him. They used these ranges. This whole territory is in free use now except as to the two in- WILLIAM H. MILLS. ' 2419 stances of leases that I spoke of, one of them here in the eastern end of the grant and the other about the middle of the grant, with some minor exceptions, as for instance where a single section has been leased to a herdsman. So the order was given that hereafter the lands would be sold only in ranges, because in that way only can the lands be disposed of. If the water necessary to the profitable use of the range is sold it is the equivalent of conferring upon the purchaser of that water the per- petual use of the land without purchase. This is just what the Gov- ernment of the United States does all the time. AREA OF RANGES, AND WHAT THEY ARE GOOD FOR. Q. Are the numbers from 1 to 28 upon the map descriptive each of range I A. Yes, sir. That is, they are intended to be generally descrip- tive of a range. The whole grant was divided into ranges from 100,000 acres up, and some of them containing 200,000 acres. The CHAIRMAN. I observe that the ranges grade from 30,000 acres to 600,000 acres ? The WITNESS. Yes. Q. Is not the effect of that to virtually or entirely exclude from this territory granted to you by the Government and designated by you as grazing land, all settlers except those who are engaged in the grazing business and able to purchase a range of from 30,000 to 600,000 acres ? A. The class you speak of have been excluded since the settlement of the country. They are excluded by the character of the country itself. They are excluded from the fact that the most of that territory is at such an altitude that there is frost every month in the year. The lowest place on that grant is 3,300 feet above the level of the sea, while it rises in some instances to nearly 6,000 feet. The annual rain-fall of the coun- try, including the snow is 2J inches of water. It is therefore an arid country, under a high altitude, with very cold winters. For the most part, in the eastern portion of the grant, the thermometer goes down to 20 and 25 degrees below zero. It is not in any sense of the word an agricultural country. THE WATER " BODIED UP" UNDER LAW OF NEVADA. That policy was also forced upon the company for another and a very important reason. The State of Nevada had a grant of the sixteenth and thirty-sixth sections for school purposes. The Government of the United States took that grant back and issued in lieu thereof scrip to the amount of 2,000,000 acres of laud, authorizing the State to dispose of that land as it saw fit. The legislature of the State allows the land to be taken in 40-acre tracts. The purchasers of that land purchased the land lying contiguous to water. The State inaugurated a system which, as they characterize it in that country, " bodied up " the water in such a way as to give its exclusive use to the purchaser of lands ly- ing contiguous to water. That policy, being pursued by the State of Nevada, produced a corresponding policy upon the company, because purchasers of lauds in that State could buy this floating scrip of the State and could body up the water in that way. They " bodied up 77 the even sections within the limits of the railroad grant, and they " bodied it " solid outside of the limits of the railroad grant. It was a plain recognition upon the part of the land authorities of the State of Nevada that the country was distinctively a grazing country. And while agriculture has been prosecuted there, under irrigation, in the lower part of the grant, from the Humboldt House particularly down, 2420 U. S. PACIFIC RAILWAY COMMISSION. and while there are large quantities of laud in Hurnboldt County which, if capital could be induced to take the water out, might be raised to a very considerable state of productiveness and induce a very considera- ble agricultural interest, yet there are other portions of the Pacific coast so much more productive that capital is not likely to be attracted that way. BUT TWO LAEGE SALES MADE IK NEVADA. Q. How many ranges designated on the map that you have produced have -been disposed of by lease or otherwise ? A. There have been but two large ranges sold in the State of Nevada. That is, in any consider- able quantity. There was one of 30,000 acres and one of 31,000 acres. Those two are the only sales I recall now there may be others. There htove been two large leases executed in that State. I wish to say to the Commission that these ranges are not arbitrary by any means. An individual can buy all the land in the township. The announcement there is simply the declaration that the old policy of selling water, that is, selling 160 or 640 acres of land on the water, would not be any longer pursued. It was a declaration that the man must buy a sufficient quantity of land lying back of the water so that he would divide the water (water being indispensable to the use of the laud) into something like fair proportions, so that lands contiguous to water would not be purchased in such a way as that the lands lying behind it would be wholly unsalable. If the compauy was to ever real- ize anything from its grant, that was the only policy to be pursued. That 600,000 acre range is right there before Mr. Anderson, and com- prises very largely the White Plains and Humboldt Desert, and 40 miles of desert, along through that region. We put it in a large tract there because at least 550,000 acres of it has no grass on it. SEEMING DISCREPANCY WITH REPORT FOR 1882. Q. Will you please explain to the Commission the difference in your statement, or the seeming difference in your explanation just made, and the report furnished by you in the year 1882 ? The WITNESS. 1883. The CHAIRMAN. Memorandum relating to bond-aided roads. You place the agricultural land in Nevada and Utah at 2,000,000 acres ! The WITNESS. Is that my report of 1883 ? Mr. NORRIS. Report dated January 1, 1883, for 1882. The WITNESS. I wish to state to you in regard to that report that I came into the department, as I have already stated to you, on the 1st of January, 1883. My predecessor had died during the year 1882. This report was derived chiefly from statements made to me by the gentle- men in charge of the office as to quantities of land and things of that kind. Immediately after taking possession of this office I was sent to Washington and New York by the company on other business, and I did not return so as to resume my duties in the land office until the 1st of April. This report was written in June. They notified me that I must make a report for the year 1882 of the office I had adminis- tered. That is, taking it up to July, I never had administered any part of the department for that year. You will observe I came into office, I went to Washington, and I resumed business here on the 1st of April, 1883. When I was notified that a report of th at kind was to be made I took the reports of former years that had been made by my predeces- aor, called the gentlemen in who had been connected with the depart- WILLIAM H. MILLS, 2421 ment from the first, and taking such general statements as might be derived from their knowledge and recollection and having the general pattern of the reports that theretofore had been made, I made the statements that appear there. Now, following that, you will find that all reports of my department are entirely devoid of any statement con- cerning the segregation of that land into agricultural, grazing, or tim- ber land. NO DESCRIPTION OF LAND IN REPORTS. Q. Did you attempt in your report of the subsequent year, or the year 1885, to make any description of the land ? The WITNESS. My report is before you, is it not f The CHAIRMAN. I am asking you the question. I ask you to look at the report ibr the year 1885, and say whether you attempted any de- scription of the land. The WITNESS. It appears not, from this report. Q. What other report can you produce, at any subsequent period, in which you divide the number of acres of land into agricultural and min- eral or otherwise in the lands granted by the Government ? A. I have made no other report to the company than such as are published in its annual reports. VALUE OF UNSOLD LANDS ON MAIN LINE. Q. I call your attention to the annual report of the Central Pacific Eailroad Company for the year ending December 31, 1885, under the heading of " Assets," and ask you to please explain the item, "Lands unsold estimated value, $24,000,000," with the estimate of value that you have given to the Commission, of $4,000,000. A. That was on the main line, if you please. I made the estimate of $4,000,000 on the main line and did not include the California and Oregon ; that is not in any respect my work. THE CALIFORNIA AND OREGON GRANT. By Commissioner ANDERSON : Q. What is your valuation of the California and Oregon, so that we can gauge the difference between the two estimates ? A. The value of the California and Oregon grant is much greater than that on the main line. There are about 1,400,000 acres in suspension, north of Eedding Junc- tion, awaiting adjustment. That is my general estimate. That land is worth perhaps an average of $2 to $2.50 an acre. There are nearly 300,000 acres unsold in the California and Oregon grant. Some of that land is quite valuable, as timber laud, and will become valuable as tim- ber lands come to be demanded. It is worth perhaps $3 an acre now, but the valuation upon these lands I have noticed 1 am speaking now simply of what I have seen of the valuation in these reports is based upon the price that the Government asks for lands within the limits granted to the railroad companies. It is the double minimum which the Government, fixes as the price of lands that alternate with lands granted to a railroad. It is an estimate derived from multiplying the whole number of acres by $2.50, I presume. VALUE OF AGGREGATE GRANT. Q. As tested by your judgment of what can ultimately be got for these lands, do I understand that the estimate of $24,000.000 is entirely 2422 U. S. PACIFIC RAILWAY COMMISSION. inaccurate ? A. My judgment is that the estimate of $24,000,000 is too high, having been ascertained by multiplying $2.50 for every acre of land within the grant. The 4,000,000 of acres of land in the^State of Nevada are not salable at $2.50 an acre, and never will be. By the CHAIRMAN : Q. How much is the asset of $24,000,000 upon the page before you, depreciated in comparison with the actual value of the same asset " land unsold"? A. Well, 1 presume that the lands remaining to the com- pany might be placed at ten or twelve millions of dollars, fairly $12,- 500,000, including the lands in Nevada and Utah. Q. Then the asset of $24,000,000 is just $12,000,000 too much as an as- set of the Central Pacific Eailroad Company, of "lands unsold?" A. According to the rules of arithmetic. ANNUAL REPORTS. Q. Do you make annual reports f A. Yes, sir. Q. To whom do you report $ A. To Governor Stanford, as president of the company. Q. Will you furnish the Commission with a copy of your reports dur- ing your term of office and your predecessors 7 term ? A. Yes, sir ; if I can find them. I can furnish you my own, I know. There are some other statistical matters that have been referred to here that perhaps ought to be tested by the actual facts. I have stated a great many things from memory. The CHAIRMAN. In each case I have for the present taken your esti- mate, and will ask you to produce the actual figures in the form of a statement. I only wanted to get the approximate figures at present. I understand you to say that you have not in your department any tax account I The WITNESS. No, sir. GOVERNMENT LAND GRANT THE ONLY ONE. By Commissioner LITTLER : Q. Did this company ever acquire additional lands from any other source than the United States Government If A. No, sir. Commissioner ANDERSON. You mean as a gift. They have purchased land for terminal facilities. Q. They have had no local land grants within the State ? A. No, sir. The sovereignty of the soil over which they pass belongs to the General Government. Q. You mean their land has been derived from the Government ? A. Of course. And the sovereignty of the soil is in the Government in the States and Territories through which the line passes. Q. I understand ; but in some cases the States have lands, and I did not know but that the State of California had fooled away its grant in that respect to the company. A. No, sir ; the State of California has managed its land grant excellently well, in my judgment. NO PURCHASES OF MINERAL LAND BY THE COMPANY. By the CHAIRMAN : Q. Have you purchased any mineral lands for the company ? A. No, sir. Q. Have any purchases been made, or have any entries upon mineral lands in the names of individuals been made for the use of the com- WILLIAM K. MILLS. 2423 pany? A. Not that I am aware of. Nothing of the kind has ever been done through my department. Mineral lands are not a desirable kind of land to own in this country. TITLE TO WYOMING COAL LANDS. By Commissioner LITTLER : Q. How did the Central Pacific acquire title to its coal lands in Wy- oming ? A. I have no knowledge upon the subject. By purchase, I presume. Q. To what sources can you refer us for information on that ques- tion ? A. My judgment would be that Secretary Miller would be good authority in that matter. Will you permit me to exhibit this map to you before you ask me any further questions ? Commissioner ANDERSON. Certainly. DESCRIPTION OF THE LAND-GRANT MAP. The WITNESS (referring to the map). There is the land grant in California. All the lands in red have been disposed of by the com- pany. All the lands in green have been disposed of by the Govern- ment. These lands [indicating] were Spanish grants. You will see that from Sacramento out, for a considerable distance, there was a very small grant of land obtained. The lands marked yellow are mineral ; that is, they are denominated " mineral" by the United States survey- ors-general. All these checks on them have been applied for; that is the cost of selecting and surveying have been paid and the lands are before the Department at Washington to be patented. Lands with a circle around them are unsurveyed, and therefore unavailable in any way. The only part of the grant in the State of California that we have not tried to get title to is a little spot there [indicating], embracing about ten or twelve thousand acres. All these red lands are patented and sold ; the blue lands are patented and for sale. All the lands col- ored green were disposed of by the Government by homestead or pre- emption or by prior appropriation, before the rights of the company at- tached. Lands colored in yellow are mineral lands. All that remains of this grant to be dealt with at all is a small space there [indicating] . Q. A small place in the northeast ? A. "Yes, sir. Now it is from this map that I obtain materials for my statement that the grant in Cali- fornia will yield the company but 774,000 acres, and you can see that we have here the data from which such an estimate- might be safely made. I have made that estimate since the Commission has been in session here the estimate of the number of acres that we can get. MINERAL LAND. By the CHAIRMAN : Q. What effect would a selection of land, leased by you before it was patented, have upon the discovery that it was mineral land and that you were not entitled to it under the law? A. Well, if we had leased a piece of land and we were not entitled to it, I suppose that the party who had paid the lease money would be entitled to recover or entitled to a rebate. Q. Do you make any conditions upon selected lands, unpatented, for any discovery in the future of minerals ? A. No, sir; that is not neces- sary. We have never leased, that I know of, any land in the mineral regions of California. We have made but very few leases, and those 2424 U. S. PACIFIC BAIL-WAY COMMISSION. very small, in the State of California. The leases that I spoke of have been in Utah and Nevada. The discovery of minerals has been one of the sources of loss to the company by reason of the tardiness of the Government to give us patents. The company was interested in getting its title as early as possible in consequence of that. Your questions have frequently gone to the general subject of a supposition that the company has avoided taking title to its land to avoid taxation. The one item alone of loss of lands in consequence of the discovery of min- erals would have paid all the taxes that ever could have been assessed against the company if the whole grant had been taxable from the start. The decisions of the courts, upon lands patented to the company before valuable mineral deposits are known to exist, are that the mineral passes with the patented land, but if the mineral is discovered prior to the is- suing of the patent the land is lost to the company, and that extension of discovery has lost in value more to the company, a great deal more than the taxes would have amounted to. AVOIDANCE OF TAXATION ON LAND. Q. As a business proposition, if you could have conveyed your title at once upon the issuance of the patent, would you not, to that extent, have avoided local taxation in the county in which the land was located? A. If I understand the question it amounts to this, that if the land was unpatented and not taxed we would have saved the tax. The CHAIRMAN. Certainly. The WITNESS. But if, by reason of failure to take the title, mineral discovery should aifect the land we would lose the land. The CHAIRMAN. I spoke of lands that you have patented, and not of lands that are the subject of selection. The WITNESS. Then I beg your pardon. POLICY IN REGARD TO DISPOSAL OF LAND. Q. I ask you, as a business proposition, whether it would not have been better from a financial standpoint, in the handling of the lands of the company, to pursue a policy of disposing of the land as quickly as possible after patenting, in order to avoid the local taxation ? A. It would as a business proposition. It has been the policy of the company to dispose of its lands as soon as possible. It undertook to repay this mortgage within a given time. It had to raise the money out of the sales of land and it has pursued the policy continually of urging the sale of its land. As a business proposition the land in the possession of a settler is of the highest value to the road, on the transportation side of the account, and there was, therefore, the strongest motive in the mind of the company always in favor of disposing of the land, as against holding it, if the land is not in the possession of any one dis- posing of it. FAILURE TO PATENT LANDS DUE TO TARDINESS OF GOVERNMENT. Q. Have you failed to patent land for the purpose of avoiding local taxation at any point along your line ? A. No, sir. Under my ad- ministration of the land department I have urged upon the Department at Washington continually the subject of survey. I have urged upon their attention selections. I have written frequently, and personally made complaints to the Commissioner of the General Land Office at Washington, of the tardiness of the Government in making response. WILLIAM H. MILLS. 2425 The Commissioner of the General Land Office in that interview promised to give it his personal attention. I represented to him the tardiness of the Government in making these examinations. The reports of the Commissioners of the Land Office from 1881 to the present time show conclusively that the Government is many years in arrears with its work. Mr. Sparks reports 16,500,000 acres of selections before his de- partment. He reports that he was able to examine and certify about 100,000 acres in one year. Mr. McFarlane, his predecessor in office, made application to the Secretary of the Interior for one hundred additional clerks and accommodations for them. Mr. Sparks renewed that appli- cation when he came into office and approved of the recommendation, or request, of his predecessor, and said that it was necessary. In 1862 Mr. Commissioner McFarlane reported to the Secretary of the Interior that the railroad division was many years in arrears. There is no pro- vision of the law whereby one company shall have a due proportion of the patents that they are able to examine and certify to in a single year, and we do not know what the fate of other companies in this respect is. We have given passes to United States surveyors in order to induce them to take contracts for surveys that the land might be patented. LAND ENTEIES AND LOCATION OF LANDS. Q. Can you furnish a statement showing the land entries paid for by the company ,- and the location of the land ? A. Yes, sir; the location of the land applied for will be shown on this map, so far as California is concerned. All the land on this map with a blue check on it is applied for, and the fees for the surveying is paid. The costs for the surveying are paid. You see it is taken clear up to this point [indicating], I do not know why that [indicating] was left out. My instructions were to commence at that end and "clean it up," as we call it. That is, take everything right straight on through the grant. You see that that course has been followed here up to this point ; and why that has not been done here I do not Imow. I am disposed to think that it is inter- dicted mineral, which shuts oif our application. Q. I understood you to say that you have paid for those entries ? A. Yes, sir ; we have paid for those surveys. All the fees for surveying have been paid on those lands. WITNESS REFERS TO HIS DEPOSITION SUBMITTED WITH GOVERNOR STANFORD'S EVIDENCE. Q. What other statistics have you bearing upon that question ? A. Well, I will state to the Commission that the questions which you pro- pounded to Governor Stanford, as president of the road, were furnished to me, and I answered to him, and yesterday a notary public appeared at my office with iny answer. I answered in writing, and answered as 'fully and completely as it was in my power to do ; and a notary public appeared and I verified that statement to Governor Stanford. I pre- sume that Governor Stanford will hand it to you in connection with the answers to the questions which you have propounded to him. In that you will find a great many questions fully answered and accurately an- swered from the books. The statistics concerning the amount for which the lands were sold and the amount and quantity of lands sold, are being made up in my office now. THE LAND FUND. Q. What control have you over the land fund I A. None whatever, I pay it to the representative of the trustees of the land mortgage. 2426 U. S. PACIFIC RAILWAY COMMISSION. Q. How often do you make settlements ? A. Every day. At tbe close of business each day I pay to the treasurer of the Central PacitU- Eailroad Company, who is the treasurer of the trustees of the laud- mortgage fund, all money received that day. Q. Does that end your control over the fund after the day's settle- ment? A. Yes, sir. It is a trust fund, and it is paid to the trustees, and they have control of it. Q. Who are the trustees of the land-grant mortgage ? A. Mr. W. E. Brown and J. O'B. Gunn. NO LAND GRANT FROM CALIFORNIA. By Commissioner ANDERSON: Q. Mr. Mills, are you positive in your answer that this company has not received land aid from the State of California or from any of the counties'? A. It has not. That is the extent of my knowledge, at least. I have been a citizen of this State for twenty-four years, and I have taken part in the general discussion of these questions. I was editor of a paper for a great many years, and I never heard of it if they ever did. I am only speaking now from the absence, rather than the pres- ence, of knowledge. There may have been some grants of terminal facil- ities, for instance. There may have been a grant of water front, and some for depot purposes, but not as a subsidy. That is, there is no such thing in my office received as a subsidy. Q. Who can tell us in regard to that f A. Mr. Gage could assist me in answering that question. GRANT OF TERMINAL FACILITIES AT MISSION BAY. Q. Was there no land grant in connection with Mission Bay ? A. Yes, sir ; there was land granted for terminal facilities here at Missiou Bay. But what I understood your question to cover was the question of inducement to construct the line. Of couFse this grant at Mission Bay was given after the line was constructed. WATER FRONT AT SACRAMENTO. Q. Were there other grants of that character? A. I believe there was some water front granted at Sacramento on condition that they would construct wharves and put lifting works upon them. That was after the road was completed, or after the line was completed. Q. Are those matters in your department ? A. No, sir. My depart- ment is confined strictly to the lands granted by the acts of 1862 and 1864, in aid of the construction of the road. These other matters are generally in the hands of the various departments ; for instance, if a shop were located upon the lands it would be in charge of the master mechanic. If they were held for depot purposes they would be in charge of the superintendent of the track department or the superin- tendent of the right of way. Mr. Curtis would have charge of them. These lands here, I suppose, are in charge of the company generally. Q. That is the Mission Bay lands ? A. Yes, sir. The Mission Bay lands must be in the charge of the directors or their representatives. NO STATE LAND GRANT BEFORE CONSOLIDATION. Q. Was there no State land grant to any of the roads which were con- solidated together before the general consolidation of the Southern Pa- WILLIAM H. MILLS. 2427 citic ? A. No, sir. There were no State lands to be granted. The State had nothing but the sixteenth and thirty-sixth sections, and it lost all the sixteenth and thirty-sixth sections in mineral belts, so that the State it- self bad no lai)ds to grant. The State was not possessed of any land, practically, at that time. The swamp lands of the State were very largely disposed of prior to the time that this road was constructed, and it could not have granted those. Congress granted, under the act of 1850, the swamp and overflowed lands to the State of California, but none of those were granted to the railroad by the State. The State ex- tended a credit, though that is a matter outside of anything I am per- sonally cognizant of. It extended a credit, but it was not in the form of a land grant. CENTRAL PACIFIC vs. L. B. ADAMS. Judge McKissick calls my attention to an error in my testimony. You gentlemen are lawyers, and I do not know that it is of any im- portance at all, but you will discover that this was not an action in eject- ment. It was the Central Pacific Kailroad Company vs. L. B. Adams. (The witness here handed to the Commission the- papers in the case referred to, together with the charge of the judge to the jury.) The WITNESS (continuing). The Promontory Stock Company I sup posed had been a party to the action. There is the charge of the judge to the jury that I referred to. LESSEES OF LARGE RANGES. By Commissioner LITTLER : Q. Who was the lessee of the large ranges that you have spoken of? A. Sparks and Tinnin are the lessees of it. 1). P. Tarpey is the largest lessee in Utah, and George W. Crumm is the lessee of the 181,000 acres that I spoke of. George W. Crumm's address is Battle Mountain and Sparks and Tinnin is Wells, Nev., and D. F. Tarpey's address is Corinne, Utah. Q. Who is the lessee of the Promontory Stock Company ? A. That is sold. That is, the company's rights there are sold. Q. To whom ? A. To the Promontory Stock Company. Q. Who compose the Promontory Stock Company ? A. A gentleman by the name of Buford and another by the name of Taylor and another by the name of Crocker Taylor, Crocker, and Buford. Q. What is Mr. Crocker's name? A. George Crocker. Q. Is he the Mr. Crocker connected with the Central Pacific Railroad Company ? A. He is a brother of Col. Fred Crocker. Q. What connection have the other members of that company with the Central Pacific ? A, Mr. Taylor is not connected with them in any way. He was formerly superintendent of public instruction in this city and he is an enterprising gentleman who has been engaged in specula- tion with them. Mr. Buford's relations with the Central Pacific I have never known. He is a lieutenant in the Navy, and he has no connec- tion with this road that I know of. WILLIAM H. MILLS. P R VOL IV 7 2428 IT. S. PACIFIC RAILWAY COMMISSION. The witness, William H. Mills, subsequently submitted the following statement in connection with his testimony : Table showing aggregate acres selected by and patented to the Central Pacific Eailroad Com- pany, and the Central Pacific Railroad Company as successor to the California and Oregon Eailroad Company, at the end of each half year, from the earliest date, to January 1, 1887, and during the Jive months thence ensuing, ending June 1, 1887. Date. Selected by. Patented to. Acres. 55 259 09 Acres, January 1 1866 July 1 1866 . 45 5JQ 54 January 1 1867 . i"]3 153 gg July 1 1867 156 204 95 190 7fiO I|A 161 755 67 144 386 63 July 1 1868 July 1 1 869 278 532 56 261 525 33 January 1 1871 . 296 910 21 July 1 1871 271 005 85 January 1 1872 .................................... .... 492 ggg gi July 1 187 9 * 558 967 09 430 96 9 32 January 1 1873 -. J.il\ 1 '1874 ' 431 122 32 899 357 32 953 788 94 833 852 37 J'Hiuirv 1876 835 5S5 26 hil\ 1 IHTti 1 316 819 11 t.n'uirvl 1877 1 362 982 02 1 02 913 35 Inly 1 1877 . 1 376 548 38 1 234 0*9 27 Jaiju.irv 1. 1878 July 1 1878 1 259 667 07 1 838 112 62 July 1 187'. J 1 950 955.35 January 1, 1880 , 2 048 788.57 1 657 557.77 Juh 1 1880 2 240 072 29 2 047 021.43 January 1 1881 . July 1 1881 . . 2 059 593 94 January 1 1882 . . July 1 1882 . January 1 1883 2 366 031 57 July 1 1883 2 119 038 66 January 1 1884 2 397 234 85 2 143 553 15 July 1, 1884 2, 523, 602. 41 2, 176, 517. 83 January 1 1885 . 2 611 684 01 2 252 619 74 July 1 1885 2 651 533 52 2 272 514 83 January 1 1886 2 720 249 41 2 284 260 72 July 1/1886 3,350,739.61 2, 324, 955. 53 3, 480, 782. 16 2, 402, 384. 34 June 1, 1887 3, 581, 146. 22 Listed 3,581,146.22 Patented 2,402,384.34 Balance in the company's favor 1,178,761.88 OFFICES OF THE CENTRAL PACIFIC RAILROAD COMPANY, San Francisco, Gal., Wednesday, July 27, 1887. EDWAKD H. MILLEK, JR., being further examined, testified as follows : By Commissioner ANDERSON : Question. Will you produce the books and minutes which ygu. relating to branch roads? Answer. Yes, sir. EDWARD C. WRIGHT. 2429 By the CHAIRMAN : Q. And also the minutes of the board of directors of the branch roads ? The WITNESS. That is, the roads that are consolidated with the Cen- tral Pacific I The CHAIRMAN. Yes. The WITNESS. I can produce such as I can find. We never had them all. Do you want them produced now ? Commissioner ANDERSON. Yes ; so that we can take them up to the hotel with us as soon as we adjourn. . The WITNESS. I can get them all for you in an hour. E. H. MILLER, JR. OFFICES OF THE CENTRAL PACIFIC EAILROAD COMPANY, San Francisco, Cal., Wednesday, July 27, 1887. EDWARD C. WEIGHT, being duly sworn and examined, testified as follows : By Commissioner ANDERSON : Question. What is your position in the Central Pacific Kailroad Com- pany ? Answer. General auditor. DUTIES OF GENERAL AUDITOR. Q. How long have you been general auditor ? A. A year, Q. One year ? A. About a year. Q. Were you connected with the company before that time ? A. Yes, sir ; I was with the company for seventeen years. Q. State what positions you have held. A. I was assistant general auditor before that, and before that I was a #lerk. Q. Please state generally what are the duties of the general auditor. A. We receive the daily reports from the ticket auditor and from the freight auditor, in a condensed form, they receiving the reports from agents. We receive also the daily statements of account from agents, which we check against these other auditors' reports. EARNINGS AND OPERATING EXPENSES. Q. What you have stated then relates solely to the earnings? A. Earnings and operating expenses. We make up reports of the operating expenses also. Q. From what sources do you receive the operating expenses I A. From reports received from the different departments, such as the motive power, and machinery department, bridges and building de- partment, and track department. Q. The two statements you have made, then, will cover the receipts of the road, the earnings of the road, and the expenses of operation? A. Yes, sir. Q. Now, do any other of the accounts of the road pass through your offices I A. Most all of the accounts representing the earnings and operating expenses go through our office 5 we make up the monthly statements. CONSTRUCTION ACCOUNTS. Q. Do charges for construction account pass through your office ? A. Yes, sir ; a great many of them. 2430 U. S. PACIFIC RAILWAY COMMISSION. Q. Do you audit all bills for construction ? A. Not all. Some of them go to the secretary's office secretary and comptroller. Q. Please state what makes the distinction as between items that go to your office and those which go into the secretary's office? A. I know very little about those that go to the secretary. The most of them go through our office. Very seldom once in a while there might be a trifling item of what is known as general expense, for which they send the bill to the secretary's office. Q. Does it first come to you and you send it to the secretary ? A. If it should come to me I would send it to the secretary. VOUCHERS FOR GENERAL EXPENSE. Q. Why should you select such a bill for general expense and send it to the secretary instead of auditing it as you would the general run of bills ? A. I know they have such an item as general expense. It is a matter of custom more than anything else. Q. Is it 'because the object for which the money has been expended dotes not appear upon the face of the voucher ? A. All the money al- ways appears upon the face of the voucher. Q. But you have stated that vouchers for general expense sometimes go to the secretary's office ; do you refer to a form of voucher which would disclose exactly what the nature of expense was, and still say that you would send such a voucher as that to the secretary I A. It might be something in the nature of a purchase bill for the particular use of the secretary, that I would know nothing about, and I would send it up there. Q. Then the test would be that you would send vouchers which you did not feel competent to pass upon yourself, from your own knowledge of the requirements of the road, to the secretary for his judgment f A. Yes, sir. Q. And after the secretary disposes of them, would they come back to your office? A. A voucher might come back to our office with in- structions from the secretary to dispose of it there and charge it to a certain item of operating expenses. DISTRIBUTION OF ACCOUNTS. Q. After you have audited a bill for any purpose which you have re- ferred to, do you have anything to do with the distribution of it ? A. Yes, sir ; as a rule I direct the distribution. Q. And you have been engaged in this business either as assistant or as principal for seventeen or eighteen years? A. Oh, no; not so many years. I was in a subordinate position for some of this time in other offices, and knew nothing about the distribution of the accounts. Q. How long have you been engaged in this business ? A. About ten years. Q. Would you be able to furnish the Commission a statement year by year for the ten years, showing the distribution of the items which went to the construction account, to the equipment account, and to operation? A. The way we dispose of construction items at present is no I could furnish what is charged in bulk to operating expenses ; it would take a long time to do it, though. CONSTRUCTION BILLS AUDITED BY PACIFIC IMPROVEMENT COMPANY. Q. To show you what I mean, can you take the construction account of that portion of the California and Oregon that was done under the EDWARD C. WRIGHT. 2431 contract with the Pacific Improvement Company anil explain the various vouchers for payments made under that contract; as audited by you, so as to show us from time to time how much road was constructed, and how much in the shape of vouchers had been audited and approved by you any's proportion, say 46 per cent - 21,971,062.00 2468 U. S. PACIFIC RAILWAY COMMISSION. (3) The amount which the Government now owes the company upon transportation, the legality of which claim has been sustained by the Court of Claims and also the Supreme Court of the United States. This amount is $1,853,323.15 (4) The amount of loss which the Company has directly sustained by reason of the refusal of the Government to grant the company patents for its lands as rapidly as called for, say 500, 000. 00 (5) The loss by the Sinking Fund investments in United States Treas- ury ,. 1,612,966.72 (6) Loss by diversion of business from Central and Union Pacific to other subsidized roads, $37, 000, 000. Central Pacific's proportion of which, 46 per cent is, say 17,000,000.00 Total 62,873,557.81 I will now proceed to answer the questions submitted by you in their order. By the CHAIRMAN : Question. Have you those answers in writing ? Answer. Yes, sir. Q. Do you desire to read them ? A. Yes, sir ; but I suppose you may sometimes desire to ask me questions as you go along. A little explanation may occasionally be necessary, and it may save the Com- mission's time. Commissioner ANDERSON. I think the witness had better get through all he desires to state and then we can ask him such questions as we may desire. The CHAIRMAN. We propose to take you up from the beginning, on the examination, as to this road. The WITNESS. I will be at your service as to anything you want. The CHAIRMAN. And you can submit your papers. The WITNESS. I do not believe there are any questions that you will ask me but what will be cheerfully answered to the best of my ability. We have never before had an opportunity to place the history of this road before the public. This is the first time. There have been more misrepresentations and more falsehoods told about this company than one would ever conceive, unless one was familiar with its history. THE BONDS WENT INTO THE CONSTRUCTION OF ROAD. All of the $27,000,000 of bonds (none of which I ever saw) and every one of our first-mortgage bonds went into the construction of the road. I signed all of them and sent all of them East to be sold, and have never seen one of them until this day. Yet they made us out as having made a profit of some hundreds of millions of dollars or more. That story was circulated all over the country. We only had twenty- seven millions from the Government at the beginning, and those sold at a discount of $7,000,000. And, by the way, those bonds are the only ones that the Government ever parted with at par. All the rest, as you know, were at a discount in gold, but these we are charged for at par. While our credit was pretty good when the Government made the contract with us, and we had great faith in the bonds, yet they came to us at a time when we sold them, I think, at 40 cents in gold. REASONS FOR RAPID CONSTRUCTION. I do not know that I have explained to you all the reasons for this rapid construction of our road, but there was more work performed on the first 150 miles of the Central Pacific than would suffice to grade a line of road from that point to Chicago, and that fact is very easily sue- LELAND STANFORD. 2469 ceptible of substantial demonstration. We worked a much larger force of men. For three years we worked more than double the force of men on those mountains that we worked afterwards when we went 500 miles in ten months (less 10 days). That rate of speed on the other portion of the road would have carried us to Chicago. We worked with more than double the force of men, and were aided on an average by five hundred kegs of powder a day. I will tell you of a conversation that occurred when we first went over the line, before there was a trail. AT THE SUMMIT. W T hen we were prospecting we got up about Donner Lake and had got to the summit and looked down at the lake, 1,200 feet below us, and looked up at the cliffs 2,000 feet above us, we meditated on the scene not only for its beauty, but also for its practical relations to a railroad, and we came to the conclusion that if a ship could start from San Francisco and sail around Cape Horn and get in back there we could not afford to build a road and meet that competition ; or if a ship could sail from any Atlantic port around Cape Horn and get in there, we could not afford to build the road and meet that competition. But we knew that they could not, and the only competition, therefore, that we were likely to have or could expect to meet,* was that of the ox-team and the mule-team, and as the laws of the State of California allowed 15 cents a ton per mile, we concluded we could build it. COMPELLED TO HASTEN CONSTRUCTION TO MEET UNION PACIFIC. When Congress passed the bill which provided for the Union Pacific Company to build west towards us, to form a connection, and allowing us to build east towards them, we were compelled then to meet that road out towards Salt Lake, or else we would have nothing but this terrific mountain to operate and we would be entirely at the mercy of the Union Pacific in bringing supplies from the East to Nevada. We were com- pelled, therefore, to push our road through with all the speed in our power to have anything of value. Although in passing the summit we had done the greatest amount of our work, and had climbed up an ele- vation of 7,000 feet in 103 miles (the most of which was done in about 80 miles), yet we made every sacrifice for speed. We economized our means as far as possible, but we never hesitated at anything that would give speed. Yoil must excuse me for branching off a little in this way, but it is a part of the history of the construction of the road and of the influences which led to its construction, which may not be generally known. Now the first question you asked me is as follows : DUTY OF COMMISSION. " Question 1. That the duty of said Commission shall be to examine into the working and financial management of all the railroads that have received aid from the Government in bonds." Answer 1. This interrogatory, being simply a recital of the duties of the Commission, does not seem to require any answer from me. The CHAIRMAN. Are you going to give us this manuscript? Governor STANFORD. Yes, sir. I might ask the privilege of editing it a little, because we have been hurried very much, and there are some typographical and other little errors that have crept in. The CHAIRMAN. There is no objection to that. 2470 IT. S. PACIFIC RAILWAY COMMISSION. HAVE COMPANIES COMPLIED WITH ALL OBLIGATIONS! u Question 2. To ascertain whether they have observed all the obli- gations imposed upon them by the laws of the United States under which they have received such aid, or which have been since passed in reference thereto, and complied with all other obligations to the United States." THE CENTRAL PACIFIC HAS FULLY COMPLIED WITH THE LAWS. Answer 2. The Central Pacific Railroad Company has always promptly observed all the obligations imposed upon it by the laws of the United States under which it received its aid in bonds, or which have since been passed in reference thereto, and has also promptly complied with all other obligations to the United States. I have never heard, either from Congress or any other official source, that the Central Pacific Railroad Company was not promptly discharg- ing, as they accrued, each and every one of the obligations imposed upon it by Congress. If there had been such complaints I should cer- tainly have heard of them. I was chosen president of the Central Pacific Railroad Company at its organization, and have' held the position ever since. It has always been the earnest desire and purpose of the company to meet and dis- charge, and it has promptly met and discharged, as they accrued, all the obligations imposed upon it by the laws of the United States ; such has ever been and still is the policy of the company. I deem it unnecessary to say more upon this point, but direct your attention to, and ask your careful consideration of, the following extracts from the reports of the Attorney-General and the Commissioners of Railroads; also to the affi- davit of Mr. E. H. Miller, jr., the secretary of the company, hereto at- tached, marked " Exhibit 1," and made part hereof. STATEMENT OF ATTORNEY-GENERAL AS TO FULL COMPLIANCE. The Attorney -General, in his report to the Senate of the United States, at the first session of the Forty-eighth Congress, said : " First. The Central Pacific Railroad Company has fully and promptly complied with the requirements of said act," meaning the act of Congress generally known as the Thurman act. (Ex. Doc. No. 121, p. 2.) Again, at the same session, in answer to further inquiry, the Attorney- General said: In further reply to the inquiries of the Senate, I have the honor to state that I ani informed by the Secretary of the Interior that the Central Pacific Company has met and paid the demands of the Commissioner of Railroads, reserving all rights. (Ex. Doc. No. 124, p. 3.) STATEMENT IN 1882 OF UNITED STATES COMMISSIONER OF RAIL- ROADS. W. H. Armstrong, United States Commissioner of Railroads, in his report for 1882, says : Able and expert accountants of this office have investigated and reported upon the business, financial condition, and proportion of net earnings due the Government for the past year. The results are shown in detail under the proper headings hereafter. Free access has been accorded to the books and accounts of the several subsidized roads whenever requested. Detailed statements of the earnings and expenses, finan JLELAND STANFORD. 2471 cial condition, and physical characteristics of the various laiid-graut railroads have been compiled from examination and returns made, and are submitted herewith. As a rule, the accounts of the road are kept in a thoroughly comprehensive and business- like manner. Reports to this office are not always made as promptly as required, but the desire is expressed by the dilferent companies to fully and promptly comply with the lawful demands of the Bureau. (Report 1882, p. 5.) Again he says : Under the act of May 7, 1878, the book-keeper of this office checked the books and accounts of the company (the Central Pacific Railroad Company) in San Francisco with a view to the ascertainment of 25 per cent, of the net earnings for the year end- ing December 31, 1881. Twenty-live per cent, of the net earnings of the subsidized portion of the road was found to amount to $1,038,935.24. The transportation for the Government during the year amounts to $959,785.33, leaving a balance due the United States of $79,149.91. Statement was rendered and payment demanded Octo- ber 20, 1882. A check for the amount was sent to the Treasurer of the United States by the vice-president of the company October 23, 1882. The company has therefore paid to the Government all its accrued indebtedness to date. (Ibid., p. 26.) STATEMENT IN 1883 OF COMMISSIONER OF RAILROADS. In his report for the following year, 1833, Railroad Commissioner Armstrong says : In accordance with the act of May 7, 1878, the books and accounts of this company (Central Pacific Railroad Company) were checked by the book-keepers of this Bu- reau in San Francisco, Cal., with a view to the ascertainment of 25 per centum of the net earnings of that portion of the road (800.66 miles) subsidized with the bonds of the United States for the year ending December 31, 1S82. The amount, found due was $792,920.24, against which the company had performed transportation services on aided and non-aided lines, all of which had been retained by the Government, amounting to $1,051,862.46, leaving a balance due the company that year of $258,942.22. The Central Pacific Railroad Company has paid promptly all balances found to be due to the United States, after statements have been rendered by this office. (U. S. Com. of R. R. Report 1883, p. 42.) STATEMENT OF SAME OFFICIAL IN 1884. In his report for 1884 Commissioner Armstrong says : The property and accounts of the several railroads have been examined, the com- panies (Pacific railroads) having freely accorded all proper facilities for the inspec- tion of their properties and the examination of their books. (U. S. Com. of R., 1884, p. 3.) STATEMENT IN 1885. General Joseph E. Johnston, United States Commissioner of Bail- roads, in his report for 1885, says : The lease (to the Southern Pacific company) has not affected the obligations of the Central Pacific Railroad Company to the United States, of course. The accounts of the company were examined in San Francisco. The property of thecom- pany was also examined and found to be in good condition ; its principal work-shops at Sacramento are thoroughly equipped, and capable of making all the engines and cars required by the whole system. The surface of the road is excellent, the ditches ample, and the road-bod well raised and bridges sound.- (Rep. 1885, p. 17.) Again, in the same report, the Commissioner says : The accounts of the companies under the supervision of this office have been care- fully examined, especially those of tho companies that were aided with the bonds of the United States. Their officers readily furnished all necessary facilities. The property inspected, including railroads, rolling-stock, and work-shops, was in good working order. * * * The portion of this road (Central Pacific) between West Oakland and Roseville Junction, 159 miles, was found to be in the usual good con- dition so characteristic of this company's railroads. (Rep. 1885, pp. 3 and 42.) 2472 U. S. PACIFIC RAILWAY COMMISSION. STATEMENT OF THEOPHILUS FRENCH. Theophilus French, United States Auditor of .Railroad Accounts, in bis report for 1879, says : This company (Central Pacific Railroad Company) lias rendered such reports ae li.ive been required, and submitted its books and accounts to examination. * * * The engineer's report shows in considerable detail the condition of the property cov- ered by the lien of the United States. * * The equipment on the road is in good condition and ample. The ferry service between Oakland and San Francisco * * * is to be commended. The passenger service on this road is un- exceptiouably good. (Auditor's Report, 1879, pp. 34-7.) The above extracts from reports made by the persons selected by Con- gress from time to time and authorized to examine the books of the company show that it has always faithfully and promptly complied with the laws passed by Congress, and has, as I before said, promptly discharged all its obligations to the Government. In this connection I direct your attention to the fact that the amount found due the company for the year ending December 21, 1882, as re- ported by the Commissioner, namely, $258,942.22, has not yet been paid. DO BOOKS SHOW NET EARNINGS OF AIDED ROADS. u Question 3. And whether their books are and have been so kept as to show the net earnings of the aided roads, and what said books actually show in regard thereto, arid what have been in fact said earn- ings." Answer 3. This interrogatory contains three independent proposi- tions : (a) Have the books been so kept and are they now so kept as to show the net earnings of the aided roads ? (b) What do said books actually show in regard thereto*? (c) What have been, in fact, said net earn- ings I To avoid confusion, I shall answer each proposition separately : CENTRAL PACIFIC RAILROAD BOOKS SO KEPT AS TO SHOW NET EARN- INGS OF AIDED ROADS. (a) The books of the Central Pacific Railroad Company have been and are so kept as to show the net earnings of the aided roads. The original acts of Congress passed in 18G2 and 1804, respectively, make no provision for the examination by any officer of the books of the companies therein referred to. After the roads were constructed and commenced business difficulties and controversies arose between the companies and the representatives of the United States in the mat- ter of the settlement of the " net earnings," which, of course, had to be determined before the amount due the Government could be ascer- tained. OFFICE OF AUDITOR OF RAILROAD ACCOUNTS CREATED IN 1878. Congress, recognizing this defect in the acts of 1862, 1864, and 1878, by a special act (June 19, 1878) created the office of Auditor of Railroad Accounts, which act took effect on July 1, 1878. The designation of this office was by the act of March 3, 1881, changed to United States Commissioner of Railroads, being a change in title only, the duties and powers remaining the same. The first auditor of Railroad Accounts appointed under the act of 1878 visited the office of the Central Pacific Railway Company in San Francisco in 4879 and made a thorough ex- LELAND STANFORD. 2473 animation of tbe accounts and books and vouchers of the company from the date of its organization down to the date of his examination. He was given every facility for examination of the books, &c., and upon his report the amount then claimed to be due from the company was promptly paid, and the amounts found due in all subsequent examina- tions by the Auditor and Commissioner have also been promptly paid. SUGGESTIONS ADOPTED. He also made some suggestions in his report that the books of the company had not been so kept as to show readily the earnings of the aided and non-aided roads. The company at the beginning of the next fiscal year Janury 1, 1880 changed its system of book-keeping at consid- erable expense of time and money, to meet his suggestions. Ever since then the books have been and are now so kept as to show the u net earn- ings," according to his requirements. NET EARNINGS SHOWN. (&) The books actually show the u net earnings " from the comple- tion of the road to the last settlement reported by the Eailroad Com- missioner of the United States, dated December 31, 1886. (c) Such earnings amount to $59,276,387.54, from the completion of the road to December 31, 1886. Now, if you will observe, under the Thurman bill we paid in one mil- lion and thirty-eight thousand dollars. That was in 1881, which was the first time that we had a competing line of road, and you will see that we never were able to pay as much in afterwards. At that time, in 1881, the Atchison, Topeka and Santa Fe Eailroad Company made a connection with the Southern Pacific at Deming, and of course opened a competing line of the road. Question 4 relates to constructive mileage. I think I can give you a little explanation here that will make you easily understand this con- structive mileage. In the operation of the transcontinental line of roads there has always been constructive mileage allowed to the Central Pa- cific because of its difficulties in operating. To illustrate (and you will see how fair that is), in going up the Sierra Nevada Mountains a train of 45 cacs, say, which any engine can haul over the level plain from Sacra- mento, has to be broken into five divisions of 9 cars to each division, which, of course, requires five engines to get to the summit, and, when there, one engine goes on and four engines return, making an engine service of 9 miles for each 1 mile of actual engine service. Each one of these engines burns more fuel, although coming back empty, than one engine would burn hauling that whole load on a level plain. You will see, therefore, that a road of that kind is fairly entitled to constructive mileage. In our own case, as between our main road and most of the little roads, I do not think there has been constructive mileage in more than a few cases, and then the road has been very small. By Commissioner LITTLER : Q. Is this constructive mileage awarded your road by the Uuion Pa- cific ? A. I do not remember whether they have allowed it or not, but the eastern roads allow it, and I think that they allow the Union Pacific constructive mileage also. I believe they put us on an equal basis. NET EARNINGS FROM BEGINNING TO JULY 1, 1878. The following statement shows the earnings, expenses, and net earn- ings of the aided road, as ascertaj-uecl by the United States Auditor of 2474 U. S. PACIFIC RAILWAY COMMISSION. Eailroad Accounts, for each year from the completion of the road to the commencement of the operation of the Thurrnaii act, July 1, 1878. It covers a period of eight years and about 8 months. The average an- nual amount of net earnings for this period was $4,327,000, 5 per cent, of which was paid into the United States Treasury under the contract acts of 1862 and 1864. Earnings and expenses of Central Pacific Eailroad Company, aided line (860.66 miles), from November 6, 1869, to June 30, 1878. [As ascertained by the TJ. S. Commissioners of Railroads.] Period. Gross earn- ings. Expenses and taxes. Net earnings. Year ending November 5, 1870 : Coin $3 980 106 91 $2 575 239 99 $1 404 866 92 2 703 298 96 1 612 615 15 1 00 683 81 6, 683, 405. 87 4, 187, 855. 14 2, 495, 550. 73 Year ending November 5, 1871 : 3 995 350 72 2 673 242 93 1 32 107 79 3 585 445 91 2 147 517 17 1 437 928 74 7, 580, 796. 63 4, 820, 760. 10 2, 760, 036. 53 Year ending November 5. 1872 : Coin . ... 5 235 711 03 3 168 870 55 2 066 831 48 4 142 783 45 2 322 266 9 6 1 8^0 517 19 9, 378, 494. 48 5, 491, 145. 81 3, 887, 348. 67 Year ending November 5, 1873 :, 5 230 251 25 3 305 999 35 1 834 051 90 Currency 4 908 428 05 2 579 462 38 2 328 9G5 67 10, 138, 679. 30 5, 974, 761. 73 4, 163, 917. 57 Year ending November 5, 1874 : 5 480 842 81 2 332 631 93 3 148 210 87 4* 98l' 012 23 2 182 809 06 2 798 203 18 10,461,855.04 4, 515, 440. 99 5, 946, 414. 05 Year ending November 5, 1875 : Coin 6 Oil 738 68 3 435 107 26 2 576 631 42 6 249 438 68 3 283 762 67 2 965 676 01 12, 261, 177. 36 6, 718, 869. 93 5, 542, 307. 43 Year ending November 5, 1876 : 6, 266, 377. 23 3, 633, 350. 02 2, 633, 027. 21 6 386 487.86 3 415 618.98 2 970 868 88 12, 652, 805. 09 7, 048, 9G9. 00 5, G03, 896. 09 Year ending November 5, 1877 : 4, 811, 515. 02 3, 315, 421. F6 1 49G 003. 16 6, 708, 736. 33 2, 955, 335. 40 2 753 400.93 10, 520, 251. 35 6, 270, 757. 26 4, 249, 494. 09 Period ending June 30, 1878 : Coin 2, 977, 445. 23 1, 744, 049. 94 1,233,395.29 3, 223, 544. 48 1, 677, 296. 00 1,546,248.48 6, 200, 989. 71 3, 421, 345. 94 2,779,643.77 85, 878, 514. 83 48, 449, 905. 90 37, 4 9 8 608. 93 9, 928, 152. 00 5, 601, 145. 19 4, 327, 000. 81 NET EARNINGS JULY 1, 1878, TO DECEMBER 31, 1886. The following statement shows the annual net earnings as ascertained by the United States Commissioners of Railroads from July 1,1878,- the commencement of operation of the Thurmau act,, to December. 3.1,, 1886. LELAND STANFORD. 2475 In order to show the requirements which are actually payable before payments can be made into the sinking fund in the United States Treas- ury, the sums paid into the sinking fund of the company in the com- pany's treasury according to the terms of the first mortgages, which are prior in lien to the United States bonds, is deducted from the net earn- ings. The balance shown is the extreme annual amount which can be paid by the company on its debt to the Government, as it is the entire net earnings of all the road included in the Government's lien after de- ducting the requirements of the prior lien. NET EARNINGS REDUCED BY COMPETING LINES. It will be noticed that the net earnings prior to 1882 amounted to about $4,000,000 per annum. In 1882 there was a decrease of $1,000,000. This is the year in which competition commenced with other transcon- tinental lines which were aided in their construction by United States land grants. This decrease continued as new land-grant lines were completed till 1884 and 1885, for each of which years the net earnings amounted to about $860,000, and the available balance to about $740,000. The net earnings of the aided line hereafter cannot be prudently cal- culated to exceed this annual amount of $740,000, as the overland busi- ness will continue to be divided, and the aided road is chiefly in Nevada and Utah, where there is very little local traffic. The temporary slight improvement shown for the year 1886 is chiefly owing to an unusually small amount of betterments, additions, and re- pairs charged in that year. Were these items of the usual amount the increase of earnings which was made at cut rates would have been ac- companied by an equal or greater increase of expenses. The annual accruing interest on the United States bonds issued to the Central Pacific is $1,671,340.80. The net earnings of $740,000 lacks $930,000 a year of meeting the accruing interest, even if every available dollar should be taken for that purpose. Earnings and expenses of Central Pacific Railroad Company, aided line (860.66 miles), from July 1, 1878, to December 31, 1886. [As ascertained under the requirements of the Thurman act.] 1878. (July-Dec.) 1879. 1880. Gross earnings aided lino . ........... $5, 483. 930. 37 $10,058 332.35 $9 953 246 78 Opera tin 0" expenses and taxes ..... ... 2, 503, 772. 66 4,788 536.67 4 135 955 66 Betterments and additions ... 138, 350. 18 143 352.66 209 216 70 Interest paid on first-mortgage bonds, having prior- ity of lien over United States bonds 834, 990. 00 1 671 540.00 1 668 390 00 3 477 112. 84 6 603 429 33 C 013 56 f ^ 36 2 006,817.53 3 454 903 02 3 939 684 42 Sinking funds payable from income for redemption of first-mortgage bonds, having priority of lien over United States bonds : Central Pacific Railroad, $100,000 per annnum) Western Pacific Railroad (83.31 per cent, of > $25,000), $20,827.50 per annum. > 60, 413. 75 120, 827. 50 120, 827. 50 1, 946, 403. 78 3, 334,075. 52 3. 818. 856. 92 P R VOL IV- -10 2476 U. S. PACIFIC RAILWAY COMMISSION. Earnings aud expenses of Central Pacific Railroad Company, <$-c. Continued. 1881. 1882. 1883. $10 271 563 71 $9 580 615 94 $8 861 4 9 5 15 Operating expenses and taxes 4 444 127 74 4 734 994.99 4 538 392 39 Betterments and additions 150 856 28 273 164.50 299 396. 16 Interest paid on first-mortgage bonds, having prior- ity of lien over United States bonds 1 671 695.00 1, 673, 940, 00 1, 676, 910. 00 Total expenses ... .. ........ 6 266 679.02 6, 682, 099. 49 6, 514, 698. 55 4 004 884 69 2 898 516 45 2 346 726 60 Sinking funds payable from income for redemption of first-mortgage bonds, having priority of lien over United States bonds : Central Pacific Railroad, $100,000 per annum ) "Western Pacific Railroad (83.31 per cent, of > $25,000), $20,827.50 per annum. ) 120, 827. 50 120, 827. 50 120, 827. 50 3, 884, 057. 19 2, 777, 688. 95 2, 225, 899. 10 1884. 1885. 1886. Gross earnings aided line $7 300 780 67 $5 949 214.73 $6, 522, 909. 33 Operating expenses and taxes 4 416 624 22 3, 167, 081. 76 3 355,555.18 Betterments and additions 351 371 80 247, 404. 00 24, 631. 87 Interest paid on first-mortgage bonds, having prior- itv of lien over United States bonds 1 671 630 00 1, 671, 180. 00 1, 671, 180. 00 Total expenses 6 439 626.02 5, 085, 665. 76 5, 051, 367. 05 Net earnings so ascertained 861 154.65 863, 548. 97 1, 471, 542. 28 Sinking funds payable from income for redemption of first-mortgage bonds, having priority of lien over United States bonds : Central Pacific Railroad, $100,000 per annum) Western Pacific Railroad (83.31 per cent, of > $25,000), $20,827.50 per annum. > 120, 827. 50 120, 827. 50 120, 827. 50 740, 327. 15 742, 721. 47 1, 350, 714. 78 CONSTRUCTIVE MILEAGE ALLOWANCES. u Question 4. Or whether there has been a diversion of earnings of aided roads to less productive branches, through constructive mileage allowances, or average mileage allowances between aided and non-aided roads, or otherwise." Answer 4. There has been no diversion of earnings of aided roads to less productive branches through constructive mileage allowances, or average mileage allowances between aided and non-aided roads, or oth- erwise, except in the instances noted elsewhere and during the period between January, 1880^ and February, 1883, inclusive. ALLOWANCES MADE BY CENTRAL PACIFIC RAILROAD COMPANY HAVE BENEFITED AIDED ROAD. Such allowance was in accordance with the usual custom throughout the United States and was in every instance to the benefit of the aided road. Its continuance, however, was a frequent source of criticism by those not familiar with the details of railway operation and the sur- rounding necessities controlling rates. Experience proved that the amounts involved were not large. To promote complete harmony, there- fore, with the Government and the officers appointed by it to enforce the acts affecting the Pacific railroads, constructive mileage allowances were discontinued and have not since been used. AVERAGE MILEAGE ALLOWANCES FAVORED AIDED ROAD. Average mileage allowances were made in ascertaining the net earn- ings of the aided line by the United States auditor from November 6, LELAND STANFORD. 2477 1869, to December 31, 1879, inclusive, but such allowances did not effect a diversion of earnings from the aided line. The rules prescribed by the United States auditor allowed only the mileage between Ogden and San Francisco in prorating through earnings, over 95 per cent, of which was by this means given to the aided line. The local earnings were then prorated to all lines oj>erated on the average mileage basis. These rules, under which the net earnings of the aided line were ascertained for the above period, favored the aided at the expense of the non-aided road, the earnings from local business being greater per mile of road in California, where the non-aided roads are located, than in the sparsely settled territory in Nevada and Utah, thro ngh which the aided line alone runs. Equal mileage has always been made on mail earnings, the rate on mails being fixed by the Post-Office Department on an equal mileage basis. CONSTRUCTIVE MILEAGE AS ALLOWED FAVORED THE AIDED ROAD. Constructive mileage was allowed in the division of earnings to the several roads to certain less productive branches between January 1, 1880, and February 28, 1883. The constructive mileage allowed was not sufficient to give such branches their proper proportion of the earn- ings from traffic interchanged between them and the main line. On less productive branches higher rates always prevail, other things be- ing equal, than on more productive branches. This is chiefly because the volume of traffic is much less, or because the expense of operation is greater. In either case the cost of the service per ton per mile or per passenger per mile is greater. In dividing the earnings from joint traffic with the main line then the less productive line may fairly de- mand more than its mileage proportion of the amount. The common practice throughout the country in similar cases is for the unproductive line to demand its local rate as its proportion of through earnings. Were the several roads operated in connection with the Central Pacific managed by different companies, the unproductive branch lines would demand and receive a division of earnings on traffic interchanged greater than they did receive by the constructive mileage allowance. There was, therefore, no diversion of earnings from the aided line by such al- lowances, but, on the contrary, the aided line received in the division a larger proportion of the earnings from joint traffic than it was justly entitled to. This fact appears from the following statement in detail of the allowances made. ILLUSTRATIONS OF CONSTRUCTIVE MILEAGE ALLOWANCES. AMADOR BRANCH RAILROAD. Constructive mileage of 100 per cent, allowed from January, 1880, to February, 1883, inclusive. The principal joint traffic with this branch is between San Francisco and lone. Actual mileage. Constructive mileage. Gait-Tone, Amador Branch San Francisco-Tracy, leased . . . Tracy-Gait aided line Miles. 27 83 41 Percent. 17.9 55.0 27.1 Ainador Brunch Miles. 54 83 41 Percent. 30.3 46.6 23.1 Leased lines Aided lino Total Total ... 151 100 178 100 2478 U. S. PACIFIC RAILWAY COMMISSION. For each dollar then received on joint business between Sun Francisco and lone the aided line would receive on an equal mileage basis 27.1 cents and on the constructive mileage basis 23.1 cents. It should have received but 18.3 cents, which is its percentage of the combined local rates, as follows : The average freight rates on classes 1 to 5, inclusive, are Miles. Cents. Per cent. Atnador Branch . .. - .......... 27 55 44.7 83 451 37 41 22i 18.3 . ' 151 123 100 On each dollar of this joint business the amount allowed by the con- structive mileage basis thus resulted in giving the aided line 4.8 per cent, more than it was fairly entitled to. LOS ANGELES AND INDEPENDENCE RAILROAD. This road received constructive mileage of 100 per cent, from Janu- ary 1, 1880, to February 28, 1883. This is a branch road running from Los Angeles to Santa Monica, and interchanged no business which affected the earnings of the aided line. LOS ANGELES AND SAN DIEGO RAILROAD. This road received constructive mileage of 100 per cent, from Jan- uary 1, 1880, to February 28, 1883. This is also a branch running oat of Los Angeles, and interchanged no traffic with the aided line. SAN PABLO AND TULARE RAILROAD. Line from Tracy to Martinez, 47 miles. Constructive mileage of 50 per cent, was allowed for the year 1880. Practically the only portion of the aided line affected by this allowance was that between Tracy and Lathrop, a distance of 11 miles, for the traffic between San Francisco and points on the Southern Pacific Kailroad. The traffic between San Francisco and Los Angeles fairly represents the average of this busi- ness. The total distance is 482 miles. The aided line proportion of the traffic is thus but 2^ per cent. The Southern Pacific and Texas Kail- road distance is 47 miles, being 9,96 per cent, of the total mileage. The constructive mileage allowance is thus chargeable almost wholly to the remaining 87.79 per cent, of the distance, which is a non-aided ancl leased road. Though this road has a short haul, it has no terminal expenses, as it formed part of the through Southern Pacific line shortly after its construction. Constructive mileage was allowed only for one year. SOUTHERN PACIFIC RAILROAD. Constructive mileage of 50 per cent, was allowed on this line as it was built southward from Goshen, from January 1, 1880, to February 28, 1883. The extension of this line was at first in an undeveloped country with but little business. From Goshen southward the road was difficult to construct and expensive to operate. It crosses the mountains where there are short curves and heavy grades, and to gain the summit at Tehachapi Pass the line doubles on itself, forming the well known "Loop," since celebrated as an engineering feat. After crossing the Mojave Desert, the road, to reach the valley of Los Ange- les, passes through the San Fernando tunnel of over a mile in length. Practically all the joint traffic with this route affecting the aided line LELAND STANFORD. 2479 was that from San Francisco. This traffic north of Goshen is carried over level grades easy of construction and operation and on lines hav- ing a larger traffic and lower average rates than the line south of Goshen. The cost per mile on the latter line being much greater, a higher charge per mile was just and reasonable, and would doubtless have been de- manded had the road been operated by a separate company. The ef- fect of the constructive mileage allowance on the line may be shown by the traffic between San Francisco and Los Angeles. This formed the greater portion of the joint business at the time the constructive mile- age was allowed, and fairly illustrates the result for the whole. Actual mileage. Constructive mileage. San Francisco-Tracy leased ... Miles. 83 147 11 241 Per cent. 17.2 30.5 2.3 50.0 Leased Miles. 83 147 11 361 Per cent. 13.8 24.4 1.8 60.0 Lathrop-Goshen non-aided . Non-aided Tracy-Lathrop aided Aided Goshen-Los Angeles, Southern Pacific Railroad Southern Pacific Railroad Total Total 482 100.0 602 100.0 For each dollar, then, received on joint business, the aided line would receive on an equal mileage basis 2.3 cents, and on the constructive- mileage basis 1.8 cents ; while on the basis of the combined local rates, which would be used where the roads operated by different companies, the aided line would receive .but 1.1 cents. By the constructive-mileage allowance, therefore, the aided line has received more than its proper and just proportion of these through earnings. This is shown by com- paring the following proportions based on combined local freight rates, with those given above based on the constructive-mileage allowance: Combined local freight charges between San Francisco and Los Angeles. Miles. Cents. Per cent 11 1.4 1 i San Francisco-Tracy leased 83 11 147 49.8 241 69 6 Total non-aided lines ...... - . ... ....................... ... 471 130 4 98 9 Total aided and non-aided ..... ........ ... .................. 482 131 8 100 STOCKTON AND COPPEROPOLIS RAILROAD. Constructive mileage of 50 per cent, was allowed on this branch for the year 1880, and 100 per cent, from January, 1881, to February, 1883, inclusive. The principal business interchanged is that between San Francisco and Milton. The operation in this case with the largest al- lowance is as follows : Actual mileage. Constructive mileage at 100 per cent. San Francisco-Tracy, leased Tracy-Stockton, aided Miles. S3 20 29 Per cent. 62.9 15.1 22.0 Miles. 83 20 58 161 Per cent. 51.0 12.4 3C. Aided Stockton-Milton, Stockton and Copperopolia Railroad Stockton and Copperopolis Rail- road Total Total 132 100.0 100.0 2480 U. S. PACIFIC RAILWAY COMMISSION. By this allowance the Stockton and Copperopolis Railroad receives 36 per cent, of the through rate as against the 22 per cent, by the even- mileage division. It should receive more than this. The proper pro- portion to each line is shown by adding the local rates and ascertaining the percentage of each to the sum. The freight rates, classes one to five, inclusive, between San Francisco and Stockton average 12J cents per 100 pounds; between Stockton and Milton, 8^ cents. The division of these locals gives the following percentages : Miles. Cents. Per cent. Leased... 83 10 47. G Aided 20 2J 11.9 29 8k 40 5 Total 132 21 100.0 It will be seen by comparison with the statement showing construc- tive-mileage percentages above, that the Stockton and Copperopolis Railroad was allowed in the division of this traffic thirty-six per cent., while it should have received on the basis of the local percentages 40.} per cent. Had this road been operated independently, therefore, it would have received fully 4.J per cent, more from earnings of joint traffic than it was given by the highest constructive-mileage allowance. AIDED ROAD HAS RECEIVED MORE THAN FAIR PROPORTION OF EARN- INGS. The aided line received by the constructive-mileage allowance 12.4 per cent, on the division of such joint rates, while it should have re- ceived on the proper basis of combined local rates but 11.9 per cent. It will be seen from the foregoing that wherever constructive-mileage al- lowances have been made by this company, such allowances have not constituted a diversion of earnings from the aided line, but, on the other hand, the aided line has, notwithstanding such allowances, received more than its fair proportion in the division of joint earnings. A DOUBLE ALLOWANCE TO NEVADA ROADS. I would say further that we allowed small connecting roads over in Nevada twice as much for the same distance, or even more than that, in comparison with what we charged ourselves. They were mere branch lines to feed us, and whatever they brought us was so much gained. They could not afford to carry the short distance, with their limited business, for the same rates that we could afford to haul over the main trunk line for a long distance. I suppose that you will under- stand in this connection that the through rate might well be propor- tionately less per mile than the local, and if a small company demands its local it gets a much larger division, and that is often done. ALLOWANCE OF CONSTRUCTIVE MILEAGE OPTIONAL WITH EASTERN ROADS. I give elsewhere a detail of the different lines of road connected with the main line which we control. You will notice, gentlemen, that in LELAND STANFORD. 2481 the matter of the allowance to us of constructive mileage by the Eastern roads it was entirely optional with those roads. As we could not send freight any other way it was only their sense of justice that made them allow it to us. IS CONSTRUCTIVE MILEAGE FAIR AND USUAL 1 ? " Question 5. And also whether such system of constructive mileage allowance is fair and usual, and, in practical operation, has resulted ad- versely or otherwise to the aided roads and the interest of the United States.' 7 ALLOWANCES HAVE RESULTED FAVORABLY TO UNITED STATES. Answer 5. Such constructive mileage allowances are fair and usual and in practical operation have resulted favorably to the aided roads and the interest of the United States. It is customary and fair to allow constructive mileage to less pro- ductive roads which are not branches, but form part of through routes. Such roads are less productive because they have but a small amount of traffic, or are expensive to operate, or both. In either case the cost of the service per ton per mile or per passenger per mile is greater on such roads, and this increase in cost is the basis of the constructive mileage allowance. Constructive mileage should always be allowed. It depends upon such circumstances as grades, curves, amount of busi- ness, length of roads, &c. The character of the business is also to be considered, for instance, as to whether it is a coarse grade of freight or costly merchandise that is hauled. Climatic influence should also go to determine a fair mileage rate. A rate that is sufficient on one road might be entirely insufficient for another. The allowances made, ac- cording to rules prescribed by the United States Auditor of Railroad Accounts, worked adversely to the non-aided and leased roads. The aided road received thereby a greater amount of net earnings than was properly its due, as more fully appears from accompanying statements. ILLUSTRATIONS OF USUAL CUSTOM AS TO CONSTRUCTIVE MILEAGE. The following cases, taken at random, of rates in force with connect- ing lines which are not operated or controlled by this company, will serve to illustrate the usual custom : Northern California Railroad and Central Pacific Kail-road. Miles. Kates through. Equal mile- age division would be 142 $5 10 $5 93 28 2.00 1.17 Total 170 7.10 7.10 2482 U. S. PACIFIC RAILWAY COMMISSION. Constructive mileage allowances of 100 per cent, to the Northern Cal- ifornia Eailroad shows : Miles. Per cent. Bate. Central Pacific Railroad ... 142 71 7 $5 10 Northern California Railroad ....... ............. 56 28 3 2 00 Total 198 100 7 10 In this case the California Northern Eailroad demanded and received 100 per cent, constructive mileage. Carson and Colorado Eailroad and Central Pacific Eailroad. Miles. Rate through. Equal mile- age division would be San Francisco to Reno Central Pacific Railroad 244 $12 05 $15 10 Reno to Lone Pine Carson and Colorado Railroad . . . 322 23 00 19 95 Total 566 35 05 35 05 In this instance the division of the through rates amount to a construct- ive allowance of about 50 per cent, to the Carson and Colorado Kailroad, and this notwithstanding that road has the longer haul. Eureka and Palisade Eailroad and Central Pacific Railroad. Miles. Miles through. Equal mile- age division would be San Francisco-Palisade Central Pacific Railroad 625 $33. 05 $35 02 Palisade Eureka Eureka and Palisade Railroad ....... 90 8.00 6 03 Total , 615 41.05 41.05 The less productive branch road in this case receives in the division of the through rate an amount equal to about 50 per cent, constructive mileage. AIDED LINES ALLOWED CONSTRUCTIVE MILEAGE BY OTHER ROADS. NEW YORK TO SAN FRANCISCO. A further illustration, which in the present connection is more strik- ing and suggestive than with the branch lines, is the allowance made to the Central Pacific and Union Pacific by the roads east of the Missouri River on transcontinental traffic. The Central and Union Pacific lines having less traffic per mile of road, and in the case of the Central Pa- cific particularly, an expensive road to maintain and operate across the Sierra Nevada Mountains, the average cost of service per ton per mile is greater than with their connections east of Omaha. A higher rate per mile is therefore considered fair and has always been allowed in the division of through rates. The through passenger rates from New York to San Francisco which were in force during the LELAND STANFORD. 2483 time constructive mileage allowances were made to branch lines by the Central Pacific, the proportions allowed each line, and the proportions each would have received had no constructive mileage allowance been made to the Central and Union Pacific line are shown by the following table : Through rates and divisions, 1880, between New York and San Francisco. KATES AND DIVISIONS AS ALLOWED. Class. Through rate. Divisions. C. B. transfer. C. P. U. P. C. B.-Chi. CM.-N. Y. $138. 30 105. 00 65. 00 100. 00 Cts. 50 50 50 50 Pro. $46. 00 34.50 20. 70 33. 26 Cents per mile. 5.22 3.91 2.35 3.77 Pro. $54. 00 40.50 24.30 38.94 Cents per mile. 5. 22 'A. 91 2.35 3.77 Pro. $14.55 12.50 6.81 10.50 Cents per mile. 2.97 2.55 1.39 1.95 Pro. $23. 25 17. 00 12.69 16.80 Cents per mile. 2. 55 1.86 1.39 1.95 Third ^ Coin...., RATES AND DIVISIONS HAD NO CONSTRUCTIVE MILEAGE BEEN ALLOWED. Unlimited 138. 30 50 36.69 *4. 15 42.92 4.15 20.34 4.15 37. 85 4.15 Second 105. 00 50 27.81 3.15 32.54 3.15 15.44 3.15 28. 71 3.15 Third 65.00 50 17.13 1.94 20.04 1.94 9.51 1.91 17. 82 1.94 Coin . .... 100. 00 50 26. 49' 3. OO 1 31.00 3.00 14.70 3.00 27.31 3.00 It will be noticed that in the unlimited rate the Pacific roads were allowed 5.22 cents per mile, while the roads between New York and Chicago received but 2.55, the former in this case receiving over 100 per cent, per mile more than the latter. The mileage of the route is: East of Missouri River, 1,402 miles; west, 1,916 miles. Applying the constructive mileage system to the sum of the rates for the several classes shows that the Central and Union Pacific received a constructive mileage allowance of over 85 per cent. PROFIT TO AIDED ROADS BY SYSTEM OF CONSTRUCTIVE MILEAGE ALLOWANCES. This through traffic was very large and comprised a considerable portion of the income of the aided line. The constructive mileage al- lowance was also for a long haul the whole length of the road. The difference therefore to the Central Pacific whether it did or did not re- ceive 'the constructive mileage allowance was of the greatest impor- tance, and the practice has added to the earnings of the aided line amounts aggregating millions of dollars^ HAVE EARNINGS BEEN DIVERTED TO WRONGFUL OR IMPROPER PUR- POSES ? * Question G. Or whether there has been a diversion of earnings of aided roads to wrongful or improper purposes, and if so, to what ex- tent." 2484 tr. s. PACIFIC RAILWAY COMMISSION. EARNINGS USED EXCLUSIVELY FOR BENEFIT OF CENTRAL PACIFIC RAILROAD COMPANY. Answer 6. In answer to interrogatory No. 6, I have to say : That the earnings of the company have been expended and applied exclu- sively to the benefit of the company. No portion of them, has been ap- plied in construction of any other road. The company is willing and desirous of making a full and complete statement to the Commission of all matters in which the Government can possibly have any concern. I assume that it is unnecessary to go into statements of matters affect- ing the interests of the company in which the Government has not and cannot have any possible interest. In determining the amount of the net earnings of the company, in which only the Government is interested, the company do not propose to make any charge or claim that would diminish or affect the amount of such net earnings, for which it will not furnish entirely satisfactory documentary evidence. All items of expenditure for which such satis- factory evidence shall not be furnished shall be charged against the company exclusively. I will merely add, however, that the disposition made of these earnings of the company, in which the Government has no interest, has met with the approval of the board of directors of the company and its stockholders, on repeated occasions. The aided line does not run into San Francisco, but from Sacramento to San Jose. In violation of the.principles of interstate law, the Gov- ernment gives the Canadian Pacific the right to bond goods here and take them from San Francisco around up through Canada to Chicago, thereby carrying them for nearly 5,000 miles, for the same or a less rate than we carry them across the continent, which is a violation of the interstate commerce principle. The Government does that for the ben- efit of the Canadian Pacific road. I will hardly say it is done for that purpose, but that is what is done, and that is the effect which it has. DISCRIMINATION IN RATES AGrAINST AIDED ROADS. " Question 7. Whether there is a discrimination of rates in favor of un- aided against aided roads." NO DISCRIMINATION EXCEPT THAT MADE BY THE UNITED STATES. Answer 7. There is no discrimination of rates in favor of unaided as against aided roads, except that made by the Post-Office Department. The rates for transportation of United States mails are fixed by the Post-Office Department in accordance with the general laws upon the subject. The basis of the rate is the average daily number of pounds carried over the whole route. The overland Central Pacific route .is from Ogden to San Francisco via the aided road to Sacramento, and thence to San Francisco via Benecia over unaided roads. The aided line does not run into San Francisco ; the business must go over un- aided lines. The generalv business follows the line designated by the Government between Sacramento and San Francisco, which is the shortest possible line 87 miles by one route and 137 by the other. The weight of mails in either case would be the same, and the rate per mile would be the same. The shorter route, therefore, carries the mails for about one-third less than the longer route. This is in effect a discrimi- nation in, favor of the unaided against the aided road. Not only has the Post-Office Department thus discriminated against our line, but it and LELAND STANFORD. 2485 the War Department and other Departments of the Government have given preference to other transcontinental lines that have not been aided in bonds, thus diverting traffic that the Central Pacific could have done. Upon this subject the United States Auditor of Eailway Accounts says : Government has taken away business across the State of Nevada, and has also given transportation to the Northern Pacific, the Southern Pacific, the Atchison, Topeka and Santa F6, the Atlantic and Pacific, and the Canadian Pacific, all rival roads, and is paying them full rates, when they could get it done for less rates by the aided Cen- tral Pacific. This matter, with its embarrassing results to the company, will be found more fully set forth in answer to interrogatory No. 54. IS ANY MONEY DUE TO UNITED STATES FOB ERRONEOUS ACCOUNTS 1 u Question 8. Whether any, and if so, how much, money is due and owing to the United States on account of mistaken or erroneous ac- counts, reports, or settlements made by said roads." MONEY IS DUE TO COMPANY FROM UNITED STATES. Answer 8. No money is due and owing to the United States on ac- count of mistaken or erroneous accounts, reports, or settlements made by our road. On the contrary, there is a balance due the Central Pa- cific for transportation services on non-aided and leased lines of $1,853,323.15, which is withheld in the face of a unanimous decision by the Court of Claims in our favor, confirmed by the Supreme Court of the United States. ANNUAL SETTLEMENTS BY UNITED STATES COMMISSIONER". Settlements have been annually made by the Central Pacific Eailroad Company with the authorized officers of the Government for the amounts due the Government under the several acts of Congres. All amounts involved in such settlements have been promptly paid by the company when due. Payments were in every case made for the amounts as claimed by the United States Commissioner of Eailroads, though they were not always believed to be justly due. The items of new construc- tion and new equipment were not currently allowed by the Commis- sioner, and payments were made for the requirements as stated by him. The courts, however, in 1885, decided these items to be proper deductions in ascertaining the net earnings. (See Eep. U. S. Com. E. E. 1885, p. 7.) The erroneous accounts were restated by the Commissioner in his report for 186G, page 35. The Central Pacific Eailroad Company has overpaid the United States on account of these mistaken and erroneous accounts the sum of $321,152.72. This sum is still held by the Government, and is due the company in cash, though repeated demands have been made for it by the company. TRAFFIC DIVERTED TO NON- AIDED ROADS. " Question 9. Whether any traffic or business which could or should be done on the aided lines of said companies has been diverted to the line of any other company or to unaided lines." Answer 9. This question will be fully answered under interrogatory No. 54. Such discrimination and diversion is made only by the Gov- 2486 U. S. PACIFIC RAILWAY COMMISSION. eminent. I refer also to report of General Manager A. 1ST. Towne, here- with submitted, and marked " Exhibit 2," also report of General Super- intendent J. A. Fillmore, marked " Exhibit 3." DEDUCTIONS FROM GROSS EARNINGS BY REBATES, POOLS, ETC. "Question 10. And what amounts have been deducted from the gross earnings of any of said railroad companies by their general freight and passenger agents or auditors, by way of rebate, percentage of business done, constructive mileage, monthly or other payments on any pooling or rate arrangement, contract, or agreement." SUCH ARRANGEMENTS HAVE ADDEp TO EARNINGS OF AIDED ROAD. Answer 10. There have been rebates and pooling arrangements, there sometimes being a balance against us and sometimes a balance in our favor. Rebates were made for the purpose of securing business, and pooling arrangements for maintaining rates, and these always favored the aided road. The question of differentials, pools, &c., is more fully treated in sup- port of the answer to interrogatory !No. 39. See the report of J. C. Stubbs, general traffic manager, verified by his oath, marked " Exhibit 7," and referred to in the answer to that interrogatory, from which it will appear that whatever has been done in this direction is fully justi- fied by the results. ASSETS OF COMPANIES. " Question 11. And also inquire into, ascertain, and report as to the kind, character, and amount of the assets of said companies." ASSETS OF CENTRAL PACIFIC RAILROAD COMPANY. Answer 11. In reply to your interrogatory No. 11, 1 respectfully sub- mit the following statement, prepared by Mr. E. H. Miller, jr., the sec- retary of the company : Assets, July 1, 1887. Railroad and telegraph lines as follows, between Milea. San Jose* and Niles 17. 54 Niles and Brighton 103. 83 Sacramento and near Ogden 737.50 Total aided road . . 858. 87 Sacramento and Ogden (non-aided) .95 Niles and Oakland Wharf 26.51 Oakland and Alameda, local lines (including 7.72 miles double track) . . 17. 31 Lathrop and Goshen 146. 08 Roseville and Coles . . 295. 30 Total non-aided road 486. 15 Total miles of road 1,345.02 Also right of way, sidings, turn-outs, switches, turn-tables, depots, stations and other buildings, round-houses, shops, and machinery, tools, safes, furniture, wharves, slips, engines, cars, and other equipment prop- erty and appurtenances belonging on the foregoing railroad and tele- graph lines. LELAND STANFORD. 2487 Steamers and barges as follows : Ferry steamers of the San Francisco Bay : Alameda, Amador, Capitol, El Capitau, Julia, Oakland, Piedmont, Transit, and Thoroughfare. Sacramento Eiver steamers : Apache and Modoc ; barges, Ace of Spades and Yolo. Stocks and bonds of other companies owned, cost $1,074,360.07. Sinking fund of the company in the treasury of the company, consist- ing of railroad bonds of the par value of $10,356,000, cost $9,601,617.50. Sinking fund of the company in the United States Treasury June 1, 1887, bonds of the par value of $2,557,000, and cash, $39,137.32 ; cost of bonds and cash, $3,168,600.50 ; cost for interest lost on investments, $1,040,503.54; total cost in excess of par value of bonds, $1,612,966.72. Land contracts, deferred payments on time sales, $1 ,142,084.86. Cash on hand, $13,768.49. Undivided half of sixty acres in Mission Bay, San Francisco ; 500 acres of water front in Oakland, Cal. ; about 140 acres of water front Sacramento. Land granted by the United States to the Central Pacific Eailroad Company, of California, and to the California and Oregon Railroad Company, less amount sold therefrom and lost from mineral lands, prior claims, &c. APPRAISEMENT OF COMPANY'S PROPERTY. . Any valuation which may be placed on the assets of the company must, at best, be an estimate. I understand that the commission have delegated the duty of making an appraisement of the value of the rail- road and other property of the company to a board of engineers, which makes it unnecessary for any such estimate to be made in this place. Much of the information I have given in answer to thi question is contained in our annual report, but it is given a little more in detail here. Commissioner ANDERSON. You understand that the report does not profess to give the value of the property $ The WITNESS. It gives only estimated values. Commissioner ANDERSON. For instance, take the construction ac- count, which represents $130,000,000 or $140,000,000. It does not even pretend to give the actual value of the assets. The WITNESS. No. That represents the cash and stock used. The stock, of course, stands on the books as if at par, but in reality it was not worth much of anything. Commissioner ANDERSON. The question here is with reference to as- certaining the actual value of your assets, in order to determine the value of the United States lien. The WITNESS. Most of these things are given at what they cost. Dur- ing the time that we were constructing the road, I remember that we paid $65,000 for two engines. That is the highest we ever paid. Of course, there is no such value to them now. . We could put them on the road now for probably $13,500. Commissioner ANDERSON. We have had a special officer, Colonel Morgan, making an examination, and I presume his report will contain an answer to that question, which we can rely on. Commissioner LITTLER. His name is Eichard T. Morgan, jr. The WITNESS. Our road is well equipped, and everything, I think, is in good order. 2488 U. S. PACIFIC RAILWAY COMMISSION. ASSETS SUBJECT TO UNITED STATES LIENS. "Question 12. And what assets of each company are now subject to the lien of the Government and the value thereof! " Answer 12. The assets of the company now subject to the lien of the Government, are as follows : ASSETS SUBJECT TO UNITED STATES LIEN. Aided line assets, July I, 1887. Railroad and telegraph lines between Miles. San Jose" and Niles 17.54 Niles and Brighton 103.83 Sacramento and Ogden 737.50 Total operated road 858.87 Also the right of way, sidings, turn-outs, switches, turn-tables, depots, station and other buildings, round-houses, shops, machinery, tools, safes, furniture, engines, cars and other equipment, property and appur- tenances belonging to the foregoing railroad and telegraph lines. As to the value of the different items of property referred to in this statement, I am personally unable to give it. I understand the Com- mission has appointed experts to make appraisement of it, and there- fore this omission will be thus supplied. The CHAIRMAN. You do not refer there to the question of how far the lien of the Government extends over the property and to what property it attaches. The WITNESS. The assets of the company subject to the lien of the Government are as I have read. Now, the lien, like the first mortgage bonds, is on the road from Ogden to San Jos6 ; but by our laws of con- solidation the entire property of all the companies consolidated becomes liable for the debts of the institution, just as a man's property is liable for his debts over and above the mortgaged property. The mortgage, first, is a lien upon so much, but all his property is liable. So all the unaided lines of our road, as well as the aided, are liable for the general liabilities of the company, but there is no lien upon them to the Gov- ernment. The CHAIRMAN. The whole property, however, is subject to execu tion? The WITNESS. Oh, yes, sir. DIVIDENDS PAID. " Question 13. And also whether any dividends have been unlawfully declared by the directors or paid to the stockholders of said company ; and if so, to what extent." NO DIVIDENDS UNLAWFULLY DECLARED BY THE CENTRAL PACIFIC RAILROAD COMPANY. Answer 13. No dividends have been unlawfully declared by the direc- tors or paid to the stockholders of the Central Pacific Eailroad Company. Section 6 of the act of Congress of May 7, 1878 (the Thurman act), provides that no dividends shall be voted, made, or paid at any time when the company shall be in default in the payment of either of the LELAND STANFORD. 2489 sums required to be paid into tlie sinking fund, or in the payment of the 5 per centum of the net earnings, or interest on any debt the lien of which or of the debt on which it may accrue is paramount to that of the United States. The Central Pacific Eailroad Company has not at any time been in default in respect of the payment of any of the sums required under the provisions of the act above quoted. The Central Pacific Kailroad Company, as heretofore stated, was or- ganized under the laws of this State, and is now carrying on its busi- ness in accordance with the provisions thereof. Section 309 of the Civil Code of California prohibits railroad corporations from making div- idends, except from the surplus profits arising from the business thereof. As required by this section all dividends have been made from the net earnings. The road has been in operation for over twenty-three years for more or less of its extent. AVERAGE DIVIDENDS 2.65 PER CENT. The total sum of these dividends amounts to 61 percent. The amounts paid therefore equal the annual rate of 2.65 per cent., and but for the completion of the Government-aided competing lines, and but for the Government's failure to pay to the company the money for transporta- tion as determined by the Supreme Court of the United States, the company would still be paying the dividends. For the information of the Commission, and the evidence of the fact that the dividends de- clared by the company were not illegal, we submit herewith, and ask your consideration of a report by Mr. E. H. Miller, jr., secretary of the company, marked Exhibit 4, and made a part hereof. By Commissioner ANDERSON : DIVIDENDS PAID OUT OF NET EARNINGS. Q. Does your report contain a statement of the net earnings actually applicable to the years in which dividends were declared ? A. No, sir ; I think not. We carried net earnings along for a good while, and when we commenced declaring dividends it was with the supposition that we would be able to continue. For a time the road earned a good deal more than a 6 per cent, dividend annually, over and above the necessary expenses. But the opening of competing business and the immense falling off of the business in Nevada, a great falling off and the gradual interference with our business in Wyoming, Montana, and Idaho have made a change. We used to have business in Wyoming, not very much, but still some, and a good deal in Montana and Idaho, but the opening and pushing out of other roads spoiled all that business for us. It was a very profitable business, as we were able to fix our own rates, free of competition. Then came the opening up of these com- peting lines, and our business fell off very much, although the gen- eral business of the country was increasing. The prices paid to us were very much reduced. As a result, from 1884 we have been not able to earn any dividends. We have always earned something over expenses. We have always kept up the Thurman fund and made something over expenses. Under the lease of the Central Pacific to the Southern Pa- cific Company it is guaranteed $1,200,000 a year, net, over and above all expenses and the interest account and the sinking fund under the Thurman act, 2490 U. S. PACIFIC RAILWAY COMMISSION. Q. I understand all that, but my question was whether the actual earnings of the road between 1872, the time of your first dividend, and your last dividend, declared in February, 1884/will show that the divi- dends paid were earned $ A. Yes, sir ; the dividends were all earned ; not in that time, however. We had quite an accumulation of net on hand when we commenced the dividends, but all the dividends were paid out of net earnings. By the CHAIRMAN : Q. Did you ever borrow money with which to pay a dividend ? A. We never borrowed a dollar to pay a dividend. DIVIDENDS. " Question 14. And whether the amount thereof may not be recov- ered from the directors unlawfully declaring the same or persons who unlawfully receive the same." Answer 14. I beg to state that as there have never been dividends wrongfully or unlawfully declared by the company there remains noth- ing liable to recovery. HAVE TRUST FUNDS BEEN DIVERTED*? u Question 15. Whether the proceeds of any trust funds or lands loaned, advanced, or granted have been diverted from their lawful uses." NO FUNDS DIVERTED. Answer 15. No proceeds of any trust funds or lands loaned, advanced, or granted have been diverted from their lawful uses. The only trust fund that the company has ever had in its treasury has been the sink- ing fund. This fund now amounts to about $9,000*000. In addition to this we have paid $1,216,000 of what was known as the State aid loan. The convertible loan also aggregated $1,500,000. The trust funds have been invested in sinking funds at interest in the company's treasury for the final redemption of bonds of the company. That fund, of course, did reduce the general indebtedness of the Central Pacific Railroad Company. It is not all for the aided line, but it is some for that line and some for the others. There are sinking funds for all of the compa- nies which are now part of the Central Pacific, and they are growing very rapidly. SINKING FUNDS. By Commissioner ANDERSON : Q. The sinking fund does not apply to the United States bonds at all I A. No, sir ; it goes to the first-mortgage bonds the bonds that are a prior lien to that of the Government. Q. It goes to all your mortgages, as I understand it ? A. Yes ; each mortgage has its own sinking fund. They are all, of course, in the hands of the Central Pacific Kailroad Company. These companies have been consolidated, and the Central Pacific has assumed these liabilities. THE LAW OF CALIFORNIA REGARDING SINKING FUNDS. Q. Will you tell me what the requirement of the law of California is in regard to permitted investments in sinking funds? A, That the money shall be loaned. LELAND STANFORD. 2491 Q. Is there no limitation ? A. I think there is none. Mr. BERGIN. There is no limitation. Commissioner ANDERSON. Can they loan it to anybody ? Mr. BERGIN. It is in the discretion of the board of directors of the corporation. The law does require of railroad companies organized under its provisions, that at the time of the creation of a liability by the company secured by a bond and mortgage, it shall also provide a sinking fund for the ultimate liquidation of the liability, but as to the manner of investing the fund, that is left to the discretion of the board of directors. DUTIES OF TRUSTEES AS TO INVESTMENT OF A SINKING- FUND. Commissioner ANDERSON. May I ask whether there has been any de- cision upholding, for instance, a loan of money in a sinking fund by a corporation to itself ? Mr. BERGIN. No, sir ; the question of the manner of investment has never yet been judicially passed upon by the courts. Q. In your opinion, would the trustees of a sinking fund amounting to many millions of dollars be justified in taking a note of the corpora- tion itself and then putting it back in the general assets ? A. The gen- eral trustees ; not the company. The company itself is not necessarily the trustee, or not the trustee at all. Q. I am asking you whether the trustees would be justified under the laws of California in putting the money which they hold in the sinking fund into the vaults of the corporation itself for its general purposes and taking as its evidence of the sinking-fund moneys the note of the corporation? A. That might be under some circumstances. I do not know now. My attention has not been called lately to the duties of trustees, but I think under our laws that a trustee may do with it as any good business man might do. I do not think there is any restraint be- yond that, is there, Mr. Bergin ? Mr. BERGIN. No, sir. EXCHANGE OF BONDS. Q. The point of my question is this : Have you not in fact surrendered over three million dollars of first-mortgage bonds of the Southern Pa- cific belonging to your sinking fund and accepted in lieu thereof the bonds of the Central Pacific issued under its second or third mortgage made in October, 1886? A. I do not know how much we have done. The trustees have often exchanged bonds at a premium for bonds which, to our knowledge, were just as good as the bonds in the fund, but which, not having an established market price, would have commanded less, and so far would have been a benefit or profit to the sinking fund. Q. What are those bonds quoted at, the bonds under the mortgage of October, 1886 ? A. I do not think they are quoted on the market. They sell here. We have been offered for them par in this market. I think that we could sell large quantities of them here at par. They are 6 per cent, bonds and they are secured by a second mortgage on the road. The mortgage is on the unaided portion of the company's property and is not a lien upon the aided portions. HAVE STOCKS OR BONDS BEEN UNLAWFULLY ISSUED? " Question 16. Whether any new stock or bonds have been issued, or any guarantees or pledges made contrary to, or without authority of law." P R VOL iv 11 2492 U. S. PACIFIC RAILWAY COMMISSION. NO ISSUES OB PLEDGES BY CENTRAL PACIFIC CONTRARY TO LAW. Answer 16. No new stocks or bonds have been issued, or any guar- antees or pledges made contrary to, or without authority of the law. The WITNESS. Stock has been issued to aid in the construction and secure a through line to Oregon. The valuable properties of the Cen- tral Pacific to-day are the unaided lines. By the CHAIRMAN : Q. Have you not made guarantees of bonds of other roads since the passage of the act of Congress of 1873? A. I cannot call to mind that the Central Pacific has made any. I do not think it has. If Mr. Miller were here he could tell. I do not think the Central Pacific has ever guaranteed any bonds. GUARANTEE OF BONDS OF CALIFORNIA PACIFIC. Q. How is it about the California Pacific bonds? A. The California Pacific is a short line of road between here and Sacramento, and it was a competing line to our 137 miles, and in the process of time it passed into and under our control. We bought stock in the road. After op- erating it for a time we saw that it could not pay the interest on the bonded indebtedness. The road did not do well. It was washed out, and was unable to meet its requirements. Upon the Central Pacific agreeing to guarantee the interest, the bonded indebtedness was veiy much reduced, and a lower rate of interest was accepted. I cannot give you the exact amount, but the interest on the remaining bonds was reduced so as to make it much more easy to handle. Q. What was the date of the guarantee ; what was the year ? A. I cannot give you the year, but it was some years ago. DIRECTORS AND EMPLOYES' INTEREST IN OTHER COMPANIES. "Question 17. Whether any of the directors, officers, or employe's of said companies, respectively, have been, or are now, directly or indi- rectly interested, and to what amount or extent, in any other railroad, steamship, telegraph, express, mining, construction, or other business, company, or corporation, and with which any agreements, undertak- ings, or leases have been made or entered into." INTEREST OWNED IN OTHER COMPANIES BY PRESIDENT STANFORD. Answer 17. I may state that I have been and am interested in the following-named companies, and to the extent set opposite the respect- ive name of each company. I know that some of the other directors of the company have been interested in some of these companies 5 and I believe, but do not know, that they are interested in all of them, the extent of their interest in which I am not prepared to state, as there is no joint ownership of the stock. As to the absolute correctness of the list that I am about to read, I am not prepared to say, because it was only furnished just as I was coming away, and I have not been over it, but I presume that it is correct, inasmuch as it has been furnished by the secretary. 1. California Pacific Eailroad. I have 24,755 shares of stock in this company. LELAND STANFORD. 2493 2. Southern Pacific of California. I bad 70,936 shares of stock in this company until December 8, 1884, when I transferred it to the Southern Pacific Company in exchange for 42,561.6 shares of its stock. 3. Southern Pacific of Arizona. I had 49,987 shares of stock in this company until December 8, 1884, when T transferred it to the Southern Pacific Company in exchange for 29,992.2 shares of its stock. 4. Southern Pacific of New Mexico. I had 16,722 shares of stock in this company until December 8, 1884, when I transferred it to the South t - ern Pacific Company in exchange for 10,033.2 shares of its stock. 5. Southern Pacific of Kentucky. I have 150,233.3 shares of stock in this company. 6^ Stockton and Copperopolis Eailroad Company. I have 586 shares of stock in this company. 7. Berkeley Branch Eailroad. I have 231 shares of stock in this com- pany. 8. Amador Branch Eailroad. I have 1,560 shares of stock in this com- pany. 9. Los Angeles and San Diego Eailroad. I have 370 shares of stock in this company. 10. California and Oregon Eailroad. I had stock in this company, and took Central Pacific stock for it when it was consolidated with that company. Do not remember the number of shares. 11. San Joaquin Valley Eailroad. Same answer as No. 10. 12. San Francisco, Oakland and Alameda. Same answer as No. 10. 13. Western Pacific Eailroad. Same answer as No. 10, 14. Contract and Finance Company. I had 12,500 shares of stock in this MONEY LOANED BY CENTRAL PACIFIC RAILROAD COMPANY. Answer 18. The amount loaned any company, corporation, or indi- vidual by the Central Pacific Eailroad Company, being the amount owing to the company June 30, 1887, is as follows : Stockton and Copperopolis Railroad Company $115, 653. 80 U. H. Giddings, New York , ,.. 93.13 2494 U. S. PACIFIC RAILWAY COMMISSION. B. E. Smith : $100,000.00 T. J. Edmondson : 8,000.00 J. H. Flagg 2,000.00 J. W. Young 35,16f\34 Coos Bay Coal Company 4,048.30 Total : 264,960.62 This statement gives only the present amount. The amounts in detail from the organization would be very voluminous. The accountants of the Commission are uow examining the books of the company ; if any statement in detail of amounts which have been loaned is desired, they will doubtless make it. LOANS FROM OTHERS. " Question 19. What amounts of money or credit have been or now are borrowed by any of said companies, giving names of lenders and the purposes for which said sums have been and now are required." MONEY BORROWED BY CENTRAL PACIFIC RAILROAD. Answer 19. The amounts of money or credit borrowed by the Cen- tral Pacific Eailroad Company, being amount owing by the company June 30, 1887, is as follows : C. J.Torbert, note $2,500.00 Southern Pacific Company balance of account 793, 293. 88 Company's operating ledger balance of account 5, 630. 87 Trustees land grant mortgage 1, 508, 549. 26 Land suspense account being payments made on lands sold, not yet con- veyed 6,754.80 Total 2,316,719.81 This gives only the present amount ; the amounts in detail from the organization would be very voluminous. The accountants of the Com- mission are examining the books of the company ; if any statement in detail of amounts which have been borrowed is desired, they will doubt- less make it up. PAYMENTS WITHOUT SUFFICIENT VOUCHERS. "Question 20. What amounts of money or other valuable considera- tion, such as stocks, bonds, passes, and so forth, have been expended or paid out by said companies, whether for lawful or unlawful purposes, but for which sufficient and detailed vouchers have not been given or filed with the records of said companies T 7 PAYMENTS APPROVED BY DIRECTORS AND STOCKHOLDERS. Answer 20. In answer to interrogatory No. 20 I have to say that the company in its settlement with the Government proposes to claim nothing as expenses in determining the amount of net earnings in which the Government has an interest for which the company does not fur- nish full and satisfactory vouchers. It is entirely immaterial to the Government and the Government can have no interest in knowing what amount of money may have been expended for which the vouchers on file are not sufficient in detail or otherwise. I wouldj however, remark LELAND STANFORD. 2495 that all items of expenditure for which detailed vouchers are not on file have from time to time been approved by the directors and stockholders of the company. INFLUENCING LEGISLATION. " Question 21. And further, to inquire and report whether said com- panies, or either of them, or their officers or agents, have paid any money or other valuable consideration, or done any other act or thing for the purpose of influencing legislation." Answer 21. In answer to interrogatory No. 21, I have to say in be- half of the Central Pacific Eailroad Company that no deduction will be made from that portion of the net earnings belonging to the United States on account of any expenditure for which detailed and satisfactory vouchers are not furnished. We will account to the Government as if no such expenditures had been made. By the CHAIRMAN : Q. Do you omit entirely the question of legislation ! A. I have given my answer to that question. CONSOLIDATION OF UNION PACIFIC RAILWAY. " Question 22. And to investigate and report all the facts relating to an alleged consolidation of the Union Pacific Eailroad Company, the Kansas Pacific Eailroad Company, and the Denver Pacific and Tele- graph Company, into an alleged corporation known as the Union Pa- cific Eailway Company. Said investigation shall include the alleged sale of the stock of the Kansas Pacific Eailroad Company to the Union Pacific Eailroad Company, and all the circumstances and particulars pertaining to the said alleged sale." Answer 22. This interrogatory relates to other corporations and re- quires no answer from me. ASSETS AND OTHER ENTERPRISES. " Question 23. And whether any of the Pacific railroad corporations which obtained bonds from the United States to aid in the construction of their railroads have expended any of their money or other assets in the construction, or to aid in the construction of other railroads, or in- vested of their moneys or other assets in the stocks or bonds of any manufacturing, mining, or commercial companies or corporations, or of other railroad corporations." Answer 23. The Central Pacific Eailroad Company has expended no money or assets in the construction or to aid in the construction of other railroads. It never had any interest in other roads except in the way of lease, or by consolidation. The company has invested a very limited amount of money in bonds and stocks of other corporations, the extent and character of which will be shown in my answer to the next ques- tion. EXTENT OF INVESTED ASSETS. u Question 24, And if any such expenditures or investments have been made, the extent and character thereof made by each of said corpora- tions shall be inquired into." 2496 U. S. PACIFIC KAILWAY COMMISSION. Answer 24. The extent and character of such expenditures and in- vestments are as follows : Description. Date of ownership. Value. Disposition. Remaining on hand December 31, 1886. Daily American Ha ", newspaper 1864 $5 000 00 Charged to expense ac- stock. 1866 48, 937. 50 ) count, Dec. 10, 1866. July 29 1868 sold for pany bonds i 1867 28, 738. 37 V $5, 766. 37. f j ^ Georgetown Wa^on Road stock 1867 1 000.00 Charged to profit and Austin and Reise River Transpor- Feb. 8, 1872 1, 000. 00 loss account, Aug. 31, 1868. Nov. 18, 1873, sold for tation Company stock, 40 shares. C. P. R. R. first mortgage bonds, 21 . S J Valley R R. bonds 1 June 14, 1873 Mar. 10, 1874 21 735.001 775. 00 ! $600; dividends, 600; charged to profit and loss account, $200. . Transferred to sinking S J Valley R. R bonds, 1 Feb. 14, 1876 9'>0. 00 [ funds An" 1 19 1879. W P R R. bonds 1 Feb. 11,1875 852. 50 J Green Point Dairy and Transporta- June 12, 1874 1, 500. 00 May 17, 1877, sold for tion Company stock, 30 shares. Nevada Company Narrow Gauge Mar. 1,1877 6, 300. 00 $765; construction ac- count, $735. Dec., 1878, sold for $6, 300. Railroad bonds, 7. Coos Bay Coal Company : 34 495 shares stock . Oct. 30, 1875 136 871 30 With assessments &c 400 acres land .... 1876 19 578 98 With expenses ....... $156 4^0 8 Wells, Fargo & Co., stock, 8,250 shares. Sold for Sept. 30, 1879 825, 000. 00 216 015 67 Sold June 30 1880 Do 4 132 1 9 4 51 Sold Dec 31 1880 Do 85 554 50 Sold May 12 1881 . Do 507 101 90 Sold June 13 1881 Sacramento Transportation Com- ? June 30, 1882 940, 796. 58 C 75,000.00? 80, 000. 00 Notes of Fisk & Hatch (see note 830 665 46 below). Secured by Chesapeake and June 14, 1875 Ohio Railroad bonds. Changed to : Chesapeake and Ohio bonds, 7 percent., 1,344. Chesapeake and Ohio stock, first preferred, 255 June 26, 1884 June 26, 1884 > 830, 655. 40 shares. Chesapeake and Ohio stock, second preferred, 11,586 shares. Chesapeake and Ohio June 26, 1884 Sept. 3, 1884 J 3, 325. 60 stock, second preferred 405 shares. Scrip 1887 833, 891. 06 Sold Sept 3 1884 833 872 19 Forest Hill Commercial and Toll ( Nov. 20,1884 2, 000. 00 I 4 000 00 Road Company stock J June 20, 1885 Last received 2, 000. 00 3 l'-*0 00 120 00 remaining unsold. Central Pacific Railroad capital Jan. 18,1872 Dec 31 1886 724 500. 00 724 500 60 stock, held in trust for company by C. P. Huntington, agent. 1, 798, 942. 47 SETTLEMENTS WITH FISK & HATCH. Fisk & Hatch, bankers of New York, acted as financial agents of the company, and at the time of their failure in 1874 gave their notes, amounting to $830,665.46, in settlement of account, with bonds of Chesa- peake and Ohio Railroad, amounting to $1,457,000, as security. Fisk & Hatch suspended payment again iu 1884, and in settlement for amount LELAND STANFORD. 2497 of notes and interest the Central Pacific Eailroad Company took Chesa- peake and Ohio securities, as above shown, June 26, 1884. The 1,344 bonds were exchanged January 28, 1887, for 16,800 shares of stock of the Newport News and Mississippi Valley Eailroad Company. By Commissioner LITTLER: Q. What is the total amount? A. One million seven hundred and eighty-eight thousand nine hundred and forty-two dollars. The prin- cipal amount of that comes through the failure of Fisk & Hatch. On their failure, some years ago, they were indebted to our company. They were pur financial agents at New York, and they gave us their note with the balance of securities. Then they failed again, and again we settled with them, and took what they had. Among other things we took these securities, and that Fisk & Hatch transaction makes the larger portion of this amount. Q. Do you mean to say that you acquired all the securities mentioned on that paper in that way? A. No, sir ; but we so acquired the princi- pal portion of them. COOS BAY COAL COMPANY. We became interested in the Coos Bay Coal Companies because we were largely at the mercy of the coal dealers, and had to pay extraor- dinary prices. For instance, we paid as high as $8 per ton for local coal which can now be bought for $4.50 per ton. In order to be inde- pendent we got this mine, and by so doing have been able to bring down the prices of outside coal. In this way we have secured a very large saving to the company. We used to be very much at the mercy of the coal dealers at times. We buy coal in England, Australia, and in the British possessions. INTEREST IN AUXILIARY ROADS. " Question 25. And also the present interests of any of said corpora- tions in the railroads auxiliary to their respective railroads." Answer 25. The Central Pacific Eailroad Company has no present interest in the railroads auxiliary to its lines, and never has had ex- cept through consolidations and leases, like the San Joaquin Valley, the California and Oregon, and the Oakland and Alameda connections, &c., which constitute the most valuable portions of the Company's prop- erty. The roads consolidated with the Central Pacific Eailroad Com- pany and those that have been leased by it are shown at length in the following statement : THE CENTRAL PACIFIC RAILROAD COMPANY. CONSOLIDATIONS. California and Oregon Railroad Company and Marysville Railroad Company, Jan- uary 16, 1868. Name, California and Oregon Railroad Company. California and Oregon Railroad Company and Yuba Railroad Company, December 18, 1869. Name, California and Oregon Railroad Company. The San Francisco aiid Alameda Railroad Company, and the San Francisco, Stock- ton and Alameda Railroad Company, October 15, 1868. Name, The San Francisco and Alameda Railroad Company. The Western Pacific Railroad Company and San Francisco Bay Railroad Company, November 2, 1859. Name, The Western Pacific Railroad Company. The Central Pacific Railroad Company of California and The Western Pacific Rail- road Company, June 23, 1870. Name, Central Pacific Railroad Company. 2498 U. S. PACIFIC RAILWAY COMMISSION. The San Francisco and Oakland Railroad Company and The San Francisco ami Aiameda Railroad Company, June 29, 1870. Name, San Francisco, Oakland and Ala- meda Railroad Company. Central Pacific Railroad Company, The California and Oregon Railroad Company, The San Francisco, Oakland and Aiameda Railroad Company, and The San Joaquin Valley Railroad Company, August 22, 1870. Name, Central Pacific Railroad Com- pany the present name of the company under the above consolidations. LEASES. Roads once leased by the Central Pacific Railroad Company now leased by the South- ern Pacific Company : Berkeley Branch Railroad. Northern Railway. Stockton and Copperopolis Railroad. San Pablo and Tulare Railroad. Amador Branch Railroad. California Pacific Railroad. Southern Pacific Railroad (of California). Southern Pacific Railroad (of Arizona). Southern Pacific Railroad (of New Mexico). Los Angeles and San Diego Railroad. Los Angeles and Independence Railroad. NAMES OF STOCKHOLDERS. " Question 26. And said Commission shall also ascertain and report the names of all the stockholders in each of said companies from its organi- zation to the date of the investigation herein provided for, as they ap- pear upon the books of said companies at the date of its annual meet- ing in each year, and the amount of stock held by each." Answer 26. In reply to this interrogatory I would say the account- ants appointed by the Commission have in their possession the books of the company containing this information and are preparing the state- ment called for. WHAT STOCKHOLDERS PAID FOR STOCK. "Question 27. What consideration, if any, was paid by each stock- holder to said company for his stock, and when and in what property such payment was made." Answer 27. In answer to this question, the statement of Mr. E. H. Miller, jr., secretary of the company, marked " Exhibit 5," is submitted hereto, and made a part hereof, showing the consideration paid the company by each stockholder receiving stock, and when an I in what property such payment was made. The dates of payment given in the subjoined list are the dates when the amounts subscribed were fully paid up. When the stock was transferred or forfeited, the date of the last payment of the person holding the stock is given. DATE WHEN EACH STOCKHOLDER BECAME SUCH. "Question 28. The date when each stockholder so appearing on the books became such." Answer 28. This question has been fully answered in the answer to interrogatory No. 27. By Commissioner ANDERSON : Q. Does Mr. Miller's report represent that the stock has all been paid for' in full ? A. I think that all the stock has been paid for in full. At the beginning there was stock where the payments were not made in LELAND STANFORD. 2499 full. We levied assessments and some of those assessments were never paid. Q. I mean does Mr. Miller's report show stock issued to construction companies directly and consider that as a payment in full ? A. I pre- sume so. I have never looked over the report. Q. Have you his report here ? A. Yes, sir. Q. And that is submitted with your paper ? A. Yes ; and I presume that will show all that. The greater part of the stock was issued for construction purposes. We managed to obtain a subscription for ten shares here in San Francisco after our books had been open for some weeks and that was all. Money at that time was here worth from two to two and a half per cent, per month, and outside of ourselves there was hardly anybody who had faith in the ultimate success of the enter- prise. They did not care to invest their money, which was worth two to two and a half per cent, in an enterprise in which they had no confi- dence and where, of course, there could be no returns until its comple- tion. STOCK HELD IN TRUST. a Question 29. And whether stock is now held or has heretofore been held in the name of any person in trust for the benefit of any other, and the names of all such persons." Answer 29. In answer to this interrogatory I will state that I am unable to say what stock has been held in trust, but the books being in the possession of, and under examination by, accountants appointed by the Commission, their report will undoubtedly contain the desired information. TOTAL AMOUNT OF STOCK. " Question 30. The* total amount of stock in each company J 9 Answer 30. The total amount of stock in the Central Pacific Railroad Company is $100,000,000, of which $68,000,000 has been issued. This includes the Western Pacific as well as all other railroads consolidated with the Central Pacific. An analysis and distribution byroads of the capital stock will be found under question No. 27. Q. You have skipped interrogatory 28. A. That has been answered in answer to No. 27. You will remember what that answer is. I will state that we were organized under the laws of this State to build our railroad to the State line. At that time the estimate was $8,500,000, probable cost, and the stock was made out accordingly. There is a law in our State, however, which provides that we cannot issue bonds to a greater amount than the capital stock of the company. We found, as we proceeded, that it would cost more than $8,500,000 to build over the mountains, and that the Government aid and the first-mortgage bonds would amount to a great deal more. We therefore increased the capital stock to twenty millions which would be about the estimated cost. After that, when Congress passed a law allowing us to build east until we should meet the Union Pacific, we again increased the capital stock, not knowing where .we would meet that road. We then made it a hun- dred millions. That accounts for the increase of capital stock from time to time. By Commissioner LITTLER : Q. In that connection let me ask you where is the residue of that stock ? A. It has never been issued. When we got through, nobody wanted that stock 5 but it was wonderful how the country developed, 2500 U. S. PACIFIC RAILWAY COMMISSION. for a time, especially in Nevada. If the promises of those early years had been continued we would have had a great property over there. INCREASE OF STOCK. " Question 31. Ancl the dates and amount of any increase of such stock, and the reason for such increase." Answer 31. The organization of the Central Pacific of California pro- vided for $8,500,000 of stock. It was soon ascertained that the road would cost more than that. Then upon the estimated cost the capital was increased to twenty millions, the principal reason being that under the laws of California the bonded indebtedness could not exceed the capital stock. Afterwards, by the act of Congress of July 3, 1866, it was provided that the Central Pacific might build eastward until it should meet the Union Pacific, and not knowing where that might be, the capital stock was again increased to one hundred millions. SALARIES OVER $5,000. "Question 32. And the amount of the annual salaries or compensa tion that are now, or at any prior time have been paid to any officer or employe" of said company, when such salary or compensation amounts to $5,000 or more per annum." Answer 32. In reply to this interrogatory, I submit a tabulated state- ment of annual salaries amounting to $5,000 or more, paid by the Cen- tral Pacific Railroad Company since its organization to any officer or employe, and all bonuses or donations which have been given or paid to any such person. The tabulated statement of annual salaries contains only the names of those employed and giving all of their time to the company. Those persons who have been employed by the comparft, giving their services only from time to time as they may be called upon by the company, are not included. Upon the consummation of the lease of the Central Pa- cific to the Southern Pacific Company, the services of the most of the employe's were transferred to the Southern Pacific Company. Statement of annual salaries amounting to $5,000 or more paid by Central Pacific Eailroad Company since its organization, to any officer or employe, and all bonuses or donations which have been given or paid to any such, person. Office. Name of officer. Annual salary. From To President Iceland Stanford .... $10, 000. 00 June 28, 1861 Mar. 31 1885 Vice-president . . C P Huntington sal- 12 500.00 June 28, 1861 July 1, 1863 Financial agent and attorney Treasurer ary and services. C... .do 1C. P. Huntington, sal- ary. Mark Hopkins 25, 000. 00 10, 000. 00 10, 000. 00 July 1,1863 July 1,1864 July 1,1863 July 1, 1864 Mar. 31,1885 Mar. 31,1878 Agent and attorney E B Crocker 10,000.00 Jan. 1,1864 Dec. 31,1869 Secretary and agent James Bailey ......... 10, 000. 00 Jan. 1, 1861 July 1, 1863 Superintendent and second vice-pres- Chief engineer Secretary ; Charles Crocker T.D.Judah E H. Miller, ir 10,000.00 10, 000. 00 10, 000. 00 Jan. 1,1866 June 28, 1861 Jan. 1, 1867 Mar. 31,1885 Nov. 2, 1863 July 1, 1878 Do...... 1 13, 000. 00 July 1,1878 Mar. 31,1885 Assistant secretary E S Miller 5, 000. 00 May 1, 1882 Mar. 31, 1885 Financial director . D D Colton 10, 000. 00 Oct. 1, 1874 Oct. 4, 1878 Treasurer E W Hopkins 5, 000. 00 Aug. 1, 1878 Dec. 31, 1882 Treasurer Timothy Hopkins 5, 000. 00 Jan. 1, 1883 Mar. 31,1865 S S Montague 5, 000. 00 Jan. 1, 1869 Dec. 31, 1869 Do 6, 000. 00 Jan. 1, 1870 Dec. 31,1871 Do... 8, 000. 00 Jan. 1,1872 Sept. 30, 1883 LELAND STANFORD. 2501 Statement of annual salaries amounting to $5,000 or more paid by, #c. Continued. Office. Name of officer. Annual salary. From To General solicitor S W Sanderson* $12 000 00 Jan 10 1870 Dec 31 1870 Do .. 18, 000. 00 Jan 1 1871 Au" 30* 1875 Do 24, 000. 00 Sept 1 1875 Mar 31* 1885 Attorney 6 000 00 Jan 1 1869 Dec 31 1871 Do. 8, 000. 00 Jan. 1 1872 Dec 31 1874 Do 10, 000. 00 Jan 1 1875 Sept 30 1881 Attorney H S Brown 5 000 00 Jan 1 1873 Aug 3l' 1875 Do 8, 000. 00 Sept. 1 1875 Mar 31 188") Dot 4. 500. 00 Sept. 1 1875 Mar 31 1885 Assistant general solicitor 15 000 00 May 3 1881 Mar 31 188** L D Mclkisick 6 000 00 Sept l' 1882 Dec 3l' 1883 Do 8, 000. 00 Jan. 1 1884 Mar 31* 1885 Dot 1, 000. 00 Jan. 1 1884 Dec 31 1885 Agent and assistant to president S. T. Gage Do $6, 000. 00 8, 000. 00 Aug. 1,1871 Nov. 1 1882 Oct. 31, 1882 Mar 31 1885 B B Redding 6 000 00 Jan 1 1871 Apr 30 1873 Do 6, 000. 00 Feb. l' 1874 Au" 31 1882 Attorney C H Tweed 13 333 33 Jan 12 1883 Mar 31 1885 C H Sherril 20 000 00 Mar 1 1876 Mar 31 1885 10 000 00 July 1 1867 Oct 30 1882 6 000 00 Apr 1 1882 Mar 31 1885 20 000 00 Jan 1* 1868 Mar' 4* 1875 Laud agent W.H. Mills Do 5, 000. 00 7, 000. 00 Jan. 1, 1883 July 1, 1883 June 30,1883 June 30 1887 10, 000. 00 Sept. 30 1871 Sept 30 1876 Consulting engineer . George E. Gray 10, 000. 00 Mar. 1, 1867 Nov 30 1870 General superintendent and general A. N. Towne 13, 000. 00 Sept. 1, 1869 July 31 1879 manager. Do .. 18, 000. 00 Au<*. 1 1879 Apr 30 1882 Do 25, 000. 00 May 1, 1882 Mar 31 1885 Assistant general superintendent . . - John Corningt 5, 000. 00 Aug. 1,1871 Au 1 670.69 Do Tehama Dec* 30* 1875 3 411.85 1876 Do... El Dorado Dec 26 1876 Year '76-77 1, 146. 52 Do Colusa Dec 26 1876 10 171.83 Do Yolo Dec 26 1876 71.77 Do Sierra Dec 26 1876 225. 04 Do Nevada. Dec 28 1876 2 425. 35 Do... Placer : District No. 1 Dec 28 1876 507. 37 Do District No. 2 Dec 28 1876 1, 259. 25 Do Do Butte Tehama Dec. 27, 1876 Dec 27 1876 2, 291. 98 5, 102. 35 Do. Sacramento Dec. 30 1876 49.10 1877 Do Placer Feb 26 1877 Miscs $0 67 Do Colusa Feb 27 1877 Miscs 21 67 Do . Yolo . . Feb 27 1877 Miscs 7 98 Do ... . Sutter . Feb 28 1877 Miscs 44 08 Do do Mar 1 1877 Miscs 858 40 Do . Tehama Mar 6 1877 Miscs 5 66 938. 46 Do Sierra . ' Dec 31 1877 Years 77 78 237. 47 Do Colusa ... Dec 31* 3877 1, 117. 76 Do ... do Dec 31 1877 $10 114.96 Do Less taxes paid under protest Sept 13 1875 8, 063. 61 Do Sutter. . Dec 31 1877 $2 051 35 287. 73 Do El Dorado Dec 31 1877 1,024.15 Do , Tehama . Dec 31 1877 4, 687. 34 Do Butte Dec 31 1877 1, 657. 84 Do Yuba Dec 31 1877 1, 911. 42 Do... Placer: District No. 1 Dec 31 1877 439. 27 Do District No 2 Dec 31 1877 857. 31 Do Yolo Dec 31 1877 66.40 Do... Nevada . Dec 31 1877 2,197.92 Do Dec 31 1877 37.92 Nevada Churchill Nov 6 1877 258. 85 Do Do Elko Lander Nov. 14, 1877 Nov. 14 1877 Years"'77-78 7, 200. 00 1,311.96 Do Nov 14 1877 9 633 28 Do Lyon Nov 14 1877 ' 129. 85 Do 'V\/"ashoe Nov 14 1877 1 438.33 1878 California Sutter Jan 15 1878 Miscs. $49. 50 Do Tehama Feb 21 1878 Miscs. 2. 30 Do Butte .. Feb 23 1878 Miscs. 340. 09 Do Yolo Feb 26 1878 Miscs. 6. 04 Do ' Sacramento Mar 5 1878 Miscs 3 65 Nevada Washoe Mar. 25 1878 Miscs. 29.19 430. 77 LELAND STANFORD. Taxes paid on lands Continued. 2513 Location. Date of pay- State. County. ment. irenott. Amount. 1878 Nevada Lander Nov 12 1878 "V"par '78 '7Q *1 O9O 00 Do Churchill Nov 13 1878 265 77 Do Elko Nov 14 1878 4 405 77 i Do Humboldt Nov 14 1878 2 777 43 Do Wash oe Nov 15 1878 1 315 64 Do Do do Nov. 19, 1878 Nov 12 1878 310. 80 004. oft California Sutler Dec 30 1878 .............. 345 60 Do Sierra Dec 30 1878 236 60 Do Butte Dec 31 1878 ............. 3 259 98 Do Colusa Dec 31 1878 2 716 61 Do El Dorado Dec 31* 1878 940 80 Do Dec 31 1878 7 632 42 Do Yuba Dec 31 1878 .............. 737 62 Do Dec' 3l' 1878 2 iGi 91 Do Placer : District No. 1 Dec 31 1878 358 27 Do District No. 2 Dec 31 1878 859 01 Do Yolo Dec 31 1878 35 27 Do Sacramento .. . .... ......... Dec 31 1878 45 07 1879 Nevada Churchill Nov 1 1879 Years '79-'80 279 63 Do Nov 10 1879 94 00 Do Eureka .. . ...... Nov 10 1879 336 67 Do Storey Nov 11 1879 157 34 Do Elko Nov 11 1870 3 969 00 Do Nov 12 1879 3 623 49 Do "Washoe Nov 12 1879 1*447 61 Do Nov 10 1879 2 025 00 California Butte Dec 29 1879 2 978 29 Do Sutter Dec 29 1879 377 69 Do Dec 29 1879 1 486 58 Do .. .. do Dec 29 1879 1 096 08 Do El Dorado Dec 29 1879 939 06 Do Yuba Dec* 30* 1879 53i 12 Do . Yolo Dec 30 3879 34 66 Do Dec 31 1879 2 099 88 Do Placer : District No 1 Dec 31 1879 400 40 Do District No 2 Dec 31 1879 Years '79-'80 804 CO Do Tehama ................ Dec 31 1879 10 346 54 Do Dec 31 1879 Miscs. $19. 20 Do Dec 31 J879 Miscs. 37.90 Do Sutter Feb 20 1879 Miscs. 16.25 Do Tehaina ........ Feb 24 1879 Miscs. 65.50 Do.... Feb 27 1879 Miscs 20. 66 159 51 Do... Dec 26 1879 Years '79-'80 357.24 1880 Do . . El Dorado Jan 28 1880 Miscs. $9.54 Do Sutter Feb 14 1880 Miscs 9 82 Do Butte Feb 14 1880 Miscs. 9. 35 Do Feb 14 1880 Miscs 8 50 Do Yuba Feb 16 1880 Miscs 119.38 Do Feb 17 1880 Miscs 8 21 Do Feb 18 1880 Miscs 66 55 Do Shista Feb 21 1880 Miscs 15 77 Do Yuba Feb 24 1880 Miscs 34 05 Do Nevada ..................... Feb. 25 1880 Miscs. 4. 55 Do Sutter Feb. 28, 1880 Miscs. 206. 83 Do Placer . June 4 1880 Miscs. 25.71 Less credit of ............... June 2 1880 Miscs. 518. 26 Miscs. 206. 80 311 46 Nevada Churchill Nov. 1 1880 Years '80-'81 295 84 Do Eureka Nov. 6 1880 385 07 Do Elko Nov. 9 1880 3 882 08 Do Humboldt . Nov. 9 1880 4 172 44 Do "Washoe Nov. 9 1880 1 350 90 Do Lyon . ............... Nov. 9 1880 102 70 Do... Storey .- Nov. 9 1880 67 30 Do Zumwalt School District Nov. 19 1880 8.65 California. . . Butte Dec. 15 1880 4 890.30 Do El Dorado Dec. 15 1880 975. 49 Do Nevada . ................. Dec. 15 1880 1 811.77 Do... Placer : DistrictNo.l Dec. 15 1880 587. 78 Do... District No. 2 .. Dec. 15. 1880 812. 56 2514 U. S. PACIFIC RAILWAY COMMISSION. Taxes paid on lands Continued. Location. Date of pay- State. County. ment. 1880 California Shasta Dec 15 1880 $6 773 71 Do Sierra Dec 15 1880 353 30 Do Yuba Dec 15 1880 1 5 l >7 89 Do . Colusa Dec 16 1880 1 487 32 Do do Dec 16 1880 1 194 62 Do Sacramento . Dec 16 1880 82 96 Do Tehama Dec 16 1880 9 311 37 Do Yolo . .. Dec 16 1880 60 24 1881 Do Butte Feb 16 1881 Miscs. $59. 16 Do Colusa Feb 16 1881 Miscs. 32.30 Do do Oct 21 1881 Miscs. 285. 68 Do do Dec 23 1881 Miscs. 16.06 393. 20 Do.,. Nevada Feb 18 1881 Miscs. 63.17 Do .. Yuba Feb 19 1881 Miscs. 18.25 Do Tehama . .' Mar 4 1881 Miscs. 24.05 Do do Mar 10 1881 Miscs. 66. 80 Do .. do Mar 23 1881 Miscs. 13.32 Do .. Yolo Dec 8 1881 Miscs. 43.23 Do Zumwalt School District Dec 22 1881 Miscs. 19.32 248 14 . Do... Yolo Dec 8 1881 Yeara '81-'82 43.23 Do . Sacramento . . ......... Dec 10 1881 52 28 Do Colusa . ........... Dec 10 1881 3 748 11 Do El Dorado Dec. 10 1881 946 10 Do . Shasta . . Dec 12 1881 5 843 28 Do.... Si erra Dec. 14 1881 353 36 Do . gutter . . Deo 14 1881 230. 62 Do Tehama ...... Dec 15 1881 9 203. T9 Do Nevada - Dec. 15 1881 1 724 56 Do... Placer : District No 1 . Dec 19 1881 400. 16 Do .. District No 2 Dec 19 1881 S13. 64 Do . .. Plum as Dec 19 1881 96 58 Do Yuba . . Dec 19 1881 2 452.80 Do Butte Dec. 19 1881 4 903.60 Nevada Churchill Nov 3 1881 301. 14 Do Eureka Nov 10 1881 481. 25 Do Do Lyon Storey Nov. 10, 1881 Nov 10 1881 132. 00 123. 04 , Do "Fumboldt ... Nov 11 1881 4, 123. 78 Do Do Elko "Washoe Nov. 11, 1881 Nov 11 1881 3, 935. 25 1, 557. 56 1882 California Tehama Feb. 3 1882 Miscs. $20. 79 Do ... Butte Feb. 11 1882 Miscs. 81. 70 Do Nevada Feb. 11 1882 Miscs. 60.45 Do El Dorado Feb. 11, 1882 Miscs. 25.84 Do gutter Feb. 11 1882 Miscs. 14. 84 Do Yuba Feb. 13, 1882 Miscs. 24.43 Do Colusa Feb. 14, 1882 Miscs. 387. 66 Do do .... Feb. 21, 1882 Miscs. 202. 29 Do do Mar. 31, 1882 Miscs. 91.48 Do do Feb. 16, 1882 Miscs. 42.84 Do Placer .. Feb. 18, 1882 Miscs. 9. 99 Do do Feb. 27, 1882 Miscs. 5. 20 Do Tehama Feb. 27, 1882 Miscs. 20.63 Do do . Mar. 27, 1882 Miscs. 425. 30 Do do Mar. 27, 1882 Miscs. 56.93 Do Nevada Feb. 27, 1882 Miscs. 16.17 1, 486. 54 Do Dec. 13 18b2 Years '82-'S3 25 23 Do Placer (District No 1) Dec. 15 1882 346 40 Do do Dec. 15, 1882 Years '82-'83 806 40 Do Dec. 13 1882 1,550. 15 Do Sierra .... Nov: 27, 1882 339. i>2 Do Yuba Dec. 13, 1882 2, 424. 76 Do Sutter Dec. 19, 1882 226. 38 Do Butte Dec. 29, 1882 6, 773. 55 Do Tehama Dec. 23, 1882 7, 861. 13 Do Shasta Dec. 26, 1882 5, 182. 79 Do El Dorado Nov. 29, 1882 920. 63 Do Colusa Dec. 13, 1882 3, 774. 18 Do Yolo Nov. 21, 1882 22.16 Nevada , \Vasho e Nov. 20, 1882 1. 485. 00 Do.... Do... Lyon Churchill .. Nov. 13, 1882 Nov. 6,1882 122. 00 301. 14 LELAND STANFORD. Taxes paid on lands Continued. 2515 TTftar Location. Date of pay State. County. ment. Period. Amount. 1882 Nevada Storey Nov 15 1882 JK194 7R Do Humbo 7 dt Nov 15 1882 40 SO t\.t Do Lander Nov 16 1882 1784. 40 Do Eureka Nov 16 188'-* ..... . ....... Do Elko Nov 15 1882 * 1883 California . . Placer Feb 2 1882 Miscs $10 00 Do.. Feb 10 1882 MJSCS 65 01 Do do Mar 4, 1882 Miscs 308 60 Do do Mar 20 1882 Miscs 97 08 Do Nevada Feb 16 1882 Miscs 65 34 Do Sacramento Feb 17 1882 Miscs 14 35 Do El Dorado Feb 27 1882 Miscs 5 00 Do Yuba . Mar 1 1882 Miscs 30 51 Do Placer Mar 2 1882 Miscs 29 23 Do, Bntte Mar 20 1882 Miscs 13 60 coo 70 Do Sacramento Dec 31 1882 Years '83 '84 14 08 Do Placer : District No 1 Dec 31 188** -|f!9 Q" Do District No. 2 Dec 31 188 9 84 9 44 Do Nevada Dec 31 1882 1 601 46 Do Sierra Dec 81, 1882 ...... ..... 405 91 Do.... Plumas Dec 31 1882 196 07 . Do Ynba Dec. 31 1882 2 068 43 Do Sntter Dec. 31 1882 218 44 Do.... Butte Dec 31 1882 5 636 91 Do . Tehama Dec 31 1882 G 49 56 Do Shasta Dec 31* 1882 4 G55 85 Do.. El Dorado Dec 31 1882 889 94 Do Colusa Dec.' 3l' 1882 3 928 15 Do Yolo Dec 31 ' 1882 22 03 Nevada... Washoe Dec 31 1882 1 300 00 Do Nov 20 188 9 J2 00 Do Churchill Nov* 2o' 188^ ............... 301 16 Do Storev Nov 20 1883 Years '83-'84 68 15 Do Humboldt Nov 20 1883 3 963 70 Do Lander Nov 20 1883 1 710 34 Do Eureka Nov 20 1883 496 61 Do Elko Nov. 20 1883 2 791.38 1884 California ElDorado Jan. 26 1884 Miscs. $12. 92 Do Placer Jan. 26 1884 Miscs. 52.41 Do Butte ..... Jan. 26, 1884 Miscs. 31.34 Do Shasta Jan. 26 1884 Miscs. 53.30 Do Colusa . Feb. 23 1884 Miscs. 70.23 Do El Dorado Feb. 28 1884 Miscs. 12.43 Do Zumwalt School District Feb. 29 1884 Miscs. 5. 21 Do Tehama Mar. 4 1884 Miscs. 208 01 Do do Mar. 27 1884 Miscs. 139. 76 Do Colusa Mar 10 1884 Miscs 168.82 Do do Mar. 18 1884 Miscs 37 04 Do.... Yolo Mar. 14 1884 Miscs 4 04 Do.... Shasta Mar 15 1884 Miscs 239 12 Do do Apr. 10, '1884 Miscs. 5H. 59 Do Yuba . Apr. 22, 1884 Misos. 19.91 Do Placer Aug. 8, 1884 Miscs. 20.78 Nevada Washoe Nov. 26, 1884 Miscs. 4. 00 1 132.91 Do... Eureka .. ............. Nov. 17, 1884 Years '84-'85 418 70 Do Elko . Nov. 14, 1884 2 169 96 Do Humboldt Nov. 15, 1884 3 548 97 Do Lander ......... Nov. 16, 1884 1 616 35 Do Lvon Nov. 15, 1884 122. 00 Do Storey . ..... . Nov. ]5, 1884 75 00 Do Washoe .... Nov. 15, 1884 1 218 50 California .. Butte Dec. 31, 1884 3 676 75 Do Dec. 31, 1884 CO 48 Do El Dorado . ... Dec. 31, 1884 1 401.44 Do Nevada Dec. 31, 1884 1 420.80 Do.. Placer Dec. 31, 1884 786. 50 Do Plnmas ......... Dec. 31, 1884 237. 79 Do Sacramento ....... ..... Dec. 31 1884 14. 18 Do Sierra . ........... Dec 31, 1884 362. 50 Do Sutler ........... Dec. 31, 1884 138. 59 Do Shasta Dec. 31, 1884 2, 323. 15 Do Tehama .. . .......... Dec, 31, 1884 4, 014. 00 Do...... Yuba Dec. 31 1884 1, 127. 52 1885 Do Feb 26 1885 Miscs $9 60 Do ...do... Mar. 4.1885 Miscs. 1. 25 2516 U. S. PACIFIC KAILWAY COMMISSION. Taxes paid on lands Continued. Location. Date of pay- State. County. ment. Period. Amount. 1885 California Colusa and Tehama May 11 1885 Miscs $61 36 Do Teliarua Mar 5 1885 Miscs 44 85 Do do Mar 24 1885 Miscs 74 51 ; Do do .. Apr. 1 1885 Miscs 23 36 Do do .. Apr 9 18 Q 5 Miscs. 2 50 Do do Apr 9 1885 Miscs 18 48 Do Placer Feb. 19 1885 Miscs 69 05 1885 Do Placer Mar 31 1885 304. 96 Miscs. 7 80 Do El Dorado Mar 9 1885 Miscs 5 22 Do Nevada Mar 11 1885 Miscs. 7 56 Do Shasta Mar 24 1885 Miscs. 54 26 Do do Apr 8 1885 Miscs 15 00 Do... do June 30 1885 Miscs 8 30 Do Bntte Mar 27 1885 Miscs 217 62 Do Tuba May 1 1885 Miscs 3 97 $624 69 Utah . . Cache Oct. 7 1885 Year '85-'86 156 30 Do Weber Oct 7* 1885 43 71 Nevada Churchill Nov lo' 18^5 295 79 Do "Washoe Nov 20 1885 767 23 Do Lyon Nov 20* 188*1 110 00 Do Storey > Nov 20 1885 69 60 Do Eureka Nov 20* 1885 427 07 Do Elko Nov 20 1885 1 844 93 Do Humboldt Nov. 20* 1885 2, 236. 91 Do Lander Nov 27 1885 1 520 82 California Placer Dec 21 1885 1 133 11 Do El Dorado Dec 21 1885 1 226 08 Do Yuba Dec 23 188*5 1 188 34 Do Tehama Dec 23 1885 3 322 22 Do .. Nevada Dec. 23 1885 1, 937. 37 Do Sierra Dec 28 1885 294 28 Do Butte Dec 28* 1885 3 751 54 Do Shasta Dec 28 1885 1 953 55 Do... Plumas , Dec. 30 1885 216.58 Do Colusa Dec 30 1885 58 91 Do .. Sutter Dec. 3l' 1885 111. 14 Do Sacramento Dec. 31 3885 13.37 1886 Do . El Dorado...... . Jan. 13 1886 Miscs. 27. 11 Do do Feb. 13 1886 Miscs. 60. 04 Do .. do Mar. 3 1886 Miscs. 21. 53 Do . Bntte Feb. 1 1886 Miscs. 37.29 Do do Feb. 11 1886 Miscs. 3. 75 Do .. do . Feb. 13 1886 Miscs. 19.62 Do ... do. . . ... June 1 1886 Miscs. 77.34 Do Colusa ... .. Feb. 13 1886 Miscs. 12.78 Do Tehama Feb. 13 1886 Miscs. 287. 56 Do Placer Feb. 17 1886 Miscs. 4. 58 Do - Shasta Feb. 23 1886 Miscs. 5. 23 Do Nevada Mar. 1 1886 Miscs. 8. 87 Nevada "Washoe June 22 1886 Miscs. $9.45 575 15 Utah . "Weber Oct. 11, 1886 Year '86-'87 33.54 Do Box Elder Oct. 12 1886 280. 82 Do Cache Oct. 14, 1886 29.70 Nevada Churchill . - Nov. 8, 1886 295. 73 Do... Lyon Nov. 15, 1886 110. 00 Do.... Storey ....... Nov. 15, 1886 60.48 Do ... "Washoe Nov. 15, 1886 741. 39 Do.... Humboldt Nov. 15, 1886 1, 198. 17 Do Elko Nov. 17, 1886 1, 539. 63 Do... Eureka .. ......... Nov. 18, 1886 441. 71 Do Lander Nov. 18, 1886 1,483.03 California .. Yuba Dec. 11, 1886 1, 451. 16 Do Sierra ........ Dec. 13, 1886 279. 72 Do Shasta Dec. 13, 1886 1,645.10 Do Tehama Dec. 15, 1886 2, 996. 06 Do. El Dorado Dec. 15 1886 1 083. 51 Do Nevada Dec. 15 1886 1 565.61 Do .. Placer: District No 3 Dec. 16 1886 82.90 Do District No 1 Dec. 18 1886 56. 14 Do District No 2 Dec. 16, 1886 804. 54 Do... Colusa Dec. 17, 1886 117. 54 Do... Butte ... Dec. 17, 1886 30.30 LELAND STANFORD. Taxes paid on lands Continued, 2517 Location. Date of pay- Year. State. County. ment. Per. od. 1886 California IPluniRs Dec 17 1886 $309 53 Do Sutter Dec. 22 1886 46 49 Do Tehama Dec 30 1886 80 41 Do Butle Dec 31 1886 3 028 73 1887 Do Colusa Feb 21 1886 Miscs $67 40 Do Tuba Feb 28 1886 Miscs 22 33 Do Butte Mar 5 1886 Miscs 89 69 Do Shasta Mar 9 1886 Miscs 3 50 Do Placer Mar. 9 1886 Miscs 61.56 Do El Dorado Mar. 14 1886 Miscs. 22 32 Do do Mar 14 1886 Miscs 66 13 Do Nevada Mar. 14 1886 Miscs. 4 86 Do Shasta Mar. 21 1886 Miscs 7 50 Do do Mar. 30 1886 Miscs 436 39 Do Butte Mar. 25 1886 Miscs 120 92 Do Placer Mar. 28 1886 Miscs. 68 40 Do . Sierra ....................... Mar. 30 1886 Miscs. 10 92 Do Yuba . . . .... Apr. 6 1886 Miscs 14 48 Do Tehama Apr 15 1886 Miscs. 121 61 1 118 01 Total to June 30 1887 420 743.67 Respec&ully submitted. E. JB. RYAN, Tax Agent. VOLUNTARY PAYMENT OE TAXES. By the CHAIRMAN : The sum of $3,000,000 estimated there for payment of taxes was not paid upon land granted by Congress ? A. No ; that was but a small portion of the railroad property. There is one thing to which I desire to call the particular attention of the Commission with regard to these facts; and that is, that after judgment had been rendered in our favor, and where there was no legal liability, we paid over a million dollars in taxes. We have always paid our taxes. Even after judgment in our favor we paid a fair amount. O By Commissioner LITTLER : Q. Who determined that question of fairness ? A. Where there was no legal liability we paid as we had been accustomed to pay, and even then we paid a great deal more than any other railroad in the United States.. I think that our assessment was over three times as much per mile as the "New York Central assessment. I do not believe there is another example like it to be found anywhere, of a company, after a de- cision in its favor, paying over a million dollars voluntarily. I only allude to it here particularly to show that we have been willing to pay fair taxes. DELAYS IN PATENTS FOE LANDS. " Question 38. And the delay of said companies in taking out patents for such lands." Answer 38. We have never been derelict in taking out patents for such lands. We have not received our patents properly, and at the present time there are applications for over one million acres of land pending before the United States Land Department. 2518 U. S. PACIFIC RAILWAY COMMISSION. INJURY TO COMPANY BY INABILITY TO GET PATENTS. It has been charged that we do not take out patents because we do not want to pay taxes thereon, but this is not so. We could never get out patents fast enough and have suffered in consequence. The inabil- ity of the company to obtain patents promptly upon application has caused us great loss, not merely in the sales of lauds, but more particu- larly in the business that would have arisen in their occupancy, as will be more fully shown in the report of Mr. W. H. Mills, land agent of the company, hereto attached and made part hereof, marked " Exhibit No. 6." RATES AND CHARGES. "Question 39. The rates of fare and freight charged, discriminations, differentials, pools, and other devices." LOW RATES ON CENTRAL PACIFIC, CONSIDERING THE CIRCUMSTANCES. Answer 39. Taking into account all the elements which have to be considered in determining the rates at which passengers and freight can be moved, such as amount of business done, the cost of doing it, c., the cheapest railroading in the world is done on the Central Pacific. Taking the business between the State lines of Nevada as an instance, the local business is almost nothing. It would not maintain the run- ning expenses. The maintenance of that portion of the road is from the business that originates outside of those boundaries and passes through - } and through freight is materially affected, both in volume and rates, by competing lines of road subsidized by the Government. For a more detailed answer I refer to the exhibit made by Mr. J. C. Stubbs, the traffic manager of the road, marked " Exhibit No. 7," at- tached hereto and made a part hereof. FACILITIES FURNISHED, AND EFFECT ON COMMUNITIES OF SETTLE- MENT FOR DEBT. "Question 40. And the facilities and accommodations furnished to the patrons of such roac(& ; and their report shall embrace a considera- tion of the interests and "fights of said communities as affected by what- ever plan of settlement or payment of the existing debt may be pro- posed." FACILITIES FIRST CLASS. Answer 40. The facilities and accommodations furnished to 'patrons of these roads are first class. There is a sufficiency of passenger and freight trains for the accommodation and convenience of the traffic. The speed and frequency of these trains are ample. The rolling stock is up to the standard and excellent in its quality and condition. Sta- tions, station-houses, warehouse facilities, and sidings are provided at all necessary points. The character of the service generally will com- pare favorable with the most thoroughly equipped and best served in the country. SETTLEMENT PROPOSED SHOULD NOT BURDEN COUNTRY ALONG LINE, In any scheme of extension or adjustment that may be made between the Government and the company, the Government should not forget LELAND STANFORD. 2519 the policy in which the measure had its origin, that is, the public inter- est. Travel and transportation should not be so burdened as to cripple the road, jeopardize its efficiency, and retard the development of the country. The Commission then adjourned to Friday, July 29, 1887, at 10 a. m. PALACE HOTEL, SAN FRANCISCO, CAL., Friday, July 29, 1887. LELAND STAKFOKD, being further examined, testified as follows: The WITNESS. The next question in your circular was : EXTENSION OF TIME FOR PAYMENT. " Question 41. Said Commissioners shall also consider and report whether the interests of the United States require any extension of the time for performance of the obligations to the United States of said companies, or any of them, and the facts and circumstances upon which said opinion is based.' 7 SECURITY HELD BY UNITED STATES. " Question 42. Including the security held by the United States for the performance of such obligations, and the value thereof." SUCH A SCHEME FOR EXTENSION AS SHALL NOT AFFECT THE SERVICE. a Question 45. And if, in their opinion, such extension shall be re- quired by the interests of the United States, they shall submit a scheme for such extension which shall secure to the United States full pay- ment of all debts due them from said companies, with a reasonable rate of interest in such time as the Commissioners shall propose, having due regard to the financial ability of said companies and the proper conduct of their business in such manner as shall afford efficient service to the public." THE EQUITIES CONSIDERED. Answer. Questions 41, 42, and 45 relate to the policy that shall be adopted with reference to the payment by the company of the debt due the Government, and therefore I shall consider them together. I have heretofore stated that the appointment of this Commission by Congress, and the authority and instructions given to it to ascertain what the com- pany had lost upon the one hand, and what the Government had gained upon the other, by the construction of the road, was a candid admis- sion on the part of Congress that this company had equities which Congress desired to adjust and allow. We believe that Congress was not actuated by any mere idle curiosity in creating this Commission to examine into and report concerning the foregoing matters. We have therefore shown among other things : LOSS ON SALE OF GOVERNMENT BONDS. (1) That the company had to sell the Government bonds at a discount, and thereby sustained a loss of $7,120,073.55 ; and interest on this loss to maturity, $12,816,132.59. 2520 U. S. PACIFIC RAILWAY COMMISSION. AMOUNT SAVED TO GOVERNMENT ON TRANSPORTATION. (2) That the Government saved $47,763,178 in transportation between the time when the line was completed and the time when it might have been completed according to the contract, this company's proportion of which was, say, 40 per cent, or $21,971,062. AMOUNT DUE BY GOVERNMENT. (3) That the Government now owes the company $1,853,323.15 for transportation on unaided roads, the justness and legality of which claim has been decided by the Supreme Court of the United States. 1 wish to say here that this matter was brought before Congress at various times ; that the Departments both the Postal Department and the War Department sent down word that they needed so much money to meet these expenses ; but Congress did not make appropriations. By Commissioner ANDERSON : Q. Can you refer us to the case in which the figure you have given was declared to be the figure that you were entitled to receive, $1,853,- 323,15? A. There is no dispute as to the amount. It arose on these non-aided roads. The question was whether it should belong to the sinking funds as the earnings of the aided road. Commissioner ANDERSON. I am speaking more especially as to the accuracy of the figures to which you refer, because the difference as to the rate to be charged for different kinds of transportation, which was the subject of litigation for many years, and the difference as to the amounts ultimately awarded by the court and the amounts claimed by the company is very important; so that if you can refer us to the de- cision, we would like to see it. The WITNESS. There is no dispute as to the amount between the Departments and the companies. The whole question with the De- partments was whether or not we were entitled to take the earnings, and the Court of Claims decided unanimously that we were entitled to take them, and on appeal to the Supreme Court of the United States that court unanimously decided the same way. Commissioner ANDERSON. That is the case to which we want you to refer. The WITNESS. I will give you the reference. By Commissioner LITTLER: Q. Is there any dispute between this company and the Government as to other sums of money? A. Not as to that particular sum now. Q. Have you any controversy with the Government now ? A. There are some sums of a long time ago, concerning which I spoke yesterday, that have never been settled. They have not been allowed. I think that they would amount to three hundred thousand and odd dollars. INTEREST LOST BY COMPANY. (1) The amount of interest the company has lost upon the money which it would have received from the sale of its lands, if the Land Office of the Government had issued patents as fast as called for by the company. This amount can be approximately determined. LOSS ON ACCOUNT OF SINKING-FUND PROVISION. (5) That the company has lost $1,612,966.72 in being forced to pay into a sinking fund established by Congress large amounts of money for LELAND STANFORD. 2521 which it not only has not received any interest, but the company has not so much money now as it paid therein by. over $500,000. In other words, it has not only lost the interest on this money by reason of mis- management of the fund, but has even lost a portion of the principal, and at the same time has been compelled to pay 6 per cent, per annum on this very amount so lost to it by reason of the purchase of the bonds placed in the sinking fund at a premium. DIVERSION OF BUSINESS. (6) The diversion of business to other lines, of which this company's proportion amounts to about $17,000,000. AMOUNT OF EQUITIES EXCEED AMOUNT DUE GOVERNMENT. There can be no question in the mind of any candid person but what this company is entitled to have the foregoing specified equities al- lowed by the Government. If they are allowed, then all questions rela- tive to the extension of time in which to pay the debt becomes immate- rial, because the amount of these equities exceed very largely the amount of debt now due from the company to the Government. If, on the other hand, the Government is not willing to allow these claims, it will be exceedingly difficult to determine the conditions which should be im- posed upon the company concerning the payment of the indebtedness. The ability of the company to pay must always be determined by the amount of business it does. This depends largely upon conditions changing from day to day, and over which the company has no control. As we have hereinbefore stated, the net earnings from local business of the State of Nevada amounts to nothing, and if the departments of the Government having control of Government transportation divert from this road and give to foreign and competing roads the busi- ness which this road is fairly entitled to, ifc is impossible to tell when the company can meet its obligations. About the only thing that can be done at this time will be to fix the rate of interest which the Gov- ernment should charge. This should not be in any case more than the Government would have to pay for the use of the money, to wit, any more than 2 per cent, per annum. There should be taken into consideration the amounts saved the Gov- ernment in transportation, that is, based upon the business before the completion of the railroad. Since the completion of the road the effi- ciency of the service has been increased beyond comparison, of whicb we make no estimate. Probably thousands of millions of values were created by the construction of the road in the development of the coun- try and making it suitable for homes. That and other benefits to the United States were anticipated at the passage of the law, and I be- lieve in no single instance have the people or the Government been dis- appointed. If the Government does not allow the company the com- pensation for services contemplated by Congress at the time of the passage of the bill, and if they are not to be allowed for the diversion of business consequent upon the Government subsidizing competing roads, then the ability of the company to pay is manifestly unequal to the burden imposed. LIQUIDATION OF DEBT ANTICIPATED BY PAYMENTS WHICH HAVE BEEN MADE UNDER ORIGINAL LAWS. I deem it, however, proper to suggest to the Commission that it was originally contemplated by Congress that the liabilities of the company 2522 U. S. PACIFIC RAILWAY COMMISSION. were to be discharged by the compensation to be made by the Govern- ment to it for the services it might be called upon to perform for the Government, and the 5 per cent, of its net earnings reserved by law. The lien was only intended to secure such performance. In other words, it was contemplated that the services of the company, together with the 5 per cent., would liquidate its liabilities to the Government. i PROPERTY NOT SUBJECT TO UNITED STATES LIEN. " Question 43. And the value of the property of such companies, and either of them, not included in such security V Answer 43. The Government lien only covers the Central Pacific from Ogden to Sacramento, and the Western Pacific from Sacramento to San Jose. No other property of the company is covered by the Gov- ernment lien. As to the value of the property of the company not so covered by the Government lien, I am unable to estimate, but am in- formed that the engineers appointed by the Commission are making an estimate of all the property of the company, which will include ttiis in- formation. A statement of these assets is given in the foregoing reply to inter- rogatories 11 and 12. FURTHER SECURITY FOR UNITED STATES. " Question 44. And what further security is it expedient that said companies shall be required to give?" UNITED STATES HAS NO RIGHT TO CHANGE ITS CONTRACT. Answer 44. In answer to question 44, I respectfully submit that the Government has no right to change its contract with the company and demand other security than that fixed in the original acts of Congress of 1862 and 1864. Nor is it expedient for the Government to ask further security. On the contrary, the best security that the Government can have will be a fair consideration of the equities we have already enumer- ated, and a fair and liberal settlement with the company upon the basis originally contemplated by Congress, to the end that the company may be able to discharge all its obligations and be able to assist in the de- velopment of the country and promote the general interests of the people. It should be borne in mind that the burden upon the company other than its obligations to the Government were vastly increased by the rapid completion of the road, both on account of the ruinous discount suffered in selling its first mortgage bonds, and the high price of material and great disadvantages under which the road was constructed in a country where a large portion of the transportation was necessary by teams, it being impossible to advance the constructed line of road on account of snow blockades in the Sierra Nevada Mountains, and the unequal character of the country through which the road passed ne- cessitated transportation of supplies and of men frequently hundreds of miles. DIFFICULTIES IN CROSSING- THE MOUNTAINS. The difficulties which we experienced in crossing those mountains can hardly be appreciated. We worked along in the heavy snow, and our supplies and material for the men and the horses had to be packed to them. We had to shovel snow, and in some places to pick it with LELAND STANFORD. 2523 a pick for 75 feet deep in order to get to a place on which to put our embankments. Snow fell there one winter 63 feet in depth since we have been operating. Not that you would find that in a measure- ment by taking the falls of twenty-four hours and adding them to- gether, but you would find drifts and places where 63 feet of snow was pressed down, perhaps, into not more than 18 feet, but packed as hard as ice, and requiring the pick and powder to make a passage. Then, in building the road out over that desert from Truckee to the Humboldt, for 40 miles, we had to haul water for our men and horses to drink, and we had to go some distance up to Humboldt before we struck water which was even fit to be used. We sent over three thou- sand men and four hundred horses in advance of our building lines to work up in the canons of the Humboldt those three canons there and all their food and supplies had to be hauled there. The springs were all a good ways from the road. Now we can get along very well, because water is brought there from springs, but at that time we had even to hunt for water. We laid the track of a little over 500 miles in five days less than ten months, and we laid a little over 10 miles in one day. There were a great many curves and a great many unforeseen difficulties which had to be surmounted. A RACE WITH THE UNION PACIFIC. By Commissioner LITTLER : Q. There was a race between you and the Union Pacific, was there not, governor ? A. Well, yes. When we were working on the mount- ains our work was so tremendous that they thought we could not get over the mountains by two years as early as we did, and they were go- ing to meet us at the end of the eastern side of the mountains. Of course our road would not be worth anything in that case. It was a difficult road to operate, and they could bring goods from the east and would be cutting off all our business over there. So we were forced to make the most extraordinary efforts in order to get out to Salt Lake and have something to say with regard to the future business and the supplies that might go into Nevada. After we got over the mountains we swarmed men along that mountain side, and we went over there faster than any one believed could be possible, aiding the men with a liberal use of powder. AVe hauled the iron for 40 miles over the mount- ains and built down on the Truckee in the winter season 40 miles of road, and hauled iron and engines and everything over, besides all our supplies. I paid 13 cents a pound for freight from the Summit out to Salt Lake City. Then we had to haul it out on the line of the road and then we paid 2 cents more. We accomplished 180 miles there with such help as we could get. Hay was worth $100 a ton, and oats, I think, about fourteen or fifteen cents a pound. Everything was up in price; 'and thos^ little teams over there would not haul much more than a wheel-barrow full of dirt. Commissioner LITTLER. The first time I was at Leadville hay was worth there $180 a ton. The WITNESS. I sold one potato for $2.50. COMMISSIONERS TO REPORT BY DECEMBER 1, 1887? " Question 46. And the said Commission shall report in full in re- gard to all such matters aforesaid, and in regard to any other matters which may be ascertained or come to their knowledge in regard to said p R VOL iv 13 2524 U. S. PACIFIC RAILWAY COMMISSION. companies respectively', on or before December 1, 1887, to the President of the United States, who shall forward said report to Congress, with such recommendations or comments as he may see fit to make in the premises." Answer 4( This question, relating as it does entirely to the duties of the Commission, does not require any answer from me. COST OF UNITED STATES TRANSPORTATION PRIOR TO ROAD. u Question 47. The Commission shall also ascertain the average cost per annum of Government transportation in the region now traversed by the Pacific railroads between the year 1850 and the completion of said roads." UNITED STATES TRANSPORTATION $8,000,000 A YEAR. Answer 47. The average cost to the Government per annum for transportation in the region now traversed by the Pacific railroads, between the year 1850 and the completion of the road, was over $8,000,000. This does not include the cost of maintenance of Government forts and military encampments and a large number of troops necessary to pro- tect the border against the hostile Indians, which disappeared with the advent of the railroad. Nor does it include the expense incident to the carrying of the mails, munitions of war, and other matters required in the region beyond the line of the road, as in northern Montana, Da- kota, Washington Territory, and other points now reached by railroads. The difference in the character of the service and other matters of interest will be found more fully set forth in the reply to question 52, which has, in a measure, to be treated in connection with this question. SAVINO TO UNITED STATES TO 1886 $139,347,741. The saving to the United States by the Central-Union line, in the item of transportation, has amounted to January 1, 1886, to the sum of $139,347,741. COST OF UNITED STATES TRANSPORTATION SINCE COMPLETION. ONE-TENTH OF FORMER COST. " Question 48. And also the average cost per annum since such com- pletion." Answer 48. As shown by the books of this company and the records of the Government, it appears that the average cost per annum for Government transportation over said roads is about one-tenth of the amount formerly paid, with a very superior service, all of which will be found set forth in detail in the answer to question 52. ADDITIONAL FACILITIES FURNISHED BY ROADS. " Question 49. And what additional facilities have been furnished to the Government and the people by said roads." COST IN *TIME AND MONEY OF FORMER METHODS OF TRANSPORTA- TION. Answer 49. It is difficult to definitely state or to specifically point out oach additional facility which lias been furnished to the Gove rumen t and LELAND STANFORD. 2525 the people 'by the railroads. It is a matter of history that before the construction of the Central Pacific Bailroad, all transportation between San Francisco and New York was done by water. The local trans- portation was done either by water or by wagons. The average time between New York and San Francisco was about six mouths by sail- ing vessel and from 30 to 40 days by steamer. The cost of transporta- tion by any method in use, before the completion of the road, was very much more expensive in the direct charge than charges have ever been since the completion of the road. The absence of a railroad to connect with the Atlantic States of the American Union with the Pacific ef- fected a loss to the people of the whole country, in time, in property, and in money, which each year equaled the annual expense of the Fed- eral Government a loss that in two years would, according to the figures of Eepreseutative James A. McDougall, cover the cost of a com- pleted railroad to the Pacific. This was a tax upon the industry and enterprise of the people of every State of the Union. The old system of transportation was marked by two great features of disadvantage; one of them was prejudicial to the merchant, in that he was required to possess a larger command of capital, in order to have a sufficient quan- tity of stock on hand for his operations, while he waited for the long-com- ing ship to arrive, whose cargo also called for money to purchase. The other operated to the detriment of consumers, inasmuch as opportuni- ties were afforded to persons having a ready command of money to buy up the whole stock of a necessary commodity existing in the market, for the purpose of creating a monopoly therein, and demanding a higher price therefor. Before the establishment of railway facilities, this was repeatedly accomplished with perfect safety to the speculator. Two-thirds of the territory of the United States lies west of the Mis- sissippi Eiver, the greater portion of which at the time of the commence- ment of this road was wilderness. It has been opened up into settle- ments, into homes and general development. The values are not to be measured by hundreds of millions. DISCOUNT ON UNITED STATES BONDS. " Question 50. Also to inquire what discount the Pacific Bailroad and its several branches were forced to make in disposing of the bonds guar- anteed by the Government to obtain the gold coin which was the cur- rency of the country through which the greater part of said roads pass." COST OF ROAD PAID IN GOLD. Answer 50. The Central and Western Pacific Railroads were com- pelled to pay gold coin during the progress of construction for all wages, supplies, fuel, materials, and contracts which were payable on the Pa- cific Coast, the gold always having been the currency of this region. CURRENCY BONDS ISSUED BY UNITED STATES. The bonds issued by the United States to aid the construction of the Pacific railroads were made payable thirty years from date with inter- est at 6 per cent., payable semi-annual ly, the principal and interest made payable in lawful money. This during the time of the construction of the road and for some years afterwards was United States currency. From these facts the bonds have always been known as " Currency Sixes," and they were the only bonds issued by the Government which could not be redeemed by it, at its option, at any time before maturity thereof. I have been informed, and 1 believe it to be true, that these 2526 U. S. PACIFIC RAILWAY COMMISSION. are the only bonds which the Government issued during the civil war upon which they did not sustain a discount. We direct your attention especially to the irredeemable character of the bonds, because, as we will hereinafter show, the company, on account of this character of bonds, has sustained a very great loss in being compelled to pay into the sink- ing fund a large sum of money from which it has received no interest whatever, and at the same time is compelled to pay interest on these outstanding bonds. CENTRAL PACIFIC CHARGED WITH TWENTY MILLIONS FOR WHICH IT RECEIVED NOTHING. During the time the company was constructing its road, and at a time when it was experiencing the greatest difficulty in getting the money to meet its obligations, the Government securities were very much depre- ciated because of the existence of the civil war. For example, the com- pany was compelled to dispose of the bonds issued to it by the Govern- ment at a loss of $7,120,073.55. The company is paying 6 per cent, on the bonds issued by the Government, so that at the maturity of the bonds the company will have to pay in round numbers $20,000,000, for which it never received one farthing. This is one item which must be taken into consideration in estimating the cost of the road, and one which is rarely recognized. Again, the company in selling its own first - mortgage bonds was compelled, by reason of the impaired value of the Government securities, to sell its own bonds at about the same rate that it got for the Government bonds. DEPRECIATED GOVERNMENT SECURITIES. Commissioner ANDERSON. I do not understand your statement about the depreciation due to the war, especially in connection with this loss of $7,000,000. The WITNESS. There was a time when the Government securities were down to 40 ; but at the completion of the road the Government credit had been restored and its bonds were a little above par Commissioner ANDERSON (interrupting). I do not understand your statement that the bonds were depreciated by the war. I do not under- stand that any bonds were issued to the Central Pacific and Western Pacific Companies until two years after the close of the civil war. The WITNESS. Yes ; there were some issued in 1863. Commissioner ANDERSON. But you got no bonds from the Govern- ment. The WITNESS. Oh, yes; we got the bonds; we got those bonds. I do not know what time exactly, but it was during the war. Commissioner ANDERSON. It was in 1866 when the first bonds were issued. The WITNESS. In 1866 ! Commissioner ANDERSON. Yes, sir. The WITNESS. I think that you are mistaken. Commissioner ANDERSON. We have got the United States reports. The WITNESS. There is no chance for a dispute as to what year these bonds were issued. We got the bonds, I know ; and they were sold in the market at the time, and we sold them for all that they were worth ill the market. Commissioner ANDERSON. I was only referring to your statement that they were depreciated by reason of the war. The CHAIRMAN. The war was virtually over when you commenced, was it not ? LELAND STANFORD. 2527 SUPPLIES HAD TO BE ORDERED A YEAR IN ADVANCE. The WITNESS. Not with us entirely. Our supplies had to be ordered fully a year in advance of their use. Supplies and materials required in the construction of the road had to be purchased at least a year be- fore we needed them. We commenced the grading of the work, and work was going on in 1863, and at that time our orders were out in the East for everything that we required for a long time ahead, so that we could continue our work with as little interruption as possible. Commissioner ANDERSON. I am talking abo'it the depreciation in the bonds, and not about the commencement of the road. The WITNESS. We sold those bonds at that depreciation. We had until 1876, by the contract, to complete the road. Had we waited for the expiration of the contract time before finishing the road, instead of building it seven years earlier than that time, we would not have had to suffer this loss. Had we waited, we would have had the advantage of the bonds at par, together with the premium at which they were sell- ing, and as our own first mortgage bonds were depending very largely upon the assistance which the Government gave, they would have been above par also. By this rapid construction and completion of the road before the time required by the act of Congress, the depreciation was not merely on the Government bonds, but upon our own first mortgage bonds, so that what we were forced to lose in the sale of the two classes of bonds made a depreciation of $7,000,000 on each class, and the in- terest on them from that time until maturity amounts to about $40,000,000, which we will have to pay at maturity more than we would have had to pay otherwise had we realized par. BONDS ISSUED. The bonds issued to the Central and Western Pacific Eailroads were, at their par value, as follows : Central Pacific $25,885,120 Western Pacific 1,970,560 Total currency bonds 27, 855, 680 These bonds were issued as sections of the constructed road were ac- cepted by the President of the United States, and so bore different dates from the years 1865 to 1869, inclusive, with the exception of a small number dated in 1870. During all this period the currency was greatly depreciated, sometimes selling as low as 42.66 cents on the dollar in January, 1865, to 83.68 cents on the dollar in December, 1869. AVERAGE AMOUNT RECEIVED FOR EACH B?)ND, $744.44. In order to get the coin to pay for their construction, labor, and sup- plies the Central and Western Pacific Companies were forced to dispose of the currency bonds received from the Government at an average rate for gold of 1.34J. The amount received by the company for each bond of $1,000 was therefore $744.44. For the $27,855,680 in United States bonds these companies received $20,735,606.45. The discount they were forced to make was thus $7,120,073.55. Interest is charged the compa- nies on the full amount to the maturity of the bonds. The interest on the $7,120,073,55 discount which the companies were forced to make is for thirty years, at 6 per cent., $12,816,132.39. 2528 U. S. PACIFIC RAILWAY COMMISSION. LOSS FROM DISCOUNT, $19,936,205. The total principal and interest for discount lost by the companies is therefore $19,936,205.94. The following table shows, the amounts and dates of the currency bonds issued to these companies, and the market value of currency at the current average premium on gold : Statement showing dnie* and anwunls of United States bonds, issued to Central and Western Pacific Railroad Ctnnfmnun (kti me tt nxcurrrncy sixes}, with value of same in United States gold at current average w/es of premium for United Stales currency. To what company Central Pacific Hail~o:id ('oiinmny ..] Western Pacific Railroad Company Date issued Interest commenced. Amount of bonds. Premium on gold, average rate. Value of bonds in United States gold. May l-\ 18G5 Jan. 16, 1865 $1, 258, 000 1.32 $953, 030. 30 An- U, 1865 Aug. 14. 1865 384, 000 1.42 270, 422. 53 Oct. If, 1865 Oct. 16,1865 256, 000 1.45 176, 551. 72 D.-c. il. 186-') Nov. 29, 1805 464, 000 1.45 320, 000. 00 M:ir. (i. li Mar. 6, 1866 640, 000 1.33 481, 203. 00 Inlv 10. 18<>0 July 10,1866 640, 000 1.50 426, 666. 66 Oct. :<> Oct. 29, 1866 320, 000 1.46 219,178.10 J.in. M. l,-'07 Jan. 14, 1867 640, 000 1.35 474, 074. 07 ' ><-t. 25, 1867 Oct. 25, 1867 320, 000 1.42 225, 352. 11 Dec. 12,1867 Dec. 11, 1867 1, 152, 000 1.34 859. 701. 49 .J::n. 10, I8C8 June 9,1868 946, 000 1.40 675, 714. 28 h.lv 11.1808 July 10,1808 320, 000 1.40 228,571.43 An-. 5.1868 An jr. 4, I'-GS 640, 000 1.48 432, 432. 43 An ST. 14, 18C8 Aug. 13, 1868 1,184,000 1.47 805. 442. 18 Sept.]?, 1808 Sept, 11, 1868 1,280,000 1.44 888, 888 88 S pt.'JO, 1808 Sept. 19, 1868 1, 120, 000 1.44 777, 777. 77 Oct. !.'{. 1808 Oct. 12,1868 1, 280, 000 1.38 927. 536. 23 Oct. '28. 1868 Oct. 26,1868 640, 000 1.34 477,611.94 Nor. f>. 1SH8 Nov. 3,1868 640, 000 1.32 484, 848. 48 Nov. 12, 18(58 Nov. 11, 1868 640,'000 1.34 477, 611. 94 Doc. 5. 1808 Dec. 5,1868 640, 000 1.36 470, 588. 24 Dec. 7.1808 Dec. 7,1868 640, 000 1.36 470, 588. 24 Doc. 30. 18K8 Dec. 29, 1868 640, 000 1.34 477, 611. 94 Jan. 13, 1809 Jan. 13, 1869 640, 000 1.36 470, 588. 24 Jan. 29, 1809 Jan. 28,1869 540, 000 1.37 467, 153. 29 Feb. 17,1800 Feb. 17, 1809 640, 000 1.35 474, 074. 07 Mar. 2,1809 Feb. 17,1809 1,066,000 1.32 807, 575. 76 Mar. 3, 1809 Mar. 2, 1809 1,333,000 1.32 1,009,848.48 May 28, 1809 May 27. 1869 1, 786, 000 1.40 1, 275, 714. 28 July 15,1809 May 27, 1869 1,314,000 1.37 959, 124. 09 July 15, 1869 July 15; 1869 268, 000 1.37 195, 620. 44 Dec. 31, 1869 July 16, 1869 1, 510, 000 1.20 1, 258, 333. 33 Jan. 2, 1872 Nov. 28, 1868 4, 120 1.09 3, 779. 81 Jan. 24, 1867 Jan. 26,1867 320, 000 1.34 238, 805. 97 Sept. 1,1869 Sept. 3,1869 320, 000 1.33 240, 601. 50 Oct. 29,1869 Oct. 28,1869 1, 008, 000 1.29 781, 395. 35 Jan. 27,1870 Jan. 22,1870 3"22, 000 1.22 263, 934. 42 Jan. 8, 1872 Jan. 22, 1872 560 1.09 513. 76 27, 855, 680 20, 448, 406. 75 The bonds were s^ld by the companies to some extent for a premium in currency, so that the above value of bonds in gold is not quite as much as the amount received by the companies, namely : Total value of currency bonds $27, 855, 630. 00 Value in United States gold $20,448,466.75 Premium added .- 287,139.70 20,735,606.45 Discount company was forced to make in disposing of the bonds, being loss to company on principal 7, 120, 073. 55 Interest thirty years at 6 per cent 12, 816, 132. 39 Total amount on bonds Central Pacific Eailroad Company is required to pay to the Government, for which it received nothing 19,936,205.94 LELAND STANFORD. 2529 BONDS BOUGHT FOB SINKING FUND. Under the provisions of the act of May 7, 1878, the company has been forced to pay for these same bonds for the sinking fund in the United States Treasury a premium of about 35 per cent. It has thus suffered a loss in premium on the redemption of the bonds of an equal rate to the loss in discount on their issue. The sinking fund of the Central Pacific Railroad Company in the United States Treasury on June 1, 1887, contained $2,548,000 United States Pacific Eailroad bonds (cur- rency sixes) and $9,000 Central Pacific Railroad first-mortgage bonds ; total, $2,557,000. PREMIUM AVERAGED 34.21 PER CENT. To secure these bonds the Secretary of the Treasury, under the pro- visions of the acts of May 7, 1878, and March 3, 1887, has paid a pre- mium averaging 34.21 per cent., or for each bond of $1,000 he has paid $1,342.10. As these bonds must be held in the fund till the maturity of the debt, when they will be redeemed by the Government at par, the premium paid is wholly lost. LOSS RESULTING FROM PREMIUMS AND DISCOUNTS. The resulting loss on account of premiums and discount for this $2,548,000 in the sinking fund is as follows : Received by Central Pacific Railroad Company in coin for $2,548,000 United States currency bonds, at $744.40 per $1,000 $1, 896, 731. 20 Paid by Secretary of Treasury in coin belonging to Central Pacific Railroad Company for $2,548,000 United States currency bonds, at $1,342.10 , 3,419,670.80 Cost of $2,543,000 bonds in excess of amount received by Central Pa- cific Railroad Company v 1,522,939.60 The foregoing facts may be summarized as follows : For each currency bond of $1,000 issued the company received in coin $744.40 And is required to pay : For principal for those in sinking fund $1, 342. 10 For interest on all for 30 years at 6 per cent., 180 per cent 1, 800. 00 3, 142. 10 Thus for $1,000 received in coin from the United States bonds the Central Pacific Railroad Company is charged with 4,220.76 LOSS ON BONDS AND INTEREST BY EARLY COMPLETION OF ROAD, FORTY MILLIONS. As before stated the road was completed seven years before the ex- piration of the term limited by Congress. If the company had taken advantage of the time allowed by Congress for the completion of the road, they could not only have sold the Government bonds at par, but could also have disposed of their own first-mortgage bonds at their face value, which would have been a net gain, over and above what was actually received, of 87,120,073.55, the interest on which for thirty years would have been $12,816,132.39, which would make an aggregate saving on the Government bonds and the bonds issued by the company, prin- cipal and interest, in round numbers, of about $40,000,000. The sacri- fice was made to comply with the urgent demands of the United States 2530 U. S. PACIFIC RAILWAY COMMISSION. and people generally, for the early completion of tlie road, with the general understanding that the Government would make due allowance for the extra exertion put forth by the company. RELATIVE PURCHASING POWER OF GOLD AND BONDS. By Commissioner ANDERSON : Q. Allow me to ask : Do you claim the purchasing power of your gold was any less than the purchasing power of your bonds ? The WITNESS. Dollar for dollar! Commissioner ANDERSON. No, not dollar for dollar. Would the gold buy any more or less labor than the bonds would have bought ? The WITNESS. The gold would buy more labor than the bonds, be- cause the bonds were not par in gold. Q. Were not the twenty millions in gold worth just as much as the bonds were to the same amount? A. No, sir; twenty millions in gold were worth as much as twenty-five or twenty-seven millions in Government bonds. If the bonds had been worth par when we re- ceived them we would have received $27,000,000 for them ; whereas we received only twenty millions. It was with our company as it was with the Government all through the war. The Government sold its bonds at a low rate. At one time they ran as low as 40 cents, I think. I re- member that there was a time when it took $3 in greenbacks to buy $1 in gold. Q. What is the first date of the issue of bonds in the table ? A. May 12, 1865. CONSTRUCTION DONE BY CONTRACT AND FINANCE COMPANY. Q. What company was referred to where you used the word "com- pany"; was it the Central Pacific Railroad Company, or the Contract and Finance Companv ? A. I have been speaking always of the Cen- tral Pacific Railroad Company. Q. Do I not understand that all this construction was done by the Contract and Finance Company ? A. Yes, sir. But the Central Pacific Eailroad Company had an interest. The expenses of that contract were a necessary part of the burden of the Central Pacific. Q. But were not those prices fixed when the contract was entered into in 1867 f The WITNESS. What prices ? Commissioner ANDERSON. The prices to be paid per mile for the con- struction of the road. The WITNESS. Yes, sir. Q. So that these alterations referred to in your statement and tables would not affect these prices, would they ? The contract with the Con- tract and Finance Company was made in 1807, and I presume that the value of your securities was considered when this contract was fixed at a specific sum per mile. If that was so, the circumstance alluded to does not affect the Central Pacific. The additional cost of labor and the cost of transportation by teams and the other circumstances could only have affected the profits of the Contract and Finance Company and could not have affected the Central Pacific Eailroad Company. A. Oh, yes; because these circumstances were all well known, and were fully considered at the time the contract was made. Q. How could you have known all these things which happened after- wards ? A. Currency did not reach par, or at least these bonds did LELAND STANFORD. 2531 not until about the time of (or after) the completion of the road. We received some bonds after the completion of the road and sold them some time afterwards, and those bonds, I think, were above par. Q. I am speaking of the specialties of that work, the use of teams for sending out supplies in order to have the work done, and the other ex- penses which you have enumerated. What I want to know is, how they would affect the price to the Central Pacific if that price had been al- ready determined ? A. We took the prices into consideration at the time these contracts were made. Q. In 1867 f A. Yes, sir. Commissioner ANDERSON. But these things occurred in 1868 and 1869. The WITNESS. What time was that contract made? Commissioner ANDERSON. October, 1867, according to the miuutes of the company. SACRIFICE OF BONDS ISSUED ON MOUNTAIN PORTION. The WITNESS. It was based on the condition of things then. The great sacrifice was on the mountains. We received the largest amount from the Government for the line over the mountains, and we were al- lowed under the law to issue our own bonds a hundred miles in advance of completion. All those bonds were issued at that time and disposed of at a sacrifice. The sacrifice on these bonds was on the then existing prices. Q. Was the mountain work done under the Crocker contract or under the Contract and Finance Company's contract? A. A portion of the work was done under the Crocker contract and a portion was done under the Contract and Finance contract. COST OF CONSTRUCTION. " Question 51. Also to ascertain the comparative cost of construction of said roads as compared to what they would have cost with the prices of labor and commodities prevailing five years preceding or five years subsequent to the completion of said roads. 77 Answer 51. Absolute accuracy of statement as to the cost of com- pleting the road as early as 1869, as compared with what would have been the cost if it had been completed five years later, cannot perhaps be made ; but by comparing prices of labor and material at the time the road was completed with the prevailing prices seven years later (the time allowed for completion), and taking into consideration the obstacles encountered and sacrifices made for rapid construction, an approximation can be made. THE CENTRAL PACIFIC COST MORE THAN DOUBLE BY EARLY COM- PLETION. It is safe to say that the road cost more than double what it would have cost if the company had taken the time allowed by the acts of Congress for its completion, by reason of the difference in price of labor and material, added to the sacrifices made by the company to hurry the completion of the road. All supplies had to be purchased in the East nearly a year in advance of the time when they would be needed, in order to get them here when required. The company also, by reason of the great demand that was made upon them by the Government and the people, sent parties ahead 3f the construction train, in order that 2532 U. S. PACIFIC RAILWAY COMMISSION. the road might be in course of construction in several different places at the same period of time. Of course, in all these cases where parties were organized and sent out in advance of the construction trains, everything used by them in the construction of the road or in supply ing food and clothing for the men and food for the teams had to be hauled in wagons, sometimes as far as 350 miles or more, at a very great expense to the company. In many instances the company even had to build the wagon-roads before their teams could reach their destination, and in some cases they were compelled to haul water for the men and teams over 40 miles. For the actual cost of the road, as compared to what it would have been had the road been constructed five years earlier or five years later, I would refer you to the reports of L. M. Clement, assistant engineer j William Hood, chief engineer ; J. H. Strobridge, superintendent of con- struction; and Arthur Brown, superintendent of bridges and buildings, numbered, respectively, Exhibits 8, 9, 10, and 11. BEFORE COMPLETION OF ROAD PACIFIC MAIL STOCK WORTH $330. The WITNESS. Here I will say something that may be of interest. Before this road was completed the Pacific Mail stock was selling for $330 a share. After the completion of the road it went down rapidly, and reached as Iowa figure, I think, as $30. They, therefore, had some reason to oppose us and throw in our way all the obstacles that they could. Commissioner ANDERSON. Perhaps that company will put in some claim against the Government for compensation because of the loss in flicted by your competition. The WITNESS. Perhaps so ; but I am inclined to think that the Gov- ernment would not feel disposed to recognize any such claim. By the CHAIRMAN : Q. Are these gentlemen you have just named in San Francisco I A. They are either here or off attending to their business ; but any of them can be had at any time. BENEFIT TO UNITED STATES BY EARLY COMPLETION OF ROAD. "Question 52. Also to inquire whether or not the Pacific Railroad was completed in less time than was allowed by law, and, if so, how much less time, and if the United States was benefited thereby." ROAD COMPLETED SEVEN YEARS BEFORE TIME FIXED. Answer 52. The act required that the road should be completed July 1, 1876 ; the road was in fact completed May 9, 1869, more than seven years in advance of the time allowed by law. In thus hastening its completion its cost largely exceeded what it would have been if it had not been constructed so rapidly, and by this completion the Govern- ment has been largely benefited. THE GOVERNMENT BENEFITED FORTY-SEVEN MILLION. Before the expiration of the time allowed for the construction of the Central and Union Pacific roads by contract the Government had been directly benefited to the extent of more than $47,000,000 saved upon freights, mails, and transportation of troops alone. LELAND STANFORD. 2533 PAYMENTS TINDER ORIGINAL ACTS TO LIQUIDATE DEBT AND INTEREST. At the time CoDgress made the loan to aid in the construction of the roads every one expected that the transportation furnished by the Gov- ernment to the road would much more than pay the interest on the bonds and probably furnish a sinking fund sufficient to extinguish the debt at maturity. This conclusion was reached by taking the cost to the Government of transportation at the time the loans were made as the basis of computation. Since the railroads were constructed the amount of Government transportation has very largely exceeded the calculations of the promoters of the enterprise, but the service has been performed at so greatly reduced cost, that the receipts from this source have fallen far below what it was expected they would be. This has been disappointing to us, but a great gain to the Government. , TESTIMONY OF UNITED STATES COMMISSIONER OF RAILROADS. Aside from what the Government saved directly in the cost of trans- portation of mails, supplies, and troops, it has also saved an enormous amount indirectly in various ways, as will be seen by reference to the report of the United States Commissioner of Eailroads for 1883, an ex- tract from which I herewith submit. The Commissioner, at page 16 of said report, says : The construction of these roads has been pronounced by the Supreme Court of the United States to have been a national necessity so urgent as to admit of no delay, and confessedly involving the integrity of the Union. The energy with which they were built is well illustrated in the fact that they were completed in seven years less time than the limit established by law, and at a time when the currency bonds issued to the companies realized an average of only about 75 per cent, in gold. And they must be repaid at par. It was doubtless expected that the compensation for Govern- ment transportation would equal the current interest ; that it has not, has been a disappointmeiit as well to the companies as to the Government, but had the charges for transportation continued at the rate prior to their construction it would greatly have exceeded the interest. The Government has the advantage, and is entitled to it, of the reduced expenses of transportation which has resulted from their construc- tion, and in this view the saving to the Government has greatly exceeded the cur- rent interest it has paid. It is also fairly to be considered that the national purposes have all been more than realized in the increased sales of public lands, the extension of civilization, the suppression of Indian wars and the consequent great diminution, of expenses, the establishment of States, and the strengthening of the ties which have bound the States of the Pacific coast indissolubly to the Union. PUBLIC BENEFITS. But the benefits to the public are even greater than those to the Gov- ernment. When we began to build the railroad the merchants of San Francisco had absolute control over the other merchants of this coast, and they could, and frequently did, combine to arbitrarily increase the price of provisions and all other articles of commerce. Sometimes they would advance the price of a single article 100 per cent, in a single day. They kept a record of all in-bound vessels with their cargoes, and when- ever they found that there was a limited supply of any given commod- ity in the market, they went out and bought up all in the market and all in transitu, and no further supplies could be furnished until orders from here could be filled in the Bast, which would take fully six months. TRADE MONOPOLIES PRIOR TO ROAD. In the mean time these men who had secured all there was of the article on which they wished to create a monopoly fixed on it their own 2534 U. S. PACIFIC RAILWAY COMMISSION. price. It was DO uncommon thing to have a necessary of life advance 100 per cent, in a day. The construction of the railroad prevented all this, and is so far a direct benefit to the consumer. Again, under the old system, when all merchandise had to be brought in ships around Cape Horn, every merchant, every importer, every business man, and every jobber, had to carry at least six months' stock in his store and an equal amount afloat, involving in the transaction of his business a very large capital, idle for the most of the time, the interest on which became a burden on the people. Now, one or two months 7 stock is suf- ficient, and a man can do as much business with $50,000 capital as he could under the old condition of things with half a million. The car- rying trade then was largely in the han'ds of foreigners, and a large per centage of the moneys paid for freight was sent to Europe. S nee the construction of these roads over 65 per cent, of the money received by us has been paid out in California and adjacent regions in operating and other expenses, and a large proportion of the balance not required to be sent abroad to pay the interest upon the bonds has been invested here in developing the resources of the State and in making it productive. The railroad company ha } paid out along the line of its road in this State in wages alone more than $100,000,000, most of which would have gone out of the country if the road had not been constructed. The benefit to the Government by the early completion of the line is more fully shown by the report of E. H. Miller, jr., secretary of this company, upon the subject, which report is attached hereto, marked Exhibit No. 11J. The report, in reply to other questions, also shows the saving in transportation charges by the construction of the road, as well as other information collateral to this general subject, all of which is compiled from official documents. SAVING TO UNITED STATES IN TRANSPORTATION IN SEVEN YEARS, FORTY-SEVEN MILLIONS. By reference to this report it will be seen that the United States has saved in transportation charges alone by the completion of the Central Union Pacific line To June 30, 1876 $47,763,178.00 To December 31, 1885 139,347,741.25 At the same rate, continued to the maturity of the bonds, the Govern- ment will have saved 259,040,430.00 That was not such a very bad investment upon the part of the Gov- ernment after all. ANTAGONISTIC LEGISLATION. " Question 53. Also to inquire if either of the Pacific Railroad Com- panies has been embarrassed audits earning capacity impaired by an- tagonistic local or State legislation "P Answer 53. The Central Pacific Railroad Company has been embar- rassed and its earning capacity impaired by antagonistic local and State legislation. While we were trying to make financial negotiations, one claim that we made was based upon the fact that the State of Cali- fornia allowed us 15 cents a ton per mile. Another was that the United States laws allowed us to charge any rate we pleased up to 10 per cent, dividends, then only interfering in case our rates were extortionate. When the agitation against rates commenced we had only 31 miles of road built, and efforts were made in the legislature to pass bills materi- ally affecting our rates. This damaged us before the public. It not LELAND STANFORD. 2535 only indicated that we might have to reduce our rates, but made the future very uncertain. CENTRAL PACIFIC ANTAGONIZED FROM THE FIRST. From the very first we were strongly antagonized. Congress required that we should build a telegraph line as well as a railroad. The con- sequence was that we encountered the antagonism of the existing tele- graph companies. We were to build a railroad to San Francisco, con- sequently we encountered the antagonism of the Steam Navigation Company and clipper-ship owners. We were to build a railroad across the mountains, and so antagonized the Pacific Mail Steamship Company and the Sacramento Valley Railway Company, which operated a railroad from Sacramento eastward about 40 miles. Upon the construction of the road their stock sustained a serious injury. A line across the conti- nent was also antagonized by the stage companies and express com- panies. The pony-express line and the toll roads, all of which had to give way before it, also opposed us. It also seriously affected contract- ors for the Government at the various posts and Indian agencies, and antagonized many other interests of wealth, power, and influence. POLITICAL OPPOSITION BY CONFLICTING INTERESTS. All these interests combined and influenced the press and politicians, and antagonized us in the money centers of the East, Germany, France, and England, with a view of injuring our credit and preventing the fruition of our hopes. As there was a feeling extant not only in Eu- rope, but in this country as well, that the effort to cross the Sierra Nevada Mountains by a practical railroad would prove a failure, these influences did injure us to a very great extent. Even the Sitka Ice Company, which was charging the people of San Francisco 5 cents a pound for ice, antagonized us from a selfish motive, as we saved the peo- ple in this direction alone, $600,000 a year. The Overland Stage Com- pany, which received from the Government .of the United States $1,800,000 per annum for carrying the mail, brought their influence to bear against us. All these interests combined to influence legislative bodies against us to injure our credit, and, as the journals of all the legislatures would indicate, anuoyed and hampered us in every possible manner. CONTINUED HOSTILE LEGISLATION PROPOSED. Hostile legislation has been proposed at every session of the legisla- ture since the commencement of the road. It has~asSuined various forms and often of so serious a character that if successful it would have been impossible to operate the road under its restrictions. CALIFORNIA RAILROAD COMMISSION UNDER NEW CONSTITUTION. By the CHAIRMAN : Q. Has any actual, local or general, hostile or antagonistic legislation been enacted ? A.. All those bills we were able to defeat. Every one of them helped to defeat itself. They were generally gotten up in ma- lignity and by men who did not understand the subject, and wherever we could get such bills before a committee composed of fair-minded men, to whom we could explain the true nature and the necessary effect of such legislation, the bills helped to defeat themselves. Finally, how- 2536 U. S. PACIFIC RAILWAY COMMISSION. ever, there was a new constitution adopted by the people of this State, which created a board of railroad commissioners with absolute powers, executive, judicial, and legislative, and without appeal. If they were so inclined they could make rates that would practically confiscate the property of the company, under this constitution, and we could not help ourselves. Our redress, of course, would be to go to the Supreme Court of the United States for a final decision of the question in the event of any such action by this board. My idea is that the whole thing is unconstitutional, inasmuch as it vests those three powers in one body, and it would not be sustained by the United States courts if the subject ever goes before them. We have not cared, however, to raise the question, but have got along the best that we could. At the same time this new constitution has interfered a good deal with the company. It will not allow us to charge less, for instance, to Los Angeles, which is a competitive point, than to intermediate non-competitive points. The result is that we cannot make a rate from here to Los Angeles which will compete successfully with the coast steamers and along the rivers. This legislation, under the new constitution, interferes with the companies in a good many ways, but the commissioneis have not done all the damage that is in their power. HOSTILE SENTIMENT DURING GRANGER EXCITEMENT. Q. What was the general character of the hostile legislation intro- duced? A. It was generally in the shape of bills "providing for the re- duction of freights and fares. I think that every one of the bills, if carried into effect, would have rendered us unable to operate the roads. Q. Was there a general sentiment in the State in favor of such bills ? A. The noisy and demagogic element was very strong at one tim^, and influenced others. The feeling engendered by these men existed very largely in the State at one time, and made the people think that we were actually overcharging them for fares and freights, but gradually we haye been able to explain, until to-day I think that the feeling iii the State is as good towards us as could be expected, we doing business with so many people. The general public has a good deal of confidence in this State, and I think that we have been able to satisfy them that we are doing and have always done all in our power to develop its resources. It was only for a little time that the interests adverse to us were able to swing things their own way. At about that time you will remember that there was a general howl all over the country against railroads. It was during the time of the Granger excitement, which you will remember existed so generally in your own country. AVERAGE FREIGHT LOWER THAN IN 1878 AND 1879. By Commissioner ANDERSON : Q. How does your average rate per ton per mile compare to-day with the rate in 1878 and 1879 ? A. It is very much less. We are now doing a class of business which requires lower rates. While we were allowed 15 cents per ton per mile by the law, I think that there was scarcely 1 per cent, of our business which was done at that rate, and that rate was charged only upon very high-class goods in very small quantities. For instance, we might charge that for short haul from the end of Oakland wharf into Oakland, a distance, say, of 3 miles, and 45 cents per ton, which is the highest we could charge, did not pay lor the handling. We alsp charged high rates on some costly articles, and upon certain classes LELAND STANFORD. 2537 of machinery, for instance, which were carried to Nevada in the early days. Some of this machinery was large and heavy, and one piece would frequently occupy a whole car. In some instances we had to build cars especially for such machine^, and perhaps they woald be required only occasionally. On such shipments we charged 15 cents a ton per mile, and even this would not pay, chiefly from the fact that we had such little use for such a car. It was only at such times and under such circumstances that we charged the maximum rate of 15 cents per ton per mile. REDUCTION OF NEVADA AND UTAH THROUGH FREIGHTS. Q. The rates, then, have been largely reduced ? A. Yes, sir; I think that our last report will show it. The serious thing to us was the reduction in the through freights that passed through Nevada and Utah. As you came across that country you saw that there was no local business there. There is not a station business in that country which amounts to enough to sustain business. We depended upon the business origi- nating in California and east of Salt Lake, which passed to and through Nevada and Utah, and when these other lines of railroads not only cut down the rates, but divided the business with us, the rates went so low and the business fell off so much that it has not paid. The value of that road was from the through, business and the good rates which it could command. There being no competition, such prices were fixed as were remunerative, and which were fair as between the shipper and the carrier. EXTREME LEGISLATION DEFEATING ITSELF. By the CHAIRMAN: Q. I understand you, then, to say that at no time has there been any hostile local or State legislation ? A. Excepting the State constitution. There have been many efforts at hostile legislation made. For instance, the law taxing our railroad. You saw yesterday a statement showing the extraordinary burden placed upon us in that way. All other very obnoxious propositions, however, were defeated. Q. Were these bills largely supported in the legislature ? A. Yes ; at one time there was a legislature very largely elected because of its hostility to the railroad, and on that account we paid no particular at- tention to it. I made up my mind that in a legislature forty men would be fair, and out of the forty there will be always twenty men who would be reasonable and just, and these twenty men would be able to defeat extreme legislation. If the legislation had not been so very extreme it is very likely that they would have passed some of it ; but the ex- treme measures proposed defeated themselves. THE ANTI-RAILROAD SENTIMENT. Q. Did the members elected to the legislature largely represent the prevailing sentiment of the people throughout the State at that time ? A. I am not sure of that. The anti-railroad sentiment was very noisy and very clamorous. I remember that at the elections a well- known railroad man and a friend of the railroad ran away ahead of his ticket. I know a man who was a candidate for controller who was known as the bosom friend of the railroad, and who believed in rail- roads, and he ran ahead of his entire ticket. And in the senate, the railroad men, as they used to be called, were, as a rule, a good class of 2538 U. S. PACIFIC RAILWAY COMMISSION. men and they were the strongest. My impression is that the anti-rail- road sentiment of the State which appeared to have existed at one time syas more on the surface than otherwise. THE SO-CALLED u DUTCH FLAT SWINDLE." Q. What year was that ? A. I cannot tell the date. I am not very good at remembering dates. It was a good while ago; I think about 1870 or 1872. During the early days we had a great deal of antagonism from the various interests opposed to this road. At one time we found it necessary, in order to carry on our work with the greatest speed and economy, to build a wagon road over the mountains, beginning at a place called Dutch Flat, and our opponents represented that we were building this railroad for the benefit of the wagon road, and the whole thing was called the " Dutch Flat Swindle," because the wagon road commenced at Dutch Flat. The local business at that time was very good. It was in the midst of the excitement in Nevada, the great min- ing excitement of that State, and a vast amount of machinery and sup- plies was constantly going forward, and the earnings from that source cut a very important figure in our earnings. INJURY BY COMPETING AIDED ALINES. " Question 54. Also to inquire if the United States, since the Union and Central Pacific Railroad Companies accepted the terms proposed by Congress for the construction of the Pacific railroads, has granted aid in lands for building competing parallel railroads to said Pacific railroads, and, if so, how many such roads, and to what extent such competing lines have impaired the earning capacity of the Pacific railroads." EARNINGS OF PACIFIC RAILROADS IMPAIRED BY UNITED STATES AID TO OTHER LINES $37,000,000. Answer 54. Congress has granted aid in lands for building competing parallel roads to the Pacific railroads. The number of which and the extent to which such competing lines have impaired the earning capac- ity of said Pacific railroads is hereinafter fully set out in the statement of J. C. Stubbs, general traffic manager, annexed hereto, marked u Ex- hibit 12," and made part hereof; the actual business diverted being upwards of $37,000,000. SERVICE OF NON-AIDED ROADS REMAINING UNPAID. " Question 55. Also to inquire if the United States have contracts with branch roads controlled by either of said Pacific roads for carrying United States mails, and, if so, what service has been performed by them, and what money, if any, has been paid for such service, and what remains due and unpaid." i PAYMENT ON LEASED LINES WITHHELD BY UNITED STATES. Answer 55. The United States Government had contracts with branch roads controlled by the Central Pacific railroads for carrying United States mail. The Central Pacific Railroad Company controlled by lease a number of branch lines prior to April 1, 1885, from which date the lines were leased to the Southern Pacific Company. Mails were carried by these LELAND STANFORD. 2539 lines for the United States under the rules and orders of the Post-Office Department. No payments have been made for such service since 1883, at which time but partial payments were made. The payments were withheld prior to April 1, 1885, because the Central Pacific Railroad Company leased the lines, and they have been withheld since that date because the Central Pacific Railroad Company had formerly leased the lines. CASH DUE UNDER SUPREME COURT DECISION $1,853,323.15. The United States Supreme Court has decided that compensation for transportation on non-aided and leased lines was payable to the com- pany in cash. From and including the year 1882 to the present time there has been annually a balance due the non-aided lines for transpor- tation services performed. The amount thus due from the Government in cash in excess of all requirements of law to December 31, 1886, is $1,853,323.15. The service that has been performed, the amount of money which has been paid for such service, and what remains unpaid are fully shown by the reports of Mr. E. H. Miller, jr., secretary of the company, hereto attached, marked " Exhibit 13," and made part hereof. By Commissioner ANDERSON : Q. Does that report contain any statement from the office of the Commissioner of Eailroads, or from the United States Treasury Depart- ment, showing any agreement on that figure? A. Yes, sir; Mr. Mil- ler's report gives such a reference. Each of these statements you will find sustained by the reports of the United States officers, and by the reports of the Kailroad Commissioners. EMBARRASSMENT TO COMPANIES BY UNITED STATES NOT PAYING AMOUNTS DUE. "Question 56. And if the United States, by failing to pay for such mail services, has embarrassed said railroad companies, or either of them, in paying their indebtedness to the United States." PRESENT ANNUAL INJURY ON THIS ACCOUNT, $560,000. Answer 56. The United States, by failing to pay for such mail service and other transportation, has caused an expenditure to the Central Pa- cific Kailroad Company of amounts equal to interest on the sums re- tained at the rate of 6 per cent, per annum ; that being the rate of interest paid during the period on floating debt of the company, which debt would have been decreased by the payment of the sums clue from the United States. The annual interest on this balance due the roads in question to December 31, 1886, of $1,853,323.15, at 6 percent, is $111,199.39. This is the present annual injury to the roads by the Government on account of the item of transportation charges unpaid. The current charges also, in excess of the requirements, amount, as shown by the foregoing statement, to about $450,000 a year. This amount with the interest on the balance makes the accruing annual sum of $560 000 due for transportation on non-aided lines and remaining un- paid. HAVE ROADS COMPLIED WITH THE LAWS f "Question 57. Also to inquire if the several Pacific railroad compa- nies have complied with the provisions of 'An act to alter and amend p R VOL iv 14 2540 U. S. PACIFIC RAILWAY COMMISSION. the act entitled "An act to aid in the construction of a railroad and tel- egraph line from the Missouri Kiver to the Pacific Ocean, and to secure to the Government the use of the same for postal, military, and other purposes," approved July 1, 1862, and also to alter and amend the act of Congress, approved July 2, 1864, in amendment of said first-named act,' commonly known as the 4 Thurman act,' and, if not, in what par- ticulars they have failed to comply." CENTRAL PACIFIC HAS FULLY COMPLIED WITH THE ACTS. Answer 57. The Central Pacific Eailroad Company has complied with all the acts enumerated in this interrogatory in letter and in spirit, to the satisfaction of the officers heretofore appointed under the several acts of Congress to examine into the affairs of this company. The first examination was made in 1879, and included everything from the com- pletion of the road up to the date of that examination. Since that time annual examinations have been made and reported upon. In every case the report shows that the company has complied with all the obliga- tions imposed upon it by Congress. All this fully appears in detail in my answer to interrogatory No. 2. WHAT CAN BE PAID WITHOUT INJURY TO COUNTRY ALONGr THE LINES. " Question 58. Also to inquire what sums the Pacific railroads and their branches can severally pay annually on account their indebtedness to the United States without imposing such burdens upon the people, and practically upon the localities through which the roads pass, as to re- tard the development of the country." INJURY TO NEVADA AND UTAH BY DEMANDING EARLY PAYMENT. Answer 58. It has been shown in answer to interrogatory No. 3 (c), that the present net earnings of the aided lines, over which the Gov- ernment lien extends, after paying the current charges which are prior in lien to -that of the United States, amount to about $740,000 per an- num. The annual accruing interest on the United States bonds is $1,671,340.80. The whole amount of net earnings therefore lacks $930,000 of meeting the accruing interest, even if every available dol- lar were used for that purpose. The net earnings of the aided road are alone available for the payment of the debt to the Government. Thus the available funds can only be increased by increasing these earnings. This can only be done by increasing the rates through Nevada and Utah, and so fixing the burden of the debt upon the communities through which the road runs. To whatever extent this means should be employed, it would retard the development of the country and im- pose a burden upon a comparatively few people along its line, for bene- fits which have been shared by the country at large and particularly by the several Departments of the Government. The local rates would wholly have to stand such a charge ; as, on account of competition of other 'trans-continental lines which were also aided in their construction by United States land grants, through rates cannot be raised. The earning from local traffic for the aided line during the month of May, 1886,* was Freight $161,310.08 Passenger - 87,366. 10 Total ,-...- -- . 248,676,18 LELAND STANFORD. 2541 This month is a fair average for the year, and would give an annual amount of $2,984,000. A considerable amount of these earnings is from traffic, the rates on which are controlled by competition, although it is local. This is the case with most of that over the aided line in Cali- fornia. In case the rates should be raised then to pay the Government bonds, the burden would fall almost entirely on the communities in Nevada and Utah. INCREASE OF LOCAL RATES REQUIRED. To pay the balance of $930,000 necessary to meet the accruing inter- est on the United States bonds, without making any provision what- ever for the principal, would require an increase in local rates in Ne- vada and Utah of over 33 per cent. The foregoing statements, together with the exhibits herewith pre- sented in connection therewith, substantiate the averment made on pages 20 and 21 hereof, that an equitable adjustment of the accounts bet ween this company and the United States would allow the company's claims against the Government to the amount of $62,873,557.81. All of which is respectfully submitted. LELAND STANFORD, President. STATE OF CALIFORNIA, City and County of San Francisco, ss : Leland Stanford, being duly sworn, deposes and says, that the facts stated in the foregoing answers to the 58 interrogatories propounded to him by the United States Pacific Bail way Commissioners are true, to the best of his knowledge and belief. LELAND STANFOED. Subscribed and sworn to before me this 28th day of Julj-, A. D. 1887. E. B. RYAN, Notary Public in and for said City and County of San Francisco, State of California. EXHIBIT No. 1. Affidavit of E. H. Miller, jr., secretary, that the Central Pacific Rail- road Company has complied with all obligations of the laws. E. H. Miller, jr., being duly sworn, deposes and says : I am a citizen of the United States and of the State of California, over twenty-one years of age, and am competent to testify in this matter. On the '29th day of September, 1863, I was elected secretary of the Central Pacific Railroad Company, and ever since then have been and now am the duly appointed and .acting secretary of said company; that as snch secretary I have had charge of and have kept, and now have charge of and keep, all the books, of account, papers, and vouchers pertaining to its business; that as such secretary I have had occasion to and have examined all the laws of the United States heretofore passed with refer- ence to aiding said company with bonds ; that as such secretary I have had occasion to and familiarized myself with the obligations of such laws, so far as they relate to the Central Pacific Railroad Company, and the company has promptly observed all such obligations to the best of my knowledge and belief. E. H. MILLEE, JR. Subscribed and sworn to before me this 26th day of July, A. D. 1887, [SEAL.] E. B. RYAN, Notary Public in and for the City and County of San Francisco, Cal, 2542 U. S. PACIFIC RAILWAY COMMISSION. EXHIBIT No. 2. Statement of A. N. Towne, general manager, relative to diversion ofbusi- ness to non-aided lines. SAN FRANCISCO, July 5, 1887. Hon. LELAND STANFORD, President Central Pacific Railroad Co. : DEAR SIR : In obedience to your instructions, I beg eave to report with respect to the question (No. 9) asked by the Pacific Railroad Commission, created by the act of Congress approved March 3, 1887 : " Whether any traffic or business which could or should be done on the aided lines of said company has been diverted to the lines of any other company or to non-aided lines," as follows: . DIVERSIONS TO THE LINES OF OTHER COMPANIES. (1) Through traffic. It is a matter of public knowledge that there are now several transcontinental lines. It is unnecessary to name them. All except the original Central and Union Pacific line have been completed since 1880. Each of those constructed since 18SO has diverted more or less traffic from the original Union and Central Pa- cific line. The aggregate of these diversions is equal to more than 50 per cent, of the total through freight and passenger traffic for the five years and nine mouths ending with December 31, 1886, the period which has elapsed since the opening of the first line competing with the Central and Union Pacific line for through traffic. The responsibility for the construction of these opposing lines rests, in my judgment, with the Government of the United States. It follows that the United States Gov- ernment is the instrumentality through which said diversions of through traffic from the Union and Central Pacific roads to the other later-built transcontinental lines was accomplished. A part of each of said other lines received large grants of land from the United States Government, the grant being in each case, 1 believe, double the grant of lands made to the Union and Central Pacific companies. It was the Government grant of land which induced the building of these roads at least it, if not the sole cause of their construction, was the inducement which facilitated their construction and caused their early completion. In each case the building of these roads has been in advance of the settlement of the country through which they run. In nearly every case the country has been settled since the completion of the road, in the main through the advertising agencies of the railroad managers whose motives were not only to develop traffic but to sell their lands. There has been no time when the original line made by the Union and Central Pacific roads could not and would not have provided facilities for and amply accommodated all the through traffic carried by the other lines; hence, the conclusion is inevitable that the United States Government, by granting large land subsidies in aid of roads which have been built, and which, since their completion, have competed for and taken a larger share of the through traffic from the Central and Union Pacific line, is directly responsible for the diversion of said traffic and the consequent loss in earnings to the Central Pacific Company and the Union Pacific Company. This loss would have been very much greater, but for- tunately the Southern Pacific Railroad Conipauy, organized in 1865 under the laws of California to build a railroad from San Francisco to San Diego, thence east to the boundary of the California State line, there to connect with railroads to be built to the Mississippi River, passed in 1870 under the control of the men who controlled the Central Pacific. The control of the Southern Pacific by the Central Pacific ownera delayed the extensions of the former road, and after its extensions were made to con- nections with lines building westward from the Mississippi River, secured co-opera- tion and harmony in working the traffic which was common to both the Central Pa- cific and Southern Pacific lines that would have been impossible under separate con- trol, and which was of great advantage to the original or Central Pacific line. There can be little questioning, in the minds of practical railroad men, of the pro- position, that had the railroads following the 32d and 35th parallel routes, respect- ively, been wholly constructed and operated by men who wer.e not interested in the Central Pacific line, the diversion of traffic to those lines would not only have been more rapid and greater in degree, but that the revenue of the Central Pacific and Union Pacific line would have been diminished in much greater ratio. The extent of the damage to the Central and Union Pacific line by diversion of traffic to these other through trans-continental lines will be shown approximately by the general traffic manager in answer to the Commission's inquiry No. 54. (2j Local traffic. The traffic between San Francisco and other bay points, on the one hand, and the cities of Stockton, Sacremerito, and Marysville, Cal., respect- ively, is shared by other carriers. This, however, scarcely comes under the bead of a diversion from the Central Pacific aided lines. The other carriers sharing this traf- fic are, (a) vessels navigating the bays, Sacramento River, San Joaquin River, and Feather River, respectively routes which were open and employed before the Gen' LELAttD STANFORD. 2543 tral Pacific line was built; (&) the California Pacific road, which was completed and in operation before the western division of the Central Pacific. Therefore, whatever amount of this business has been done via the western division of the Central Pa- cific is, in fact, a diversion from the other carriers named. DIVERSIONS TO NON-AIDED LINES. While the roads to which the diversions treated under this heading have been mad j were built and are owned by other companies than the Central Pacific, yet as they are controlled by those who have also controlled and managed the Central Pacific, I presume they illustrate the diversions to non-aided lines referred to in the Commis- sion's interrogatory. Traffic to and from points south of Lathrop interchanged with San Francisco and Oakland has, since the completion of the San Pablo and Tulare road, Tracy to Oakland via Martinez, been carried over that road instead of being carried via Niles and Liv- ermore. The road from Tracy to Oakland, via Martinez, is 11 miles longer than the road from Tracy to Oakland via Livermore, but the former is a practically level road, its maximum grade being 10 feet to the mile, over which an ordinary engine can draw 50 cars, loaded with from 10 to 12 tons each, while the latter crosses the Contra Costa Range with a maximum grade of over 52 feet to the mile, which would require three engines to haul the same train. The longer line does not lose appreciably, if at all, in the matter of time when compared with the Livermore line, while it gains greatly in the matter of cost of operating. Traffic on the western division of the Central Pacific east of Lathrop, to and from San Francisco and Oakland, has also been diverted from the "aided" line between Tracy and Niles in like manner and for the same reason as the traffic to and from points south of Lathrop. Traffic interchanged by points east of Sacramento and north of Roseville Junction, with San Francisco and Oakland, has been diverted at Sacramento from the " aided" line, between Sacramento and Niles, to the California Pacific and Northern Railway, a non-aided line. The reasons for this diversion are (1) Public convenience. The passenger train time between San Francisco and Sacra- mento, via the California Pacific line, is four hours against six hours via the Central Pacific, Stockton, and Livermore route. The public demands and is entitled to the best service we can give. We should be unable to justify sending passengers or even freight over the long and heavy line via Stockton against the shorter, easier, and much more attractive line via Beuicia. Especially is this true of the through or trans-continental traffic, which is taken in competition with other trans-continental lines. The weight of this consideration with those whom the company serves is well illustrated by the fact that the United States Government chooses the short line for the transportation of its mails in consideration of (a) public convenience, (&) and the fact that it pays for the transportation of mails by the mile. By so doing it expe- dites the mails and saves money, secures the beat service at the least expense to the Government. (2) Economy in operating. The line from Sacramento to Oakland wharf, via Stock- ton and Niles, is 136 miles, and crosses, as I have before explained, the Contra Costa Range at a maximum grade of over 52 feet to the mile, while the California Pacific line via Benicia makes but 86 miles between Sacramento and Oakland wharf, and is practically a level line. If we were to equate the two lines that is to say, reduce the grades and curves of both lines to their equivalent in straight level lines, we would find the Stockton route to be more than double the length of the Benicia line. There is fully that difference in the cost of handling the traffic over the two routes, in view of which it would have been inexcusable to use the longer and more expen- sive route. The Government did not assume the responsibility of constructing the Central Pa- cific road. It contributed thereto by a grant of land and a loan of credit, but its motives were selfish. It was not moved by a desire to benefit or enrich the promoters of these enterprises. The result, as will doubtless be shown before the Commission, has amply justified the wisdom of Congress in granting the aid. No government; or individual ever made a better investment, or, if I may be allowed the expression, ever engaged in a more successful venture, even if it transpires that neither the prin- cipal nor the interest of the loan is ever repaid. Neither did the Government assume the responsibility of operating the road when it was completed. It was left in the control and management of its owners, and we must assume that this was the purpose of Congress. We may also fairly assume that Congress expected the road to Ue man- aged by practical business men upon established business principles, of itself a val- uable promise, affording the best guaranty that sooner or later the company would be able to discharge its obligations to the Government. These shareholders found themselves engaged with the problem of making a support for nearly a thousand miles of road through a sparsely settled territory, which, for the most part at the time, 2544 U. S. PACIFIC RAILWAY COMMISSION. was regarded as incapable of producing anything in tlio way of traffic which a carrier could move with profit. It was a link in a trans-continental line connecting the At- lantic and Pacific coasts. California was the cbief State on the Pacific coast, having a population in 1870, of but little over 560,000. It was known only as a mining State. Its agricultural resources were not only undeveloped but unknown, even undreamed of by the most sanguine. The chief value of the road was its value to the Government as a military road, as a strategic line, but the government assumed no responsibility for its management, provided no guaranty of earnings, no means of support. The owners of the road were left to their own resources and devices to develop traffic, and to make a support for it. The occasion called for the greatest skill and sagacity, untiring in- dustry, and the utmost economy on the part of the owners and the agents they employed to assist in conducting the affairs of the company. The Government, which 1 here put in the place of the public, certainly understood this. It cannot be that at the time there was any warrant for interfering with the management of the road, or any thought of questioning the propriety of anything which the man- agers of the road might or should legally do in pursuit of the interest of the rail road company. Its interest was to secure the maximum of traffic and to move it at the minimum of cost. It is not to be supposed that the circumstances I have described ever (until after the passage of the Thnrman act) suggested to the man- agers of the road, to its patrons, to Government officials, or to Representatives in Congress, that the question whether the company should or should not be re- strained from adopting any method of conducting its traffic or any measure of econ- omy in operating the road, or any device to conserve, increase, or promote its traffic, should turn upon the point whether or not it affected the earnings of a particu lar " aided" or "non-aided" portion of the road, so long as the method, measure, or device was lawful, and had for its object the welfare of the company. On the contrary, it is fair to assume that these circumstances not only warranted but re- quired the employment of every measure of economy, every lawful device to defeat or meet competition, every means to increase the traffic and enlarge the revenue of the company, regardless of special considerations for a part of its road, whether "aided" or " non-aided," so long as the communities on every portion of the road were afforded reasonable service at a fair price. Were we to examine into the ultimate cause which led to the acquirement or build- ing of the "non-aided" lines to which traffic may be said to have been diverted, it will be found in every case to have had for its object the strengthening and protec- tion of the Central Pacific line. They are all feeders of the main line. They occupy territory which sooner or later would have been seized by other railroad companies. They have developed the resources of that Territory and made it tributary to the main line of the Central Pacific. I venture to say that in each case the gain to the Central Pacific Company from contributions of traffic, the reduction of competition, the saving in cost of handling traffic by the acquirement of these " non-aided " com- petitive and tributary lines has more than equaled their cost. As a single example, take the California Pacific road. Suppose it had continued under separate and in- dependent control from the Central Pacific, what its extensions might and would have been to the damage of the Central Pacific iii its most productive territory is scarcely a matter of conjecture. It certainly would have been extended through the Sacramento Valley, and probably would have been constructed east and formed an- other through line. The control of the California Pacific was necessary to the Central Pacific. Having it, a reasonable regard for the public interest, as well as economy in conducting the traffic, compelled the Central Pacific managers to handle the traffic in the manner I have described. I need only suggest these considerations. They have doubtless been thought of and debated in your own mind to far greater length than in mine or than I would be authorized to treat them in this communication. Very respectfully, A. N. TOWNE. SAN FRANCISCO, July 8, 1887. Hon. LELAND STANFORD, President Central Pacific Railroad Co.: DEAR SIR : In addition to what I said in my letter of the 5th relative to the diver- sion of business and the difficulty in operating the aided line between San Francisco and Sacramento as compared with the level and shorter line by the non-aided roads, I desire to call your attention to another important factor entering into the question, showing still further reasons why the company will not be able to meet its obligations t& the Government at maturity, or even for many years to come. Of the H55 miles (in round numbers) of the aided line between San Jose" and the point of junction with the Union Pacific, 5 miles west of Ogden, 586 miles, or 67 per cent., is located in Nevada and Utah, through a section almost wholly devoid of the first element of prosperity in a country, namely, agricultural. All this vast re- gion offers little inducement to the farmer in fa/st, the country through which the LELAND STANFORD. 2545 toad passes is a vast area of unoccupied land, and the settlements along the road are small and unimportant, with few exceptions. I find in looking over the earnings for that portion of the line within the State of Nevada for the month of August, 1878 (which month showed the largest earnings of any month th;tt year), it shows the en- tire receipts from both freighc and passengers collected from our patrons for the pro rata proportion of the road operated within that State to have been as follows : Freight forwarded from points in Nevada $48, 620. 64 Freight received at points in Nevada 74, 715. 06 Passengers both ways 27,974.00 Total 151,309.70 On the other hand, for this same month the taxes and amounts actually paid out to our own men, residents of that State, amounted to $63,347.97 ; and we may add to this amount the cost of all such as rails, fastenings, timber, lumber and material for shops, fuel, &c., used in that State, which are not included in the above figure, together with proportion of interest, salaries, and other expenses; and we would find out that the amount so paid out was greater than the proportionate amount of earnings re- ceived from all traffic within the boundaries of that State. There being no timber and but little cultivation, this vast territory may be classed as grazing and mineral lands, and the contributions to the road in the way of traffic are small and of far less value now than in the past, as will be seen by the following comparative statement of freight traffic to and from points in Nevada during the years 1876 and 1886 : ' 18 76. 181 % Pounds. Earnings. Pounds. Earnings. From Nevada.' points 121 712 030 $5i9 780.60 160 909 650 $649 237 60 381 211 690 2 789 9244 131 958 100 1 021 363 10 Total 3 339 710 00 1 670 600 70 Which shows for the "out" freight a gain in charges of 15 per cent, over 1876, and for " in " freight it shows a loss in charges in 1886, as against 1876, of over 63 per cent. On the total "in" and "out" it shows a loss in 1886, as compared with 1876, of $1,669,109.30, or about 50 per cent. The live-stock shipments are light, for the reason that the cattle-men drive much of their stock north through a good grazing country to shipping points for the East by the Union Pacific and Northern Pacific roads. And the great mining industries of Nevada, which once contributed a large and remunerative traffic to the road, now give us but a very limited amount. From the Nevada State line westward, 138 miles, the road is constructed over the Sierra Nevada range of mountains, reaching an elevation of nearly 7,000 feet, where the traffic is light and the expense of operating very heavy. And since it is proper to judge all things by a standard of comparison, I may perhaps be permitted to point out a few of the difficulties incident to constructing and operating tho Central Pa- cific road over this mountainous and sparsely-settled section as compared with the roads of the Eastern and Northwestern States ; the latter were easily built, having straight lines, running through level and populous sections, many of them over inex- haustible beds of coal, with grades so favorable that eighty cars and upwards can be taken with safety in a train, while on the other hand, on the mountain section of tho Central Pacific above mentioned, six cars is the limit for a train with a ten-wheel engine, with 18 by 24-inch cylinders, more than six cars requiring a second engine, and more than twelve or thirteen a third engine, or the train must be divided ; this is on the portion of the road where we have to overcome an elevation of nearly 7,000 feet. In passing, and in this connection, I will add that the nature of the country through which this road runs between San Francisco and Ogden is such that there is nearly 15,000 feet of ascending and nearly 11,000 of descending grades ; making a total of about 26,000 feet. The total curvature is 45,000 degrees, equal to 125 complete circles, or to a 52-degree curve for the whole distance, thus necessitating a material increase of locomotive power. Again referring to that portion of the line between the Nevada State boundary and Sacramento, I should not fail to remind you of the large and unavoidable ex- 2546 U. S. PACIFIC RAILWAY COMMISSION. pense in the construction and maintenance of snow sheds and galleries, in extent nearly forty miles, made necessary as a protection against the storms of the winter months in that region ; then there is great cost in the maintenance and operation of the enormous snow plows, with a large force of men to work them, which force in the summer season has to be kept on water trains, fully equipped, to extinguish fires in the sheds and galleries. This is an expense that no other railroad in this country, or perhaps in the world, is subjected to. All this is necessary to keep the line open for the movement of the traffic promptly and satisfactorily ; and further, it is all-important that the line be ever kept open in order to meet the wants of the Government, as provided in the act requiring us to be prepared at all times to transport the mails, troops, munitions of war, supplies, and public stores whenever required to do so by any department of the Government, as they are to have preference in the use of the roa"d in all cases and under all circum- stances. The line from Sacramento to San Jose" is, in round n-umbers, 140 lineal miles ; be- tween Sacramento and San Joaquin River, 68 miles, the country is good, and devoted to agriculture and horticulture, the soil is productive and the traffic profitable to the road, although at Sacramento and Stockton we have active competition from the riv- ers, which makes traffic to and from those cities less desirable and profitable than we could wish. From the San Joaquin River over the inner coast range of mountains to Livermore, 31 miles, is a section which pays little tribute to the road, but from Livermore to San Jose" the line runs through a fine productive section of agriculture and horticult- ure, although that portion of it between Niles and San Jose", 17 miles, is subject to active competition from the South Pacific Coast Railroad, which not only divides up the traffic, but compels this company to take the remainder at very low rates. Further competition from this source is, however, happily now avoided by the ac- quisition of that company's property by the Southern Pacific Company. In conclusion, I will add that notwithstanding the light traffic, the facilities and accommodations furnished our patrons are in all respects first class. Yours, truly, A. N. TOWNE. EXHIBIT No. 3. Statement of J. A. Fillmore, general superintendent, relative to cost of operating mountain divisions. SAN FRANCISCO, July 25, 1887. Hon. LELAND STANFORD, President Central Pacific Railroad Company : DEAR SIR: As requested in yours of even date, I submit the following relative to the difficulties of and the difference in cost of operating the mountain division of the Central Pacific Railroad as compared with a road of ordinary grade : (1) The engine service alone is nine times greater. For example, one engine can take a train of forty -five cars in the valley from Sacramento to Rocklin, from which point it requires fi,ve engines of the same class 1o take the same train over the mount- ain division. On the return these engines, not being required to pull the trains, are virtually "dead-headed," with the exception of one. (2) The total cost of engine service per mile was much greater. Using the same fuel, wood, at the same price per cord, the cost per mile on the 'mountain division is 33f ^, cents ; on a road of ordinary grade, 23$$, cents, an increase of 42^ per cent. (3) On account of the increased number of trains over the mountain division (five trains being required to do the work of one in the valley) there is a corresponding increase of expenses in the way of stations, telegraph operators, track- walkers, watch- men, wood-pilers, &c. (4) The cost of keeping the mountain division open in heavy weather, especially during the winter months, is something beyond comparison with any other division or with any other road. I had charge of that division, as division superintendent, during the winter of 1873-4. The total fail of snow that winter was 63 feet. At times it was necessary to run five snow-plows, and nine engines were required to each plow, to insure against blockade. In addition to this we had to employ be- tween four and five hundred shovelers during the storms, and most of them were re- quired between tho storms to shovel back the snow preparatory to another storm. During that winter, and indeed during every winter when we are troubled with snow in the mountains, all freight trains are put on sidings outside the snow-belt, their en- gines are placed on the snow-plows, and we only attempt to run passenger trains. We have had as many as thirteen engines on one passenger train of six cars. On that portion of the mountain division where the snow sheds are located, we have expended for repairs of the sheds in the nine years from 1878 to 1886, inclusive, $384,274.23, an LELAND STANFORD. 2547 average of $42,697.23 per year. This is for ordinary repairs, and doesn't include bet- terments. In addition to the above expenses on repairs of the snow sheds, in order to guard against fire, we have three fire trains under steam day and night, ready to move at a moment's notice when an alarm of fire in the sheds is turned in. As a further precaution against fire, the sheds are watered twice a week for a distance of about 36 miles, (5) We have over the Central Pacific Railroad one through express train each way per day, and during the summer months, for about six months of the year, for about two-thirds of the time, these trains are run in two sections, being too long and too heavy to be run as one solid train. Over the same road there is an average of three through freight trains per day each way ; this is about the same daily number that have been run during my entire connection with the road, which began in 1871. It is only within the last few years, however, that second sections during the summer months have become of almost daily occurrence. (6) Relative to where the business comes from that would maintain a road from the State of California through Nevada and Utah, will say : East-bound through freight originates in California, nearly all of it, and mostly west of the Sierra Nevada Mount- ains. Nearly all west-bound through freight originates east and south of Ogden, Utah. Yours, &c., J. A. FILLMORE, General Superintendent. STATE OF CALIFORNIA, City and County of San Francisco, 88 : J. A. Fillmore, being first duly sworn, saith : That he has read the foregoing state- ment ; that the matter and things therein stated are true of his knowledge and belief, except as to those matters stated on his information and belief, and as to those he be- lieves it to be true. J. A. FILLMORE. Subscribed and sworn to before me this 26th day of July, A. D. 1387. [SEAL.] E. B. RYAN, Notary Public in and for said City and County. EXHIBIT No. 4. Statement of E. H. Miller, jr., secretary, relative to dividends paid. Number. Date. Kate, per cent. Amount. 1 Sept 13 1873 3 $1 68 265 2 Aii 4 1874 5 2 713 775 3 April 1 1875 6 3 256 530 4 Oct 1, 1875 4 2 171 >;> 5 April 3* 1876 4 2 171 >;> 6 Oct. 2,' 1876 4 2, 171 9 7 April 2, 1877 4 2 17' O'^O 8 Oct. , 1877 4 2 171 O'>0 9 Feb. , 1880 3 i 68 205 10 Aug. , 1880 3 ] 778 26."> 11 Feb". 1881 3 1 778 265 12 Aug. , 1881 3 1 778 265 13 Feb. , 1882 y 1 778 265 14 Aug. 1882 3 1 77 2(55 15 Feb. 1883 3 1 778 205 16 Aug. 1, 1883 3 1 778 265 17 Jan. 15 1884 3 1,778 265 34. 308. 055 U. S. PACIFIC RAILWAY COMMISSION. Central Pacific Railroad Company. Statement showing surplus profits available for dividends from organization to December 31, 1884. 1864 to June 30, 1878. Income receipts $124,283,017.46 Land receipts to redeem bonds 1, 136, 000. 00 Interest on sinking funds 790,207.43 $126, 209, 224. 89 Expenses, &c 98,582,084.43 Sinking funds of company 3,072,557.43 United States Government : One-half transportation charges retained prior to 1873 758,639.69 One-half transportation to June 30, 1878 1,021,289.85 Five per cent, of net earnings to June 30, 1878. . 1, 871, 430. 00 Land bonds redeemed 1,136,000.00 106,442,001.40 Surplus profits to date 19,767,223.49 Dividends Nos. 1 to 8, inclusive, September, 1873, to October, 1877. . 18, 453, 670. 00 Balance surplus profits 1,313,553.49 July 1 to December 31, 1878. Receipts: Earnings $9,798,477.33 Lands 1,151,000.00 Interest on sinking funds 118, 702. 29 11,068,179.62 Expenditures: Expenses, &c 7,916,723.13 Land bonds redeemed 1,151,000.00 Sinking funds of company 223,702.29 United States requirement, 25 per cent, of net earnings 536,291.93 9,827,717.35 '1,240,462.27 For the year 1879. Receipts : Earnings 17,250,971.02 Lands 433,000.00 Interest on sinking funds 233,903. 18 17,917,874.20 Expendi tures : Expenses, &c 14,860,262.54 Land bonds redeemed 433,000.00 Sinking funds of company 772, 403. 18 United States requirement, 25 per cent 899, 563. 92 16,965,229.64 952,644.56 Balance surplus profits to date 3,506,660.32 For the year 1880. Receipts : Earnings 20,911,108.58 Lands.. 200,000.00 Interest on sinking funds - 254, 617. 08 21,365,725.66 tELAND STANFORD. 2549 Expenditures : Expenses, &c $16,588,934.81 Laud bouds redeemed 200,000.00 Sinking funds of company 1,008,117.08 United States requirement 1, 037, 225. 28 18, 834, 277. 17 $2,531,448.49 Surplus profits to date 6,038,108.81 Dividends Nos. 9 and 10 3,406,530.00 Receipts : For the year 1881. 2, 631, 578. 81 Earnings $24,094,100.95 From investments 612,656.40 From lands 420,000.00 Interest on sinking funds 262, 500. 00 25,389,257.35 Disbursements : Expenses, &c 18,087,719.98 Laud bonds redeemed 420,000.00 Sinking funds of company 1,016,000.00 United States requirements 1, 038, 935. 24 20, 562, 655. 22 4, 826, 602. 13 Surplus profits to date 7,458,180.94 Dividends Nos. 11 and 12 3,556,530.00 Balance surplus profits 3, 901, 650. 94 Receipts : For the year 1882. Earnings $25,683,242.41 Lands 711,000.00 Interest on sinking funds 281, 260. 00 26,675,502,41 Expenditures : Expenses, &c 20,545,180.24 Land bonds redeemed 711,000.00 Sinking funds of company 1,034,760.00 United States requirement 792, 920, 24 23, 083, 860. 48 3,591,641.93 Surplus profits to date 7,493.292.87 Dividends Nos. 13 and 14 3,556,530.00 Balance surplus profits 3, 936, 762. 87 Receipts : For the year 1883. Earnings $24,751,657.75 Lands 574.000.00 Interest on sinking funds 335, 125. 00 25,660,782.75 Expenditures : Expenses, &c 20,196,863.42 Land bonds redeemed 574, 000. 00 Sinking funds of company 1, 088, 625. 00 United States requirement 661, 530. 69 22, 521, 019. 1 1 3, 139, 763. 64 Surplus profits to date 7,076,526.51 Dividends Nos. 15 and 16 3,556,530.00 Balance surplus profits 3, 519, 996. 51 2550 U. S. PACIFIC RAILWAY COMMISSION. For the year 1884. Receipts : Earnings $'22,162,030.86 Lands 472,000.00 Interest on sinking funds 373,000.00 Miscellaneous 234,211.83 23,261,242.79 Expenditures : Expenses, &c : 21,238,166.03 Lan d bonds redeemed 472, 000. 00 Sinking funds of company 1 , 126, 500. 00 United States requirement 538, 851. 52 Deficit. 23,375,517.55 $114,274.76 Surplus profits to date Dividend No. 17 Balance surplus profits to date 3,405,721.75 1,778,265.00 1,627,456.75 E. H. MILLER, JR., Secretary. STATE OF CALIFORNIA, City and County of San Francisco, 88 : E. H. Miller, jr., being first duly sworn, saith : That he has read the forgoing state- ment consisting of the pages next preceding, marked " Exhibit No. 4," and knows the contents thereof; that the facts therein stated are true except as to those matters stated on his information or belief, and as to those he believes it to be truf. E. H. MILLER, JR. Subscribed and sworn to before me this 26th day of July, A. D. 1887. [SEAL.] E. B. RYAN, Notary Public in and for the City and County of San Francisco, State of California. EXHIBIT No. 5. Statement of the consideration paid the company by each stockholder receiving stock, and when and in ivhat property such payment was made.* [The dates of payment herein given are the dates when amount subscribed was fully paid up. "When stock was transferred or forfeited, the date of last payment by party holding stock is given.] Names of stockholders. No. of .shares. Dates of pay- ment. Amount paid. In what property. Transferred, &c. Central Pacific Rail- road Company. 1 Oct 10 1864 $100 00 Cash 1 Oct 10 1864 100 00 Cash 2 Dec 1 1862 20 00 Cash To Chas Crocker. Mar 21 1870 180 00 Cash Adams C W 10 Mar 11 1864 1 000 00 Cash Brickell B 20 Apr 30* 1861 ' 200. 00 Cash .. To C. C. Crocker C Mar 21, 1870 1 800 00 Cash Brickell E J 40 Apr 30 1861 400 00 Cash To C. C. Crocker C Mar 21* 1870 3 600 00 Cash Booth L A 10 Jan 17 1867 1 000.00 Cash Bradley & Co E L ''5 Apr 30 1861 250. 00 Cash Forfeited. Beans T E 10 Apr 3o' 1861 100 00 Cash, Forfeited Bowstead & Co 10 Apr 30* 1861 100 00 Cash To D "W "Welfcv Welty, D. W To C. C. Crocker, C June 21 1870 900. 00 Cash Bailey, James Stanford, A. P 150 Apr. 30, 1861 Sept 28 1863 1, 500. 00 Cash To A. P. Stanford. To Leland Stanford. Stanford, Leland Apr 4 1870 13 500.00 Cash... Blanchard U" W 10 Apr 30 1861 100 00 Cash To C. C. Crocker C Dec 14 1866 900 00 Construction Burnham "W. C 10 Feb" 12* 1864 1 000 00 Cash Burt B 5 Feb 18 1864 500 00 Cash i Bell T 2 Nov 5' 1862 20 00 Cash To C. C. Crocker, C June 21* 1870 180 00 Cash Bruner. Joset)h . . 2 Ffib. 9' 1863 40.00 Cash... ToC.C. * See answer to questions 27, 28, and 30. LELAND STANFORD. 2551 EXHIBIT No. 5. Statement of the consideration paid the company by each stockholder receiving stock, Chevalier, F .1.. Cash Cash Cash 1 Crocker C Cash Converse C. H 1 5 5 15 Cash Cook T.H Cash Coolot A Cash Cole Cornelius Cash Hnntinion C. P Cash Crocker, E. B Crocker H. S 10 5 20 Cash Services Cash dimming^, William... Bithell J Cash Crocker C i, 266. 66 100. 00 900. 00 5, 000. 00 5, 000. 00 45, OUO. 00 25, 000. 00 500. 00 500. 00 500. 00 210.00 90.00 50.00 450. 00 100. 00 4, 000. 00 10.00 100.00 200. 00 2, 000. 00 100. 00 1, 000. 00 100. 00 200, 00 Construction . ..' Cash . . Clark D. W 10 Crocker C Cash Crocker, B. R C roc ker. C harles 50 500 250 5 5 5 3 Cash . . . Cash Construction ... Cash ... Chamberlain, O. L Drew N. L Cash .. . Dein (r li Cash Duffy Barnes A Casli Davis, E Cash Crocker C . Construction .. Cash Drehor W . . 5 Crocker, C Cash Drew,D. K 1 40 1 10 2 20 1 10 3 Cash Drew & Co., N. L Don "lasS. W. J Cash Cash English, W. G . Cash Evt'na, J. R Cash Ebner, C. & F Cash Esl, A. Earl.D. A.v .. Casli Cash Evertt, W. L Cash C rocker, C - Construction . . 2552 U. S. PACIFIC RAILWAY COMMISSION. EXHIBIT No. 5. Statement of the consideration paid the company by each stockholder receiving stock } 0 Cash Forfeited. Mahlenfels F H 2 Nov 5 1862 20.00 Cash ... Forfeited. Mosier Samuel 5 Nov 7 1862 50.00 Cash Forfeited. Meister John 2 Nov 8 1862 20. 00 Cash Forfeited. Marvin W W 10 May 10 1864 1 000. 00 Cash McNeil John 5 Sept 5 1868 500. 00 Cash McDonald K H 20 June 8 1868 2 ono.oo Cash Myers H 5 Dec 3 1864 500. 00 Cash ..... Mott jr. E B 10 Feb 5 1866 1 000.00 Cash...... ... Moore George R 10 Feb 25 1865 1 000. 00 Cash Mangan P F 1 Feb 15 1864 100 00 Cash Moore D Z 25 June 19 1865 2 250.00 Cash... To C C Crocker, C June 21, 1870 250. 00 Cash Mills & Co., D.O Mahou D "VV 50 5 Mar. 1,1864 July 1 1863 5, 000. 00 500. 00 Cash Services . Nichols N. S 10 Dec 16* 1863 1 000.00 Cash.... Newbaur &. Co A. 3 Nov 5 1862 30.00 Cash ...... To C C Crocker C June 21 1870 270. 00 Cash O'Neil, James 2 Oct 25 1862 20 00 Cash. .... To C C Crocker, C June 21 1870 180. 00 Cash Oatman, Ira. 10 Nov l' 1862 100. 00 Cash Forfeited Ochs, George . . . 2 Nov 7 1862 20.00 Cash To C C Crocker, C June 21 1870 180 00 Cash... Oettl, F 10 Dec 11 1862 100.00 Cash Forfeited Pond, J. S 2 Jan 30 1863 40. 00 Cash To C C Crocker, C June 21 1870 160. 00 Cash. ..... Pike, J.F 20 Mar 20 1865 2 000.00 Cash Kussell, P. H 5 June 19 1865 500. 00 Cash Rice.C... 10 Anril 6. 1863 300. 00 Cash... To C. C. 2554 U. S. PACIFIC RAILWAY COMMISSION. EXHIBIT No. 5. Statement of the consideration paid the company by each stockholder receiving stock, $c. Continued. Names of stockholders. No. of shares. Dates of pay- ment. Amount paid. In what property. Transferred, v. !\ 1f8 DI.-U 14, J8U8 Jan. 5, 1869 Feb. 18,1869 Oct. 1, 1869 $100 2,200 36, 000 200 20, 000 20, 200 4,000 300 337, 700 1,300 300 2,000 20, 000 1,000 3,000 6, 500 14, 100 504, 100 658, 400 271, 700 5,500 100, 500 221, 000 115, 800 210, 900 5, 000 190, 100 2,500 2,000 433, 400 57-4. HO 4,500 678, 500 431,600 5,000 2,000 559, 500 13, 000 2,000 9,500 29, 500 1, 477, 700 142, 900 20, 000 60, 500 29, 500 199,600 161, 700 5,000 700 3,000 694, 000 1,097,600 2, 182, 200 912, 500 500 729, 900 176, 100 1,000 5,000 400 860, 000 5, 500 7, 396, 000 500 1,488,100 200 8, 600, 000 6, 880, 000 Stationery and printing. Car trucks Paid for materi- als. Services and cash. Rolling stock... Construction . . . Services ' Mason Mfg. Co Huntington, C. P., agt . Ross Samuel ....... Bran u an S ........ C rocker C .......... Moore George R...... Parker J. E Real estate Construction ... Real estate Services Crocker Charles ...... Ames Henry . Estee M M Haskell D. H Services Huntington, C. P., agt . Robinson Robert ..... Sold for cash . . . Services ........ Huntingtou, U. P Crocker E. B Salary Salary Crocker C Construction ... Construction ... Construction ... Salary Crocker C Crocker C ............ C rocker C ....... .. Construction ... Construction ... Construction ... Construction ... Paid to sundry persons and charged ex- pense. Construction ... Expense Crocker C... Crocker C Huntington, C. P., agt . Huntington, C. P., agt. Huntington, C. P., agt. Crocker C Expense Construction ... Construction ... Sold for cash . . . Construction . . . Construction ... Expense . Crocker C Huntington, C. P., agt. Crocker C.... ........ Crocker C.... ........ Huntington, C. P., agt. Huutington, C. P., agt. Expense Construction ... Expense. . . . Huntington, C. P., agt. Huntington, C. P., agt. Huntington, C. P., agt. Huntington, C. P., agt. Crocker C 130 20 95 295 14, 777 3,429 200 605 295 1,996 1,617 50 7 30 6,940 10, 976 21, 822 9,125 5 7,299 1,761 10 50 4 8,600 55 73, 900 14, 80 1 2 86, 000 68, 800 Sold for cash. . . . Sold for cash . . . Expense ..... Construction Construction Sold for cash Sold for cash... Expense .... Crocker C Huntington, C. P., agt. Huntingtou, C. P., agt . Huntingtou, C. P., agt . Construction Construction Sold for cash. . . Sold for cash. . . Expense Huntiugton, C. P., agt. Huntington, C. P., agt . Huntington, C. P., agt . Crocker C Construction. . . Construction Construction. . Construction.. Sold for cash. . Construction.. Construction.. Cash . Crocker C Crocker C Crocker C Huntington, C.P., agt. Crocker, C . ....... Crocker, C McClatchy, James Buntington, C. P., agt. Huntington, C. P., agt . Contract & Finance Co. Huntington, C. P., agt. Contract & Finance Co McDonald, R. H Crocker, C Paid sundry per- s o n s and charged to ex- pense. Expense as above Construction Expense Construction Real estate Construction.... Expense . Huntington, C. P., agt. Contract & Finance Co. Contract & Finance Co Construction Construction.... LELAND STANFORD. 2557 EXHIBIT No. 5. Statement of the consideration paid the company by each stockholder receiving stock, 1867 .. .. 10 177 65 161 755 67 144 386 63 17 369 04 1869 13 354 31 278 532 56 144 386 63 134 145 93 1870 14 863 88 296 910 21 261 525 33 35 384 88 1874 15 443.24 304 196.38 271 165 85 33 030 53 1875 18 961.84 358, 628. 00 341 496 03 17 131 97 1876 42 668.34 721,658. 17 528 854 12 192 804 05 1877 43 543 is 735 2 -;> 4 53 694 158 99 41 065 54 1879 44 286 18 745 GG4 45 708* 86 9 17 36 802 "S 1882 51 546 35 871 623 73 71 434 68 150 189 05 1883 52 485 34 887 7'->8 12 780 879 40 If6 84^ 72 1884 63 440 01 1 077 727 50 889 945 99 187 781 51 1885 69 830 79 1 19 9 , 262 87 Q->1 586 97 270 675 90 1886 90 484 17 1, 566 519. 07 1 039*710 59 5 9 G 808 48 95 468 64 1, 162, 323. 13 1 039 710 59 62 61 9 54 LELAND STANFORD. ' 2563 DUE DILIGENCE TO SECURE PATENTS. Your attention is respectfully called to the very significant fact that at the end of the year 1869, the date at which the road was completed, the company had made list application for 278,532 acres, all of which was made prior to the completion of the road itself, and that the Government had responded by issuing patents for but 144,386 acres, leaving a balance of acres listed and unpatented of 134,145. Thus, at the date of the completion of the road, the company was a petitioner for 134,145 acres of land in ex- cess of the response of the Government to its petitions by way of patent. Your at- tention is further called to the fact that at the end of the year 1876, the approximate date at which under the act the company was to have completed the road, it had made application for 721,658 acres, to which the Government had responded by issuing pat- ents for but 528,854, leaving a balance of acres listed and unpateuted of 192,804. Fol- lowing the table down to the close of the year 1883, a most significant exhibit should not escape your attention. At the close of that year the company had applied from the date of the first listing in 1865 to the last listing completed in 1883, for 887,728 acres. From the acres so listed the Government had patented to the company 780,879 acres, leaving a balance of acres listed and unpatented of 106,848 acres. From the close of the year 1883 to the 1st of June of the current year the company has made ap- plication for 774,595 acres, an amount nearly equal in the three years and six months under observation to the gross amount of lands applied for in the twelve years pre- ceding that period. The policy of increased activity in the application for patents was inaugurated in the hope that a corresponding activity in the examination of lists would be manifested by the Government. This, unfortunately, has not been the case, as the table herein above clearly exhibits. The only effect has been to increase dis- proportionately the figures in the column headed "Balance of acres listed and uu- patented." Of the 887,728 acres in the aggregate listed at the close of the year 1883, but 106,808 acres remained nnpateuted ; that is to say, about 13 per cent, of the acres presented to the Land Department at Washington in the lists of selections remained unpatented, while, on the other hand, of the 1,662,323 in the aggregate listed on July 1, 1887, 622,612 acres remained unpateuted, the unpatented land bearing the percent- age relation to the whole number of acres selected of about 38 per cent. Thus the percentage of the balance of acres listed and unpatented has increased since the close of the year 1883 from 13 per cent, to 38 per cent. The significance of this exhibit, as plainly tending to discourage the activity of the company in making lists of selections, will not escape the attention of any candid mind. The simple exhibit of facts them- selves forces upon the company the conclusion that increased activity in the way of making lists of selections of lands for which patent is asked has not been met by a corresponding activity on the part of the Government in responding to the petitions of the company, but, on the contrary, has served only to increase disproportionately the balance of acres listed and unpatented. Your attention is called to the fact that the aggregate fees paid on account of lands selected by the company amount to $95,468. Of this sum 38 per cent., or a sum in excess of $37,000, was paid upon the lands for which patent is still withheld. The balance in favor of the company at the close of the business of 1883, which had been paid upon the lands selected and unpatented, was but slightly in excess of $6,000. Increased activity in meeting the requirements of the granting act, by paying the costs of surveying, selecting, and conveying the land, has therefore resulted in the payment into the Treasury of the United States of a large sum of money, of the use of which the company is deprived, and which, by reason of the failure" of the Government to respond with patents, lies useless in its Treasury. These facts present only discouraging features well calculated to deter the company from the policy of increased activity in the way of making lists of selection of the land granted. The exhibit also shows clearly that from the date of the inauguration of the re- lations between the Government and the company under this head there has been no time at which the company has not had on deposit with the Treasury of the United States a considerable sura of money on account of the payment of the cost of survey- ing, selecting, and conveying the lands ; that at all times from the date of the first list of selections to June 1, 1887, the Government itself has been the party delinquent, and that lists of selections upon which the fees had been paid largely in excess of the response of the Government by way of patents have been at all times and at all dates since the first list of selections was completed before the Land Department of the Government for examination. THE GOVERNMENT FAILS TO SURVEY THE LAND. Notwithstanding the requirement that the company shall pay the costs of surveys, the right to determine when such surveys may be made is vested by law in the Gov- ernment of the United States. During the past two years the rates allowed by the Commissioner of the General Land Office for surveying have been so low as to almost 2564 U. S. PACIFIC RAILWAY COMMISSION. wholly arrest the progress of surveys within the limits of the grant. As fully illus- trating the disposition of the existing administration in the premises, it may be hero related that during the year 1886 the surveyor-general for the State of Nevada adver- tised for bids for surveys relating to three hundred and forty-five townships of land wholly within the limits of the grant to your company in that State. These three hundred and forty-five townships, embracing about one-half the area of the lauds granted to your company in the State of Nevada, are still unsurveyed. Specifications for these surveys and the amount which would be allowed as fees for the surveys were advertised, and the bids were to have been opened, according to the advertisement, on the 1st day of November in that year. Upon the date at which these bids were to bo opened not one bid had been received. Ttie proposals had been rejected in their en- tirety by the surveyors. A like result has attended the offers of the Government for the completion of the surveys of land in California, and on the 1st of July, 1886, the surveyor-general of California returned to the Treasury of the United States the entire amount of the appropriation which had been made by Congress for the com- pletion of the surveys of laud in this State, notifying the Commissioner of the Gen- eral Land Office at the same time that no responsible surveyor would enter into a contract for the completion of the surveys ; that the rate of compensation ottered by the honorable Commissioner of the General Land Office was entirely too low. In the Territory of Utah the efforts of the Commissioner to secure the completion of the surveys have been attended with a larger share of success, but there still remains in that Territory within the limits of your grant a very large area of unsurveyed land, while of the lands surveyed in that Territory within the limits of the grant, more than half of the surveys have been completed since the year 1880. According to the statements furnished by the honorable commission appointed to investigate the affairs of your road under this head, there was granted an aggregate of 8,000,000 of acres of land to your road. A very small proportion of this area was surveyed prior to 1860. Between the years 1870 and 1880 surveys were prosecuted very tardily. From 1880 to 1883 an increased activity in the surveys was observable, but even at the present date about one-half of the lauds granted are still uusurveyed, but owing to the policy inaugurated and persisted in by the present honorable Commissioner of the General Land Office, surveying for the past two years has been almost wholly suspended. DISCOURAGING AND UNREASONABLE REQUIREMENTS. In addition to all the discouragements herein set forth, within the past three months, and in the exercise of his discretion, the honorable Commissioner of the General Land Office has departed from all the precedents established by his predeces- sors in offi e, and has attached to the requirements for disapproving the mineral char- acter of land onerous and, to my mind, unreasonable rules of practice. These new rules are made applicable to the lists of selections which have been before the De- partment for more than two years. Among these rules may be mentioned that of requiring non-mineral affidavits as to land returned and denominated by the United States surveyors as agricultural. Heretofore such return by the surveyor was ac<- cepted as prima facie evidence of the agricultural character of the land. Under the existing regulations of the Land Department, which regulations have been announced only within the past three months, and made to relate to lists of selections which have been before the Department for more than two years, it is now required that an affidavit shall be made as relates to each 40 acres of laud embraced within such list of selections by an individual "who has frequently passed over " each subdivision of 40 acres, and is therefore competent to testify that there are no mineral indications found upon the 40-acre tract subject of the affidavit ; that the affidavit shall be made separately and specifically as relates to each particular 40 acres, and that a single affidavit embracing a number of these small Governmental subdivisions will not be competent ; and that the individual who makes the affidavit shall be specifically authorized in each particular case to make such affidavit. This requirement is made to relate to large areas of grazing land in the State of Nevada and the Territory of Utah, notoriously free from all mineral indication. It is well known to you that large areas of lands, fit only for grazing purposes, in the State of Nevada and the Territory of Utah, are located in very sparsely settled regions, and that it will be most difficult, if not wholly impossible, to find individuals who have frequently passed over each particular and separate 40-acre tract embraced within the limit of your grant, and who therefore possess the necessary knowledge to qualify them to make the required affidavits in this behalf. OBSTRUCTIVE MEASURES. As to land interdicted as mineral by the field-notes of the United States surveyors, new, onerous, and to my mind, unreasonable requirements, are made in the recently adopted rules of pr&ctice, Under the rules of practice obtaining in 1865 and up to LELAND STANFORD. 2565 the 1st of March, 1887, disproof as to the mineral character of land interdicted as mineral could he initiated upon lands unselected. This was obviously a reasonable rule. The lists of selections must first he submitted to the registers and receivers of the local land offices of the district wherein the lands are located. Upon lists so pre- sented registers and receivers must first hear and determine upon all questions relat- ing to the mineral character of the land before they can certify that it is agricultural in character, and therefore clear of the company, and subject to the terms of the grant. The practice has uniformly been to initiate proceedings prior to selections to disprove the mineral character of the land, which proof has been submitted under the rules established by the Interior Department itself for registers and receivers, and under the direction of these officers with re*spect to advertising the hearings of such testimony in disproof. Upon the testimony so presented, registers and receivers have determined the mineral or agricultural character of the land in question. The agri- cultural character of the land being established, it became subject to selection by the company, and land so selected could be certified as clear to the company by the reg- isters and receivers of the district land office to the Commissioner of the General Land Office. In pursuance of this rule of practice, which was established by the Interior Department, and which had been maintained by all the Secretaries of the Interior until within the past few mouths, disproof as to the mineral character of the land was taken as relates to a large area of acreage. The proceeding is in the very nature of things costly, and after this cost had been borne by the company, &c., so much of the land as had been decided by the registers and receivers of the district land offices to be agricultural had been selected, the Commissioner of the General Land Office dis- missed all the proceedings with reference to the non-mineral character of the land, not because of any allegation of irregularity of proceedings under the rules of prac- tice which have obtained for the last twenty years, but upon the technical plea" that the grant to the company does not of itself establish such right in the company with respect of lauds selected as would entitle it to inaugurate proceedings in disproof, but that its rights to the laud must first be inaugurated by a, selection, and that dis- proof as to the mineral must follow and not preclude such selection. The order of the honorable Commissioner does not raise any question as to the adequacy of the proofs submitted. It simply declares that the proof, however adequate, was taken prior to the selection, and forces upon the company the expensive duty of reopening the proceedings in disproof, which are objected to not because of inadequacy, but solely on account of having been taken prior to selection. By this ruling lists of selections long since completed were relegated to a condition of very indefinite delay as to the issue of patents. The extent to which the require- rnent relating to affidavits of non-mineral indication on each forty-acre tract of agri- cultural land within the limit of your grant will delay the future operations of the company in obtaining record title to its lands will readily be perceived. It should he remembered that at the date of the passage of the act the territory to be intersected by the line of road between the Missouri River and tide-water at the city of Sacra- mento was, with the exception of a small portion at the western terminus near the Missouri River, almost entirely uninhabited. The presumption was most natural that the construction of the road would be conducive to the settlement of this \ast territory. At the date of the grant less than 5 per cent, of the lands granted were surveyed. No applications for patents could be made with respect to lands unur- veyed, and while one-half of the costs of the survey within the limits of the grant were chargeable to the company, the other half of the costs would have to be borne by the Government itself. The grant to the entire line from the Missouri River to the Pacific Ocean embraced approximately 20,000,000 acres of laud, being at the date of the grant an unsurveyed and unappropriated portion of the national domain. The administrative task of surveying the lands was Avith the Government itself, a task which, after the lapse of a quarter of a century from the date of the granting act, is now only partially accomplished. The hearing and determination of evidence aris- ing out of questions as to whether lands applied for were granted or excepted out of the grant added materially to. the embarrassment of producing record evidence of title as rapidly as would meet the requirements of the company. As already noted, this embarrassment was further complicated by the exception of mineral land from the operations of the grant. There has never, therefore, been a time in the history of this transaction when the Government was able to meet the requirements of the com- pany promptly by the issue of patents as rapidly as asked for. GOVERNMENT UNABLE TO MEET THE DEMANDS OF THE COMPANY. The Government has never been at any time, and it is not now, in a position to pat- ent more than a small proportion of the land granted. The payment of the costs of surveying, selecting, and conveying, being a condition precedent to the issue of pat- ents, would involve a largo expenditure on the part of the company upon each list of 2566 U. S. PACIFIC RAILWAY COMMISSION. selections made. In the aggregate a very large sum of the company's money is now tied up by these payments, and in view of the tardiness of the governmental response to the demands of the company for patents, a delinquency which is clearly set forth in the accompanying documents, there is nothing to encourage, but rather everything to discourage, activity under this head. During every period of the administration of the land department of the company it has been apparent that the augmentation of lists of selections retarded rather than promoted the issuing of patents, and the com- pletion of these lists and their presentation to the General Land Office at Washington involved a large expenditure of the company's money, which, while the company was deprived of its use, remained idle and usejess in the Government Treasury. The task of completing the surveys of the vast area of uusurveyed land, and the cost of making such surveys, which must be borne by the Government itself, were all difficulties which confronted the Government, and to which is referable the policy of vesting the company with the right to make demand for patent only as prompted by its own requirements, or the progress of settlement and consequent occupation and absorption of the lands granted. The provision of the granting act herein referred to was clearly suggested to the Congressional mind in the interest of the Government itself, and exactly supplemented the rights, conveniences, and interests of both the grantor and the grantee. In practice, however, it has conserved the interests of the Government more than those of the company. In all cases the delay in the issue of patents to the company has been a loss to the company's treasury. It has retarded the growth and development of the country tributary to the line of transportation constructed, and it has subjected the settler upon lands granted to the railroad com- pany to inconvenience and loss arising out of delayin receiving title to his land. It has delayed the payment of money to the company for the purchase of such lands, and, beyond all this, it has been the occasion of much loss by reason of the extension of the discovery of mineral within the granted limits. This latter feature deserves more than passing notice. Under the decisions of the Supreme Court, lands patented to the company, and not known to be mineral at the time of the issuance of patents,* pass the mineral with the title conveyed, while the discovery of valuable mineral de- posits in the lands prior to the issue of patents excepts the land in which such min- eral is discovered from the operation of the grant. Within a large section of the granted limits search for valuable mineral deposits has been arduous and constant. Mineral discoveries, therefore, have been constantly extending, and as they are ex- tended, they operate to except out of the grant large quantities of valuable land which would have been patented by reason of the absence of mineral indications and mineral discoveries at the time application was made. Ascertainment of the quan- tity of land thus listed to the company would be a very tedious task. Approxima- tions, however, have been made, and the result of such approximations justify the statement that at least 200,000 acres of land have been lost to the company in this way. GOVERNMENTAL POLICY. The policy of the Government with respect of the disposition of the even-num- bered sections within the granted limits has been very injurious to the interests of your company. As soon as the granting act was passed the price fixed upon the even- numbered sections within the granted limits was raised to double minimum valuation, thus discouraging the operation of the pre-emption laws within the granted limits. The effect of the land policy of the Government as compared with the land policy of the railroad company is clearly shown by the fact that in townships of land where patents could be obtained, and where settlement has been made, settlement was begun and prosecuted upon railroad land alone. Recently prepared statistics con- cerning the disposition of the Government and railroad lands within the better set- tled portions of the grant show that more than twice the quantity of railroad land is being cultivated by actual settlers than of Government land within the same bound- aries. Your company has addressed itself assiduously to the task of inducing set- tlement upon its lands, and by a liberal policy, embracing in its features low prices, long extensions of credit at low rates of interest, has largely accomplished its great mission of extending settlement and civilization along its line of road. On tho con- trary, the policy of the Government relating to the disposition of its lands, inter- spersed with the lands granted, has been rigid and many of its requirements not adapted to the development of the country. The unwisdom of its policy is particu- larly noticeable in the grazing areas of the great uplifted plateau lying between the Rocky and Sierra Nevada ranges of mountains. The limitations of acquiring only 160 acres to each actual settler, applicable only to such agricultural land as by reason of fertility makes that quantity suited to the industry of a single occupant, is not ap- plicable to grazing lands. The general result of this has already been stated. Set- tlement has been chiefly upon lands granted to the railroad, LELAND STANFORD. 25G7 A SUMMARY OF POINTS. To summarize briefly the points herein presented, it has been clearly shown : (1) That by the terms of the granting act itself the cost of surveying, selecting, and conveying the land was made a condition precedent to the issue of patents, and that such cost was to be paid only as a title was required by the grantee. (2) That the company has used due diligence in the payment of the costs of sur- veying, selecting, and conveying the lands, and that its diligence in this regard has resulted in a demand largely in excess of the response of the Government at every period in the history of this transaction. (3) That all the apparent delay in the issue of record title to the lands granted to the Central Pacific Kailroad Company is chargeable to the tardiness of the Govern- ment and not to the company. (4) That the Government has at no time been in a position to grant patents con- veying the title to large granted areas by reason of the absence of surveys and the unavoidable delays in determining questions of law and fact as to whether lands ap- plied for were granted or excepted out of the grant. (5) That the company has been subjected to great pecuniary loss growing out of the payment of costs of surveys and other attendant fees upon large lists of lands for which no patents have been granted and the loss of the use of moneys which would have been paid by the purchasers of lands had the response of the Government been commensurate with the legitimate demands of the company. (6) That arbitrary and obstructive rules of practice have recently been devised, nullifying the efforts of the company to facilitate the completion of lists of selections and unnecessarily complicating the perfecting of such lists, whereby even greater tardiness in the response of the Government to the demands of the company than has heretofore been exhibited- may be expected. (7) That the delinquency of the Government and its tardiness in responding to the requirements of the company have at all times acted as discouragements to applica- tions for patents ; and Generally. The exhibits presented prove conclusively that the grantee has been a party observant of all the duties made incumbent upon it by the terms of the grant itself, and that there has been no delinquency in contravention of the true intent and meaning of the granting act, except such as is chargeable to the grantor. GENERAL LAND OFFICE HOPELESSLY IN ARREARS WITH WORK. This statement would be incomplete without some consideration being given to the subject as to whether the Land Department of the Government is in position to ex- amine the claims presented, and pass upon them with greater promptness than it has manifested in the past. The railroad division of the General Land Office is charged with the adjustment of the grants for railroads, wagon roads, and canals, and with the adjudication of claims of settlers and others within the limits of the grant. Under date of October 11, 1882, Hon. N. S. McFarland, Commissioner of the General Land Office, reported to Hon. Henry M. Teller, Secretary of the Interior, for the fiscal year ending June 30, 1882, that t*he work of the railroad division of his department was several years in arrears. As illustrating the difficulties with which that division is beset, it may be noted in the same report that Mr. McFarland declares that during the year 1882, 5,564 cases were presented for adjustment in the way of claims of settlers and others within the limits of the grants to railroads, and of this large number but 617 cases had received attention. Three thousand nine hundred and forty-seven, therefore, constituted the accumulation of the year. In the same report Commis- sioner McFarland submits a supplemental estimate in which he asks for 100 additional clerks and sufficient additional room for their accommodation. Each successive administration has called attention to the delinquency of the vari- ous divisions of the Land Department. The present honorable Commissioner, W. A. J. Sparks, repeats the suggestions of his predecessor, Commissioner McFarland, and urges upon the attention of the Secretary of the Interior the importance of authoriz- ing additional clerical force in the department. The volume of business in tho rail- road division, and the relative capacity of the division to pass upon the lists of selec- tions presented, and the inadequacy of the force at hand of the Commissioner of the General Land Office, are most clearly illustrated in the following exhibit : In 1882 lists of selections presented to the railroad division for patent by the land- grant railroads to the United States aggregated 1,958,392 acres. In 1883 the amount had risen to 3,070,453 acres. In 1884 the lists of selections had accumulated and ag- gregated in that year 11,861,608 acres. In 1885 the accumulation of business repre- sented 14,273,057 ;wres. In 1886 the acres before the department awaiting its action worn 16,571,299. Thus, in five years, the number of acres before the department awaiting its action had risen from 2,000,000 to over 16,000,000. The foregoing state- 2568 IT. S. PACIFIC RAILWAY COMMISSION. ments are derived from the official reports over the signatures of the Commissioners themselves. As more fully illustrating the extent of this incapacity of the department to examine and certify for patents lands before it for examination, the significance of the follow- ing statement will be apparent : The railroad division of the General Land Office in 1881 examined 949,446 acres, and certified that quantity for patents. In 1882 it examined and certified for patents 176,406 acres ; in 1883, 477,740 acres; in 1884, 647, 162 acres; in 1885, 1,153,950 ; in 1886, 100,823 acres. The business transacted from June 30, 1885, to June 30, 1886, was the only full year under the administration of Commissioner Sparks ; with 16,570,299 acres before the railroad division under his administration awaiting examination and de- termination by the division, it was able to examine and certify for patents b,\t 100,000 acres. For the six years reported, to wit, from June 30, 1881, to June 30, 1686, there were examined and certified for patents 3,505,527 acres, being an average of 584.254 acres per annum, or, in round numbers, a half million acres per annum. If, therefore, no further lists of selections are presented to the department, and the average amount of business can be transacted in the railroad division in the future as in the past, as shown by the above exhibit, it will require thirty-two years to complete the exami- nation of the land already selected by lists of selections now before the department for examination. ONE HUNDRED AND SIXTY YEARS. If, however, the volume of business transacted by the railroad division in the year 1886, the only full year under the existing administration, is to betaken as a criterion of the capacity of that department for the examination of the selections before it, one hundred and sixty years will be required to examine the selections now made and sub- mitted. The capacity of the department under the existing administration having been tested by a full year of administrative effort, and found to be equal to the task of examining and certifying 100,000 acres per annum, the lists of selections now before the department from the Central Pacific Railroad alone will require six years in their examination should the department devote itself entirely to the business submitted by your company to the exclusion of all other lists. There is, of course, not the slight? est reason to hope that the business of your company will receive this exclusive at- tention, and receipt of patents for lands now applied "for is, therefore, relegated to the indefinite future. In the mean time settlers and occupants who have in good faith taken possession of the lands granted to your company and established homes thereon are clamorous for title. This delay with titles serves to obstruct and hinder the set- tlement and occupancy of the company's lands, and the result consequent is a loss oa the transportation side of the account" The granting of patents upon the selections now before the department would place your company in a position to make lists of selections covering 1,000,000 acres within the next year and the sale of lands along the line of your road would augment the business of the line in the most signal manner. THE USELESSNESS OF FURTHER SELECTIONS. In view of the condition of things as reported by the Commissioner of the General Land Office, and of the further view of the manner in which lists of selections have been treated by the Government, the uselessness of making further lists of selections, and of devoting further sums of money to that purpose until the lists now before the Interior Department are disposed of, is altogether apparent. It is not the province of this report to you, nor within the purview of answers to the questions propounded, to suggest remedies for this state of things. It is, however, plain to the most casual glance that the Land Department of the Government is most hopelessly in arrears with its business, and to such an, extent as to make it entirely beyond its power to extricate itself from existing complications. The department charged with the ad- justment of these land grants and the ultimate final adjudication is vastly inadequate. The remedy is self-suggestive. Subsidiary departments in each State and Territory wherein these land grants are located should be vested with the power of hearing and of final determination of these cases. Their position on the ground would connect their knowledge more immediately with the nature of the question in controversy, and enable them to reach final determination with greater facility, and also to reacli an adjudication of the various cases more nearly in accordance with the equities in- volved. With 16,500,000 acres before the department at Washington for examina- tion, and the tested capacity to hear and determine as to but 100,000 acres per annum, it may be said with reason that the progress of the adjudication is practically arrested. If it is ever to be proceeded with in a manner consistent with the rights and interests of both the grantor and grantee, it is now plainly apparent ttat at least one hundred times the force at the command of the Commissioner of the General Laud Office will be necessary to meet the requirements under this h ead. It is unreason* LELAND STANFORD. 2569 able, if not wholly absurd, to suppose, in view of the existing tate of things, that a single department of the Government, controlled and directed by a single head, can hear and determine within a reasonable time the vast number of cases submitted for its attention. In his report to the Secretary of the Interior, Commissioner Sparks declares that the number of contested cases awaiting final action at the close of the fiscal year was 6,331. Of these 1,227 had received some attention, but not final action, and 5,104 had received no attention and no action whatever. Of the exparte cases before the department there remained for final action at the close of business 4,540, and of these 923 had received some attention, leaving 3,617 exparte cases which had not been reached for examination. CASES BEFORE THE DEPARTMENT. At the close of the year, therefore, there were 8,721 cases before the department which had received no attention whatever. At the close of the business of the ad- ministration preceding the present one, viz, June 30, 1882, the aggregate of cases which had not been reached for examination was 3,947. In a period of four years, therefore, there has been an increase of 4,477 cases which had not been reached for examination, proving clearly that the arrears of the department under this head are constantly augmenting instead of diminishing. With the lapse of each fiscal year the reports of the Commissioner show that under every head the department is becom- ing more hopelessly and inextricably in arrears with its business. In view of these facts the land department of the company is confronted with hope- less and discouraging circumstances that call loudly for remedial legislation at the hands of the national Congress. RECENT AMENDMENTS TO THE LAW. Frequent reference has been made in this report to section 21 of the act of 1864, which declared that before any land granted by the act should be conveyed, there should first be paid into the Treasury of the United States the cost of surveying, select- ing, &c., as the title should be" required by the company. In the foregoing, it has been clearly set forth that, notwithstanding the right was vested in the company to pay the cost of surveys, and to make lists of selections, as the title should be required by it, yet the company has at all times importuned the Government for the issue of patents. Your attention is now called to the fact that, by an act approved July 10, 1886, entitled "An" act to provide for taxation of railroad land grants and for other purposes," section 21 of the act of 1864 was amended. The amendment is found in section 4 of- the act of July 10, 1886, and reads as follows : "SEC. 4. That section 21, chapter 216, approved July 2, 1864, is hereby amended so that the cost of surveying, selecting, and conveying therein required to be paid, shall become due and payable on demand therefor made by the Secretary of the Interior, as provided in section 2 of this act." Notwithstanding the act last above quoted was approved July 10, 1886, no demand has been made on the company by the Secretary of the Interior, and until such.demuml is made the company cannot be delinquent or in default with respect of the payment of costs of surveying, selecting, and conveying, or the making of lists of selections. CONCLUSION THE LAND-GRANT MORTGAGE. In conclusion, permit me to call your attention to the strictures that have been made upon the mortgage or trust deed, executed by the company on the 1st day of October, 1870, upon the lands granted in aid of the construction of the line. It has been contended that the mortgage was placed upon the land in evasion of a provis- ion found in section 3 of the act of 1862. That provision reads as follows : "And all such lands so granted by this section, which shall not be sold or disposed of by the said company within three years after the entire road shall have been com- pleted, shall be subject to settlement and pre-emption like other lands at a price not exceeding $1.25 per acre, to bo paid to said company." The trust deed, however, was decided by the Supreme Court of the United States to be a disposition of the land within the meaning of the grant. But even if the trust deed above alluded to had not been executed the proceeds of the land grant would have passed to the company under the operation of this clause of section 3, which, in effect, would have established in the company a perpetual right to receive the proceeds of the sale of the laud. The lands would thus have reverted to the public domain, and the proceeds of their sale would have been payable to the company. As Government laud they would necessarily have been exempt from taxa- tion by States, counties, and municipalities, but the proceeds of their sale would have been the property of the company. The execution of the trust deed, therefore, 2570 IT. S. PACIFIC RAILWAY COMMISSION. operated to create taxable property. Criticisms which have been made upon the ex- ecution of the trust deed have generally proceeded upon the theory that if such trust deed had not been executed, the lands "would have reverted to the Government abso- lutely, and the rights of the company therein would have ceased and determined. The erroneous nature of this view is clearly shown by the words of the granting act. WM. H. MILLS. STATE OF CALIFORNIA, City and County of San Francisco, ss : William H. Mills, being first-duly sworn, saith that he has read the foregoing state- ment consisting of pages next preceding, marked " Exhibit No. 6," and knows the con- tents thereof; that the facts therein stated are true, except as to those matters stated on his information or belief, and as to those he believes it to be true. WM. H. MILLS. Subscribed and sworn to before me this 26th day of July, A. D. 1887. [SEAL.] E. B. EYAN, Notary Public in and for the City and County of San Francisco, State of California. EXHIBIT No. 7. Statement of J. C.Stubbs, general traffic manager, relative to differen- tials, pools, #c. * The rates of charge for freights and fares are just and reasonable. When consid- ered in respect of circumstances and conditions affecting profit and loss, they af- ford the cheapest transportation service in the country. Among the circumstances and conditions affecting profit and loss are the physical characteristics of the road, such as the gradients and curvatures, which very largely determine the cost of build- ing and also the cost of operating the road, and the volume of business which deter- mines the earning power of the road. These, and other, if not equally important, certainly very important, circumstances and conditions, together with the rates of charge on the Central Pacific line when compared with similar circumstances and conditions of rates of charge on other railroad lines in the country, will inevitably lead to the conclusion that there is no cheaper transportation service in the United States. RATES CHARGED. The fare between San Jose" and Sacramento (128 miles), where there is practically no competition, is at the rate of 2.6 cents per mile, and between intermediate stations for short distances at the rate of 4 cents per mile. The freight charges for this line range from ! cents on the lowest class, to 3f cents per ton per mile on the highest class. This line crosses the Contra Costa range of mountains, rising from 88 to 740 feet above th.e sea-level in 25 miles, and has for 38 miles an average grade of 52.8 feet to the mile. During the year 1885 the total number of passengers taken up and laid down, either or both, on this line was at the rate of 2,410 per mile. The freight taken up and laid down, either or both, on this line during the year 1885, was at the rate of 3,197 tons per mile. The rate of charge for fares between Sacramento and California State line (140 miles) is 5 cents per mile. The rates of charge for freights range from 1 cents on lumber, to 14 cents per ton per mile on the highest class. PHYSICAL LOCATION OF ROAD AND TRAFFIC DONE. The number of passengers taken up and laid down, either or both, on this line, dur- ing the year 1885, was at the rate of 534 per mile. The number of tons of freight taken up and laid down, either or both, on this line during the year 1885, was at the rate of 1,070 per mile. On this section the road crosses the Sierra Nevada Mountains, rising from 30 feet to over 7,000 feet above the sea-level. In a distance of 87 miles (between Eoseville and Summit) the rise is over 6,800 feet, the average grade being over 80 feet to the mile, the maximum being 116 feet. Over 55 per cent, of the dis- tance is curved line and about 40 miles of it is protected by snow sheds. Between California-Nevada State line and Ogden (603 miles) the rate of fare lo- cally for single trips is 7 cents per mile, and for round trips 5 cents per mile. The freight charges range from less than seven-tenths of a cent per ton per mile on lumber to 15 cents per ton per mile on the highest class of merchandise. ; * See answer to question No. 10 and question No. 39. LELAND STANFORD. 2571 For about 499 miles this line is through the comparatively desert and sparsely pop* ulated State of Nevada, which contains 112,090 square miles of territory, and had about 62,000 inhabitants in 1880, which declined to 58,000 in 1885, being about one in- habitant to each two square miles. This area is nearly equal to that of New York and the New England States (115,307 square miles), which in 1885 contained a popu- lation of 9,744,385, or an average of 109 inhabitants to each two square miles a pop- ulation 169 times greater than that of the State of Nevada. The road through Eastern Nevada is heavy, having frequent grades, ranging from 52 to 79 feet to the mile. In 1885, the number of passengers taken up and laid down, either or both, within the State of Nevada, was at the rate of 77 to the mile ; and the number of tons of freight was 237 to the mile j from which it will be seen that the local travel on that line would not suffice to pay ordinary train expenses of one train per day. Except on extraordinary occasions, one train per day each way amply accommodates all the passenger travel, both through and local. COMPARISON OF PASSENGER RATES WITH THOSE OF OTHER ROADS. The fare bet ween San Francisco and Sacramento (140 miles, 110 miles of which belongs to the bond-aided line) is $3. Compare this with the rate between New York and Philadelphia (90 miles) which is $2.50 ; or with the rates between Chicago and Union Grove, on the Chicago and Northwestern Railway, a distance of 128 miles, which is $3.83, or at the rate of 3 cents a mile ; or the fare between Chicago and Kewanee, on the Chicago, Burlington and Quincy Railroad, 131 miles, which is $3.93, or at the rate of 3 cents per mile ; or with the fare between Chicago and Wyanet, on the Chicago, Rock Island and Pacific Railway, 129 miles, which is $3.74, or at the rate of 2.9 cents a mile ; or with the fare between Chicago and Mount Carroll, on the Chi- cago, Milwaukee and Saint Paul Railway, 128 miles, which is $3.83, or at the rate of 3 cents a mile ; or with the fare between Chicago and Columbia, on the Pittsburg, Fort Wayne and Chicago Railway, 120 miles; 'or between Chicago and Sturges, on the Lake Shore and Michigan Southern road, 132 miles ; or between Chicago and Mattowa, on the Michigan Central road, 1,9 miles, which was $3.90, $3.90, and $3.65, respectively, or at the rate of 3 cents per mile. As I have said, volume of traffic is one of the most important factors in the earning power of a road, and necessarily is a determining factor in the rate of charge. I have no means of determining the volume of traffic of the Eastern roads nametl above in comparison with the Central Pacific line, but from various statistical authority principally the United States census report of 1880, cyclopedias, and standard geog- raphies I have collated the following information which bears directly on the ques- tion: The line of the Chicago, Milwaukee and Saint Paul Railway, above referred to, runs through the counties of Cook, Du Page, Kane, De Kalb, Ogle, and Carroll, in Illinois. The Chicago and Northwestern road runs through the counties of Cook, Du Page, Kane, De Kalb, Lee, and Whiteside. The Chicago, Burlington and Quincy road runs through the counties of Cook, Du Page, Kendall, La Salle, and Bureau. The Chicago, Rock Island and Pacific Railway runs through the counties of Cook, Will, Grundy, La Sallo, and Bureau. Of ilio counties through which the first-named (Chicago, Milwaukee and Saint Paul Railway) runs, the population is 210 per square mile; 88.49 per cent, of the total area is improved land ; the value of the products in 1879 was $4,661.44 per square mile ; the value of manufactures in 1880 was $74,436.70 per square milo. The tion ucts $66,779.37 per square mile. Of the counties through which the Chicago, Burlington and Quincy runs, the pop- ulation is 210 per square mile; 87.82 per cent, of the land is improved; the value of products in 1879 was $4,479.78 per square mile ; the value of manufactures in 1880 was $73,928.49 per square mile. Of the counties through which the Chicago, Rock Island and Pacific runs, the pop- ulation is 188 per square mile; 88.19 per cent. of the laud is improved; the value of products in 1879 was $4,309.54 per square mile ; the value of manufactures in 1880 was $66,053.96 per square mile. The line between San Jose* and Sacramento, Cal., runs through the counties of Ala- meda, San Joaquin, Santa Clara, and Sacramento. The population per square mile is 34; percentage of improved lands, 50.19 percent.; value of products in 1879, V2,473.33; value of manufactures in 1860, $3,376.35 per square mile. P R YOL 16 2572 u. s. PACIFIC RAILWAY COMMISSION. * The Central Pacific line, between Sacramento and State line, runs through ibe counties of Nevada, Placer, and Sacramento. The population to the square mile is 20; the percentage of improved lands, 20.25 per cent.; value of products, $993.13 ; manufactures, $1,517.30. The line of the Central Pacific road through Nevada runs through the counties of Washoe, Storey, Churchill, Hnmboldt, Lander, Eureka, and Elko, having a popula- tion of -0% P er square mile; -j 1 ^ of 1 per cent, of the land is improved ; the value of products in 1879 was $32.56 ; and the value of manufactures in 1880 was $32.43. The fare from San Josd to Reno (281 miles), or from San Francisco to Reno (294 miles), is $12.05. The fare between New York and Washington (236 miles) is $6.50. The latter line is practically level, running between the metropolis and the capital of the United States, through Philadelphia and Baltimore, the tracks crowded with trains, and the trains crowded with passengers. THROUGH RATES REGULATED BY COMPETITION. The through rates of fare for business between California and points in the Eastern States are regulated by competition. For unlimited first-class travel the rate is 3 cents per mile ; for limited first-class 2| cents per mile, and for third-class or emigrant If cents per mile. The rate for first-class travel over the great lines between Chicago and Council Bluffs is 2| cents per mile; between Chicago and Pittsburg, 2f cents per mile; be- tween Chicago and Buffalo, 2.59 cents per mile; between Chicago and New York, 2 cents per mile. , .The rates between San Jos6 and Ogdeii, over the whole line, range from 1 cents on the lowest class of freight (merchandise) to 5-fc cents per ton per mile on first-class, while we have taken coke from Oakland to Ogden at one-half cent per ton per mile. The legal maximum rates for California and Nevada are 10 cents per mile for pas- sengers, and 15 cents per ton per mile for freight. Probably less than I per cent, of the entire traffic has been carried at the maximum rate. The through rates for freight between California and the Eastern States are gov- erned by competition, and at present vary from day to day. RATES IN CALIFORNIA APPROVED BY STATE BOARD. Our freight and passenger charges in the State of California have been approved and published by the California State board of railroad commissioners. In the State of Nevada they are published and posted according to law. For interstate traffic they have been duly published and posted in accordance with the requirements of the interstate commerce act. They are by these means given a wider publicity, and are so reasonable that it is seldom that complaints are made. As an evidence of this, I beg leave to call your attention to the fact that in 1876 the legislature of California enacted a law under which a board of railroad comrnissiocers was appointed by the Governor. This commission was popularly regarded as representing the anti-rail- road sentiment of the State. In their first report to the legislature, dated December 1, 1877, the commissioners say : "In October, 1876, we issued a circular which was addressed to many hundred citi- zens in various parts of the State whom we deemed likely to be able to furnish us with information or suggestions of value in connection with the subject of railroad transportation. A copy of it is as follows : "BOARD OF RAILROAD COMMISSIONERS APPROVE THE MANAGEMENT. "'SACRAMENTO, October, 1876. "'Among the principal objects proposed by the legislature in creating the board of transportation commissioners is the compilation of facts and statistics connected with the building and operation of railroads in this State, and also the investigation of their management, especially as it affects the interest of their patrons. 'It is believed that an impartial investigation of this subject will result in sub- stantial advantage to all concerned, and to this end this board desires to receive information and suggestions and statements from all who are interested. "As your position has probably led you to give more than usual attention to the subject, there may be matters to which, in your opinion, the attention of the board should be called ; in which event it is requested that you will communicate them to this board in writing. " ' By order of the board. (Signed) < WALTER M. PHILLIPS, " Secretary.' LELAND STANFORD. 2573 " This was transmitted to supervisors, county officers, members and ex-members of the legislature, judges, prominent merchants, storekeepers, editors, hotel keepers, patrons of husbandry, &c., and it led to some valuable communications, although not to contributions of public opinion or information on the subject as full or as ex- tensive as we might have reasonably looked for. "We have deemed it our duty to visit and inspect, so far as such inspection can be made in transitu, every part of every railroad in the State, in order to acquaint ourselves so far as possible with the circumstances, local connections, situation, and conditions of the various roads. "Without entering into unnecessary detail on this subject, we observed that gen- erally the railroads of the State are in good order and their management wise and economical, and conducted with a view to the public convenience." The communication addressed (as ab'ove stated bv the railroad commissioners) to citizens of all classes and occupations, whose position was presumed to have led them to give more than usual attention to the subject, was a bid for complaints, and resulted in a report, by a certainly not friendly commission, that, as quoted above, generally the railroads of California were in good order, their management wise and economical, and conducted with a view to the public convenience. Since the date of said report the State of California has had several diiferent boards of railroad commissioners to which complaints regarding the charges of this com- pany have been rare. In nearly every case they have proved to have been without foundation or based on a misrepresentation of facts, and no case has failed of a satis- factory adjustment. CENTRAL PACIFIC INTEREST IN POOLS. With respect to pools : The traffic over the line between San Jose" and Ogden, or any part of it, is not, and has not been since April 5, 1887, subject to any pooling contract. Previous to April 5th it was concerned with the Union Pacific and Denver and Rio Grande Companies in a pool of Utah traffic, the object of which was to secure uniform, reasonable, and stable rates of charge for freight to and from the Territory of Utah ; conditions so necessary to successful trade as to be of equal value to both the public and the carrier. The balances received and paid under that pool were very small. For several years previous to February, 1886, this line was also concerned with others in a pooling contract which covered through rates between points east of 97th meridian in the United States and the Pacific coast. The association of roads con- cerned in this pool was termed the Trans-continental Association. The object of this association was to make and maintain reasonable rates of transportation, afford mu- tual protection to the interest of the associated roads, and to fairly distribute the revenue from traffic which was naturally the subject of competition between them. The pool was very beneficial to the Central Pacific line. It was discontinued Decem- ber^!, 1885, with the expectation of renewing it, but the parties could not agree upon the terms, so that on or about February 18, 1886, tho Trans-continental Associa- tion was dissolved. The result was a " war in rates" that was very destructive to revenue. Had the trans-continental pool be.en maintained during 1H86 and the same amount of tonnage carried at the rate per ton per mile earned by the associated roads in 1885, the earn- ings of the Central Pacific line from freight subject to that pool during 188G would have been increased by over a million dollars. It is only fair to say, however, in this connection, that doubtless the very low rates that obtained in 1886 diverted traffic from the water lines which would not have been carried by rail at the rates in force in 1885, and it also doubtless moved other tonnage which would not have moved at the rates of 1885. Nevertheless a continuation of tho trans-continental pool on both freight and passengers would have benefited the Central Pacific line in a very large sum. PACIFIC MAIL AGREEMENTS. For many years the Central Pacific line, in connection with the Union Pacific Rail- way, was concerned in a contract with the Pacific Mail Steamship Company, where- iimtor a certain amount of space in the vessels of said steamship company was pur- chased by tho railroad companies for a given sum, which varied from time to time as the contract was amended. Under the last contract the amount of space was 1,200 tons each way per month, and the sum paid was at tho rate of $95,000 per month. This space was filled by such freight as could bo obtained for California at rates made and controlled by the railroad companies. The arrangement was of the nature of a joint purse arrangement, simply for the purpose of regulating the competition be- tween tho steamship company and the railroad lines. It was beneficial to both by securing stability and uniformity in rates, and was of great value to the public as 2574 U. S. PACIFIC EAILWAY COMMISSION. well as to the carriers. Upou the organization of the Trans-continental Association the roads joined in that organization assumed the obligations of the said contract with the Pacific Mail Steamship Company. In March, 1886, this contract was termi- nated by reason of the disorganization of the Trans-continental Association, since which time there has been unrestrained competition between the steamship company and the railroads, greatly to the detriment of both. POOLS ARE PRODUCTIVE OF REASONABLE RATES AND BENEFICIAL. The beneficial eifects of pooling contracts to the Central Pacific interest is demon- strable by our experience and records. No contracts to pool the earnings from traffic to which your companies have been parties since my connection withtthem have permitted the charging of unreasonable rates. On the other hand, they effected the minimum of discrimination, secured sta- bility and uniformity in rates, and were of mutual benefit to the public and the car- rier. I take it that a reasonable rate is one which will, without diminution of the profits to the carrier, permit and encourage the largest increase and development of traffic ; that it would be unreasonable on the part of any carrier to impose a charge for its service which would obstruct or dimmish remunerative traffic ; that it would be equally unreasonable to require a carrier to increase its traffic at the expense or diminution of profits. In other words, the law of supply and demand governs the carrying trade as it rules all other commerce, and a reasonable rate is what a writer on ''"The Natural Laws of Business " terms a " normal " rate, which he defines as "that point above which demand falls off so rapidly that profits diminish, and below which even a great increase of business would lessen them." The problem of railroad management is to make the nearest approximation to this " normal" rate. In my judgment this has been the constant aim and effort of the officers of your companies. Rates have constantly tended downwards, and that tendency will inevitably con- tinue. The pooling contracts referred to have not prevented nor interrupted the downward tendency of rates. They have simply regulated it by preventing a reckless compe- tition which would have destroyed all profits. These pooling contracts have not destroyed competition. When they were in force each carrier party thereto continued in the field its soliciting and advertising agencies as active and earnest in the pursuit of business as though it had no guarantee of revenue from the pool. Each party had its own clientage, and was as jealous of the interests of that clientage as the shippers themselves could be. All tariffs required unanimous consent, and all rates and rules were uniform. The fact that these pools did not hinder the operation of the law of supply and demand on the traffic; did not destroy the competition between the car- riers, and did not diminish the traffic, is sufficient proof that they did not permit the charging of unreasonable rates. Again : It is seldom, if ever, that two or more carriers competing for the same traffic are equal in respect to physical characteristics of the line, terminal facilities, connec- tions, or those features which determine preferences upon the part of the traveling or shipping public upon all the traffic pooled, and therefore their respective taking power differs. Those carriers having few advantages to offer in these respects cannot compete with others possessing numerous advantages upon equal terms ; hence their rates must be lower. The better lines will not suffer the loss of business by permitting lower rates to be made by others, except there is a mutual agreement fixing the relations of the rates by the various routes. The result is the see-saw process, the working of one line against the other by the shipper, which causes not only constantly varying rates by the different lines but also different rates to different individuals. The pooling contract produces uniformity in the rates by all lines or fixes the degree of difference in the rates by the several lines, and by so doing effectually prevents the discrimina- tion between individuals which invariably results from independent action. This uniformity and unanimity of action in making tariffs prevents frequent changes and requires changes, when made, to be duly considered and simultaneously published and applied by all the carriers. It also requires a reasonable notice to the public, as each carrier, jealous of the interests of its own patrons, insists upon time and opportunity to acquaint its patrons with said changes, thus securing a stability in rates which shippers as a rule regard as of the greatest value. " DISCRIMINATIONS " AND " DIFFERENTIALS." " Differential" rates as commonly used by practical railroad men, are not and have not been in use on your line. The general passenger agent and general freight agent, who are charged with tho details of the passenger and freight business, respectively, report that there are no unjust discriminations in the fares and freight charges of this company. I presume LELAND STANFORD. 2575 it is understood that in transportation business discriminations areas necessary as in all other business; that is to say, different rates of charge are made for different chisscs of passengers, and for different classes and different quantities of freight. The rates of charge on the valley portions of the road are lower than on the mountain portion. The charges upon lines through comparatively thickly settled districts are lower than those made through sparsely settled and desert territory. Such discrim- inations, I believe, are recognized as necessary, legitimate, and judicious. Where competition is encountered, rates necessary to meet that competition are made. Where this competition is with water carriers, the charge is often lower for a longer than for a shorter and immediate service, but in no case is a lower charge made for a longer than for a shorter haul included in the longer except where competition- com- pels it. There are not and have not been any discriminations in fares or freight charges having for their object or effect the prosperity of one locality or community against another locality or community, or the promotion of the interests of one per- son or any number of persons against the interests of any other person or persons. In this connection I beg leave to quote further from the report dated December 1, 1877, of the railroad commissioners to the legislature of California, namely : " Some few complaints of inequality or unfairness of charges and of lack of proper attention to the public convenience in the classification of goods and the charges for freight have reached us. These have, in all cases, been first referred to the companies concerned for remedy or explanation, and, in every instance, so far, the complaints have been responded to as promptly as if we possessed legal authority to command their answer or enforce redress. Some of the complaints made to us proved to be w ithout foundation or made on a misapprehension of facts. In others, reasons for the course pursued have been adduced, not before known to the parties complaining." DISCRIMINATION BETWEEN INDIVIDUALS. 1 ' No instance of the occurrence of this abuse has been brought to our notice. There are rumors of its existence, and it is even said that the sufferers by it fear to complain lest they be punished by further and ruinous discrimination. Whilst it is possible that there may be some foundation for these suggestions, it is also probable that the instances, if they exist, are of rare occurrence, and in most, if not in all, cases ex- plainable by circumstances unknown to or insufficiently considered by the parties who have felt aggrieved." Upon the subject of inflexible railroad rates the railroad commissioner of Michigan says (Report, 1883) : It is certain that no rates can be made of universal application to all roads alike without working the grossest hardship and injustice. The consideration of cost of doing the business enters largely into the question of rates, while the condition of the road bed, gradients, and character of lino generally have so much influence in determining that cos't on each individual road, that it is not at all certain that the interests of the public and the corporations will not best be promoted by leaving the great principle of supply and demand to regulate the price of railroad transportation the same as it does that* of the commodities carried. If left to regulate itself as does the question of rates on the high seas, only restricted by such reasonable limitations to maximum charges as are incident to the fact that a railroad is a public use, and the company that operates it in its corporate capacity derives its franchises upon such conditions as the legislature may impose, I have no doubt that railroad tariffs would soon become as uniform and rates as low throughout the country as the cost of build- ing and operating, coupled with the amount of tonnage to bo carried would justify commensurate with a fair return upon the capital invested ia the road. So far as the productive industries in this State are concerned it can in truth bo said that as between production and transportation there is little, if any, friction, and that but for the fact of the question being a potent factor in politics we should hear no complaint from the consumers who after all pay all the freight charges on what is consumed. STATE OF CALIFORNIA, City and County of San Francisco, 88 : J. C. Stubbs, being first duly sworn, saith that ho has read the foregoing statement consisting of the pages next preceding, marked Exhibit No. 7, and knows the con- tents thereof; that the facts therein stated are true, except as to those matters stated on his information or belief, and as to those ho believes it to be true. J. C. STUBBS. Subscribed and sworn to before me this 26th day of July, A. D. 1887. [SEAL.] E. B. RYAN, Notary Public in and for eaid City and County. 2576 U. S. PACIFIC RAILWAY COMMISSION. EXHIBIT No. 8. Statement of L. M. Clement, civil engineer, relative to cost of construction.* SAN FRANCISCO, July 21, 1887. HOD.LELAND STANFORD, President Central Pacific Railroad Company : DEAR SIR : At the beginning of the construction, the company, knowing the polit- ical and commercial necessities demanding the rapid completion of the railroad, de- termined that nothing which was in their power to prevent should for a single day arrest its progress. With this determination in view all energies were bent, fully realizing the physical obstacles and financial difficulties to be overcome. The financial difficulties were not lessened by the opinions circulated to the effect that the obstacles were insurmountable ; that the railroads then constructed in Eu- rope were as bagatelles compared with the difficulties to be met in constructing the Central Pacific Railroad, and failure was clearly written on the rocky sides of the canons and the\>old granite walls of the Sierra Nevada Mountains. Not only was it impossible to construct a railroad across the Sierras via Dormer Pass, but owing to the great depth of snow, some years reaching an aggregate fall of nearly 50 feet, would be impracticable to operate, and if built must be closed to traffic in the winter months, which would have been the case had not the road been protected at great cost by snow sheds. Against these utterances from men of railroad experience the company had to bat- tle in financial circles, forcing them to show that they were not attempting an im- possibility, though always realizing the great difficulties. As soon as the company went into the American market for rail, for they were shut out from the other markets of the world by their charter, the prices raised 80 per cent., from $41.75 to $76.87 per ton, nearly three (3) times the price of steel rails two years ago. It must not be forgotten in discussing these questions that the Central Pacific Rail- road was begun a quarter of a century ago and has been completed over eighteen (18) years. We should consider the state of affairs, circumstances, and conditions then existing. The average price of American iron rail during the building of the road (no steel rail was then made and think none till the last year of its construction) was $91.70 per ton at the rolling mills. This rail had to be transported to San Francisco via Cape Horn or the Isthmus of Panama, and lightered for transportation to Sacramento, Cal., the initial point of the Central Pacific Railroad. Shipments via the Isthmus, as late as the year 18(58, cost for transportation alone on rail, $51.97 per ton, the rail costing, delivered at Sacramento, $143.67, not includ- ing charges for transfer from ships at San Francisco to the lighter, nor for transpor- tation up the Sacramento River. Delays and losses of ships and IJieir cargo of railroad material via Cape Horn and unforeseen emergencies made it necessary to frequently use the Isthmus route, that there should be no detention in the progress of the rail- road eastward. During construction, by reason of high war risks, transportation rates advanced 275 per cent, per ton. Via the Isthmus, for freight alone, there was paid as high as $8,100 for one loco- motive. On a shipment by the latter route of eighteen locomotives the transportation charges were $84,466.80, or $4.692.50 each. For two engines, twenty-two years ago, there was paid $70,752 in the currency of the United States. This was an extreme case, but the power was absolutely neces- sary to supply materials needed for construction ; without these engines there would be delay. The first ten engines purchased by the Central Pacific Railroad Company cost up- wards of $191,000 ; the second ten upwards of $215,000. The demand for power after the first 25 miles of road were constructed was great was great, as then were met the high mountain gradients. The freight via Cape Horn to San Francisco only, on the first locomotive purchased by the company, was $2,282.25. Not only was all the material for railroad construction commanding high prices, labor also shared in the advance in prices. California's laborers were mainly miners, accustomed to work in placer mines or not, as it suited them. Mining was more to their liking than the discipline of railroad work. They were indifferent, independ- ent, and their labor high-priced, and to these difficulties the excitement of the .great Comstock lode was upon us, where any able-bodied man commanded $4 or more per diem. * See answer to question No. 51. LELAND STANFORD. 2577 Labor sufficient for the rapid construction of the Central Pacific Railroad was not then on the coast, and the labor as it existed could not be depended upon the first mining excitement meant a complete stampede of every man, and a consequent aban- donment of all work. This labor question as well as others were serious ones. Each day brought up propositions which must be solved without delay ; the construction must advance. As the snow line was reached the snow increased in depth toward the summit, from a few inches to over 15 eet on a level, from actual measurements. The ground was kept bare forthe graders by shoveling, upwards of one-half of the labor and, after storms, the entire grading force being expended in removing snow. Not only was it necessary to remove the snow to permit excavation, but the space to be occupied by the embankments was cleared and kept clear of snow, otherwise the melting of the snow under the broad bases of the high embankments would have caused serious set- tlements, which, on ascending gradients already of 105 or 116 feet per mile, would in cases increase the gradient beyond the tractive power of the engine. There was a limit to this snow shoveling as the altitude increased, and this limit was reached when it required an army of men to clear away and keep clear after each storm, for a small gang of laborers. As we neared the summit of the Sierras winter was again upon us, granite tunnels to bore, deep rock cuttings to make, and retaining walls to construct. Rock cutting could not be carried on under snow drifts varying in depth from 20 to 100 feet. It was decided, no matter what the cost, that the remaining tunnels should be bored during the winter. To reach the faces of the tunnels the snow drifts were tunneled and through these snow tunnels all rock was removed. Retaining walls in the canons were built in domes excavated in the snow the wall stones raised or low- ered to their places into the dome through a shaft in the snow. All the force, numbering thousands, could not be worked in the tunnels and on the retaining walls. The surplus men with their tools, luggage, &c., were hauled beyond the summit, skipping the line now covered with deep snow, and active work begun in the canons of the Truckee River. That no delay, even here, should result from the unfinished gap, 20 miles of rails with their fastenings, a locomotive, and cars sufficient for working, were, by oxen and horses, hauled over the summit and down into the canon of the Truckee River. It was deemed important to reduce some of the work in the lower mountains crossed by the railroad in Utah, so that when the track reached those points there should be no delay. About one car-load of tools and material was wagoned from Wadsworth to the Promontory Mountains, at a cost of $5,400. Everything was ex- pensive ; barley and oats ranged from, $200 to $280 per ton; hay $120. All other supplies in Utah in the same ratio. Along the Humboldt River much of the line was constructed during the winter. Earthy material that could ordinarily be excavated by the pick and shovel was frozen to such a depth as to require blasting. This frozen material made expensive embankments, requiring constant attention when the frost was leaving it, to maintain the roadway in a condition for the transportation of ma- terial to the front. As early as it was possible, in the beginning of the following year, to again attack the work in the heavy snow-belt region, the forces were re- turned to the granite cliffs and canons. This army of men shoveled off the snow to gain time ; miles of the line were thus made ready for the drill and powder $67,500 worth of powder in a single month being used, a sum sufficient to construct and equip 8 miles of ordinary railroad at the present day. During the winter months there was constant danger from avalanches, and many laborers lost their lives. Where it was possible to reach the threatening combs of great masses of compact snow leaning over, the granite bluffs they were removed by powder. To reach the overhanging snow required courage and determination, and the call for volunteers for this daring undertaking was always answered. When the forces were concen- trated the progress in the solid granite ledges was slow but certain. The track was kept close up to the grading forces and never lagged when it was possible to provide track material, power, or rolling stock, either by steamships or sailing vessels. For many days, owing to the hardness of the rock in the vicinity of Cisco, it seemed impossible to drill into it a sufficient depth for blasting purposes; shot after shot fired as if from a cannon. Perseverance alone conquered. That was before the powerful explosives were invented and many other improvements made for railroad construc- tion purposes in the last twenty years. The company at the summit of the Sierras, Doniier Pass, manufactured nitro-giycerino, but it was too dangerous for general use. Transportation of material, tools, &c., was then an important factor in construction; there were then no such powerful engines as of the present day, which could haul two of the then most powerful ones and their loads ; no cars to carry 50,000 pounds of load. All material for construction excepting timber, the greater portion of which came from the Sierra Nevadas and some from the coast counties of California and from Oregon, inus,t come from tfte Atlantic States, via. tlio Isthmus or Cape Horn to 2578 U. S. PACIFIC RAILWAY COMMISSION. Francisco, there lightered for ascending the Sacramento River to Sacramento, and thence hauled over the Central Pacific so far as completed, and when needed wagoned beyond the end of the track. The trains returned empty no return loads ; there was not one inhabitant to 10 miles between the last crossing of the Truckeo River and Bear River in Utah. With the exception of a few cords of stunted pine and juniper trees, all the fuel was 'hauled from the Sierra Nevada Mountains. Not a coal bed on the line of the Central was then known, and the only one yet discovered is a poor quality of brown lignite. Water was scarce after leaving the Truckee and Humboldt Rivers, and during the entire construction was hauled for steam and general use of the grading forces. Thousands of dollars without result were expended in well boring ; tunnels were bored into the mountains east of Wadsworthto develop small springs, and when water was found it was carefully protected and conveyed in some cases over 8 miles in pipes to the line of the road. There was not a tree that would make a board on over 500 miles of the route, no satisfactory quality of building stone. The country afforded nothing entering into the construction of the superstructure of a railroad which could be made available. The maximum haul for ties was 600 miles, and of rails and other material and sup- plies, the entire length of the Central Pacific Railroad, or 740 miles. Cars were transported on ship, in pieces, to San Francisco, and lightered for Sac- ramento, and there put together. California had no means for manufacturing for railroads. Only fourteen years prior to the beginning of the construction of this railroad was any considerable emi- gration directed to this coast, either by wagon, requiring as many months as now days from the Missouri River, by sailing vessels via Cape Horn, a long and tedious voyage of months, or by steamship. Twenty-two days was a quick trip. It was a country new, and only known as a mining region. A quarter of a century has made great changes. Once the possibility of constructing a railroad across the mountain ranges and deserts proven and emigration started west, capital was less timid of the probable future of railroad enterprises, and means were furnished for constructing other transcontinental roads. By the aid of machinery, powerful explosives, and ex- perience, railroads can now be constructed at comparatively light cost. It is probable that had the road been constructed during the five years preceding it would not have cost more than 66 per cent, of what it actually did cost. The principal elements material, transportation, and labor were very much cheaper. Rails averaged 51 per cent, less; transportation 63 percent, less. Every element, excepting labor, was a large percentage less. If constructed five years subsequent, it would have cost about 75 per cent, of the actual cost. Had the whole time allowed for construction of the Central Pacific Railroad been used, it is not an easy problem to determine for how much less the road could have been built. Advantage of the markets could then have been taken; contractors would have been willing to undertake the work if a reasonable time for completion were allowed, so that they would not be required to perform any of the work during the winter mo.nths where mercury freezes and in deep snows; in fact, all the advantages of seven additional years. Respectfully, yours, LEWIS M. CLEMENT. STATE OF CALIFORNIA, City and County of San Francisco, 88 : L. M. Clement, being first duly sworn, saith : That he has read the foregoing state- ment, consisting of the pages next preceding, marked "Exhibit No. 8," and knows the contents thereof; that the facts therein stated are true, except as to those mat- ters stated on his information or belief, and as to those he believes it to be true. LEWIS M. CLEMENT. Subscribed and sworn to before me, this 26th day of July, A. D. 1887. [SEAL. E. B. RYAN, Notary Public in and for the City and County of San Francisco, State of California. LELAND STANFORD. 2579 EXHIBIT No. 9. Statement of Wm.Hood, chief engineer, relative to cost of construction.* SAN FRANCISCO, CAL., July 23, 1887. lion. LELAND STANFORD, President Central Pacific Hailroad Company : SIR: Referring to yonr letter of recent date in regard to the Central Pacific Rail- road: I was an assistant engineer on the road during the greater part of its construction, and have been chief engineer since October 10, 1883, and ain familiar with its con- struction and subsequent operation. The entire road was completed in May, 1869, or about seven years sooner than was required to comply with the act of Congress under which it was built. This early completion of the railroad was accomplished only in the face of obstacles of the most formidable nature and such as were perhaps unprecedented in railroad construction. The Sierra Nevadas have a snowfall on the higher portions aud a rain- fall nearer their basis such as would seem incredible to those not acquainted with the facts; and these climatic features were enough to have caused the suspension of the work each winter had attention been paid to cheapness of construction or to any con- siderations except the completion of the road in the least possible time and in the most substantial manner practicable with the available materials. Below the snow line in the winter of 1865 and 1866 the roads were practically impassible for wagons ; aud the large construction force was supplied mostly by pack trains, employing large numbers of animals to transport supplies of all kinds to the required points on the work. The winter of L866 and 1867 and the winter of 1867 and 1S68 were long remem- bered as having had a snowfall heavier than has since been known on the mountains, and it was during these seasons that the railroad was built above the snow belt and over the summit. The annual snowfall was about 40 feet, which gave as much as 18 feet of snow on a level near the summit of the railroad pass, and as late as March, 1867, the average level depth of snow in Summit Valley was between 15 and 16 feet. These depths of snow, with the frequent storms, made any work except in tunnels impracticable during the winters in the region of the summit, and it was decided to send the force not engaged on tunnel work to build railroad in advance in Truckee River Canon, where the less depth of snow rendered grading work possible. The supplying of this force in the Truckee Canon, by means of sleds over the summit through deep snows and blinding storms, was exceedingly expensive, as was also the transportation by the same means of track material for 40 miles of road so built in Truckee Canon aud 3 locomotives and 40 cars. In this way, by working tunnel force in winter and moving back the remainder to do the outside work in summer, the sum- rait worfc was finished, an incidental expense being the moving of from 10 to 12 feet of packed show from the sites of the cuts and banks before grading could begin in the spring. When the road over the summit to Truckee was done, the rapid progress across the deserts began. About 3,000 men were sent a distance of 300 miles in advance of the track to Palisade Canon, and supplied by teams over the deserts, the haul without water being as much as 40 miles in places, and the remaining force Drought up the work in advance of the track. Ties were hauled from the Sierra Nevadas hundreds of miles into the deserts. Rails for the rapid progress were brought by sail around Cape Horn, and when any delay was possible through non-arrival of ships, track material was sent at heavy expense by the quicker route via the Isthmus of Panama and steamers. In the winter of 1868 and 1869 the weather was most severe, and the earth was often frozen so deeply that it was blasted and handled as if rock, at considerable expense. During the entire construction of this railroad all supplies were very high-priced. Rails were nearly three times as expensive as they were a few years afterwards, and freights via Cape Horn were high ; and after reaching San Francisco all track mate- rial had to be rehaudled and sent up the river to Sacramento before it could be loaded on the cars for the front. Tne same was true of all the rolling stock. With all these causes of extra expense to increase cost of buildiug the road, it is my opinion that with more time spent in building, with entirely legitimate reduction of force in winter and in general with ordinary speed of construction, the entire road could have been built for fully 75 per cent, less than its actual cost ; but in that case it would not have been open for traffic for a long time after its actual date of completion. The road was finished to Newcastle at less speed than afterward ruled. From Newcastle to Wadsworth was built between February, 1865, and July, 1868, with a force averaging fully 11,000 men and more than three years' time was required for this 157 miles. From Wadsworth to Ogden was built between July, 1868, and May, 1869, with a force avera^ " only to build this 555 mi 1869, with aforce averaging 5,000 men, and between nine and ten months were required >5 miles. The work of buildiug from Wadsworth to Ogden is about * See answer to question No. 51. 2580 U. S. PACIFIC RAILWAY COMMISSION. comparable 011 an average to tliat from Ogden to Omaha ; and the work of building the Central Pacific Railroad from Newcastle to Wads worth, only 157 miles, would have easily built the entire road far east of Omaha, had this 157 miles been of the same average cost as the road from Wadsworth to Omaha. Respectfully submitted. WILLIAM HOOD. STATE OF CALIFORNIA, City and County of San Francisco, 88 : William Hood, being duly sworn, says he has read the foregoing statement ; that the matters and things are true of his own knowledge except as to matters on his in- formation and belief, and as to those he believes them to be true. WM. HOOD. Subscribed and sworn to before me this 25th day of July, A. D. 1887. [SEAL.l E. B. RYAN, Notary Public in and for said City and County. EXHIBIT No. 10. Statement of J. H. Strobridge, superintendent of construction, relative to the cost of construction.* SAN FRANCISCO, CAL., July 23, 1887. Hon. LELAND STANFORD, President Central Pacific Railroad Company : SIR : Referring to your letter of recent date, in regard to the construction of the Central Pacific Railroad, I was superintendent of construction during the building of the road. The work was pushed with the utmost vigor ; all the men were hired that could be found, and no eifort or expense was spared to complete the road as quickly as possible. Inthiswayit was finished and in operation from Sacramento, Cal., to Ogdeii, Utah, about seven years sooner than was required by act of Congress. During con- struction very high prices were paid for powder and all tools and supplies used on the work, and nothing was spared that would hasten its completion, and the work was pushed regardless of the season. The winter of 1865 and I860 was a very wet one, making the roads on the clay soils of the foot-hills nearly impassable for vehicles. Large numbers of pack animals had to be brought into use, and on them were carried nearly all supplies, even hay and grain, over steep mountain trails, to the construc- tion camps. As illustrating the irnpassability of the roads, the stage running from end of track to Virginia City was stuck in the mud and left standing in the street at Gold Run for six weeks, the passengers being carried in the meantime by saddle train from the railroad at Colfax to Dutch Flat. The building of the railroad during thin time was prosecuted with energy but at much greater cost than would have been the case in the dry season. During the winter of 1866 and 1867 and the following winter of 1867 and 1868 there were unusually heavy snowfalls in the upper Sierra Nevadas, where the road was then under construction. The tunnels were got under way with as large a force as could be used on them, and the remainder of the force was sent to the Truckee Canon on the east slope of the Sierras, where the snowfall was not so great as to entirely prevent grading during the winter, the total force being about 13,500 men at this time. The snows were so deep that it was impossible to keep the tunnel approaches clear, and we were compelled to make tunnels through the snow from the dump to the tunnel entrances. Snow tunnels were also required to get into camp. In many instances our camps were carried away by snowslides, and men were buried and many of them were not found until the snow melted the next summer. In the spring of each year the men were taken back from the Truckee into the moun- tains and an average depth of 10 or 12 feet of snow was cleared away before grading could be commenced. The total snowfall of the season was about 40 feet, and the depth of hard, settled snow in midwinter was 18 feet on a level in Summit Valley and Donner Pass, over which we hauled on sleds track material for 40 miles of railroad, 3 locomotives, and 40 cars from Cisco to Donner Lake, where all was reloaded on wagons and hauled over miry roads to Truckee, a total distance of 28 miles, at enormous cost. In this way the road was forced to the east slope of the Sierra Nevadas. In crossing the deserts eastward from the Truckee River, water for men and animals was hauled at times 40 miles. It was necessary to have the heavy work in Palisade Canon done in advance of the main force, and 3,000 men with 4oO horses and carts were sent to that point, a distance of 300 miles, in advance of the track. Hay, grain, and all supplies for the * See answer to question No, 51, LELAND STANFORD. 2581 men and horses had to be hauled by teams over the deserts for that great distance, there being no supplies to bo obtained on the entire route. The winter of 1808 and 1809 was one of severe cold. The construction was in progress in the upper Humboldt Valley, where the ground was often frozen to a depth of 2 and 3 feet, and material re- quired blasting and treatment like rock, which could have been cheaply moved in a more favorable time. The entire cost of the railroad, had it been built with less speed and as such railroads are usually constructed, would have been fully 70 per cent. less than its actual cost, as it was built with rapidity of construction, and without regard to any outlay that could hasten its completion. The railroad from Newcastle on the west slope of the Sierras to Wadsworth at the beginning of the Nevada deserts, 157 miles, was built between February, 1865, and July, 1868, more than three years, with a force averaging 11, COO men. The railroad from Wadsworth to Ogden, about 555 miles, was built between Julj r , 1868, and May, 1869, about ten months, with a force averaging 5,000 men. If the country between Newcastle and Wadsworth had been of the same average difficulty as that between Wadsworth and Ogden and between Ogden and Omaha, the labor that was out upon the Central Pacific Railroad would have built it to a point far to the eastward of Omaha in the same time, the work from the east slope of the Sierra No'vadas to Ogden being more than an average of that from Ogden to Omaha. Very respectfully, J. H. STROBRIDGE. STATE OF CALIFORNIA, City and County of San Francisco, ss : J. H. Strobridge, being duly sworn, says he has read the foregoing statement ; that the matters and things therein stated are true of his own knowledge, except as to matters on his information and belief, and as to those he believes them to be true. J. H. STROBRIDGE. Subscribed and sworn to before me this 25th day of July, A. D. 1887. [SEAL.] E. B. RYAN, Notary Public in and for said City and County. EXHIBIT No. 11. Statement of Arthur Brown, superintendent of bridges and buildings, relative to cost of construction.* WEST OAKLAND, CAL., July 25, 1887. Hon. LELAND STANFORD, President Central Pacific Railroad Company : DEAR SIR : In reply to your letter of the 23d inst., I herewith submit a brief outline of the construction of the snow sheds over the Sierra Nevada Mountains, on the line of the Central Pacific Railroad, as well as the conditions which made them a neces- sity. As superintendent of bridges and buildings the work of constructing those sheds was assigned to myself. The excessive snow belt where the road crosses the Sierra Nevada Mountains, extends from a point near Blue Canon, on the western slope, to Cold Stream Canon on the east, a distance of about 40 miles, having its maximum depth near the summit. The snowfall for the season has been known from actual measurement to be nearly 50 feet. In the fall of 1866 the road was opened to Cisco. The experience in keeping the road open through the following winter led to the construction of the snow sheds. Although every known appliance was used to keep the road clear from snow that winter, including the largest and best snow plows then known, it was found impos- sible to keep it open over half the time, and that mostly by the means of men and shovels, which required an army of men on hand all the time at great expense. It became evident from our experience then that the snow problem had become serious, and it was decided, after various discussions on the subject by the directors of the company, that the only positive means of protecting the road was by snow sheds and galleries, although the expense of building a shed nearly 40 miles in length was almost appalling and unprecedented in railroad construction, yet there seemed to be no alternative but build the sheds. I was therefore instructed to make prepa- rations and plans for such sheds as was deemed best, from our limited experience at that time. In the summer of 1867 we built some experimental sheds, which we had to modify considerably. The snow-shed building in the spring of 1868 was commenced in ear- *See answer to question No. 51. 2582 U. S. PACIFIC RAILWAY COMMISSION. nest. Owing to the short season in which the work had to bo done (less than live months) it was decided to cover all the cuts and the points where the roads crossed the great avalanches beyond the summit, with the idea that the high embankments on the road could be kept clear of snow. As the road was then rapidly progressing up the valley of the Humboldt it became a matter of the most vital importance that the sheds should be so far finished that the supplies and building materials for construction ahead should not bo interrupted, as the -connection was to be made in the spring of 1869. We therefore had to gather men from all quarters and pay high wages carpenters $4 per day, and suitable la- borers about $2.50 to $3. We employed about '2,500 men, with six trains with loco- motives distributing material. The expense was considerably increased by the fact that we had to keep the road clear for the traffic, which was great, owing to the large amount of building material forwarded to the front, and to avoid accident, which consumed about 30 per cent, of the time, consequently increasing the cost in that proportion, besides, we had, by commencing early in the spring, to shovel from 6 to 8 feet of snow before we could put in foundations foi 4 sheds. In the fall we continued until the snow stopped us entirely, although we had been shoveling snow for nearly two months. The expense from the amount of snow that had to be shoveled, spring and fall, and the difficulty of getting men at reasonable wages to remain on the work owing to snow, bad weather, &c., added very much to the cost. As there were not enough saw-mills to supply the necessary material, we had to resort to round and hewn timber, which had to be got from the woods and brought to the track at a great expense, as suitable men for that purpose were very scarce. The galleries are built along the side of the mountains, where the slope of the roof conforms with that of the mountain, so' the snow can pass over easily. Some of thoso galleries run back on the slope of the mountain several hundred feet from the center line of the road. In other places massive masonry walls were built across ravines to prevent the snow from striking the sheds at right angles. The snow sheds and gal- leries were finished in the fall of 1869. In them was used 65,000,000 feet, B. M., of timber, and 900 tons of bolts and spikes, &c. The total length of sheds and galleries when finished was about 37 miles, at a cost of over $2,000,000. For several years the loss from fires was considerable, as several miles were burned down and had TO be rebuilt, and at the present time water trains are constantly kept on hand for sprinkling down the sheds twice a week, thus preventing their destruc- tion by fire. A number of the tunnels through the same mountains had to be timbered at a great expense, as most of it had to be got out in the winter time, and, as it was impossible to keep the roads open, we had to employ men and bring timber to the tunnels on hand sleds. I am quite familiar with the extraordinary exertions put forth in all departments of this work, as I was constantly on the ground during all this construction, and es- pecially the almost superhuman effort put forth by Mr. J. H. Strobridge. superin- tendent of construction, in keeping the men at work on the rock work and tunnels, and shoveling snow at great depth during the fall and winter, and contending against mud and snow in getting supplies to the ground at great expense. I consider, from my experience, that if time could have been spared to take advan- tage of the proper seasons, it could probably be duplicated now for less than 40 per cent, of its original cost. Very respectfully, ARTHUR BROWN, Supt. B. and B. Dcpt. STATE OF CALIFORNIA, City and County of San Francisco, ss : Arthur Brown, being first duly sworn, deposes and saith : That he has read the foregoing statement, and knows the contents thereof ; that the same is true, except as to matters there in stated on his information or belief, and as to those he believes it to be true. ARTHUR BROWN. Subscribed and sworn to before me this 26th day of July, A. D. 1887. [SEAL OF NOTARY.] E. B. RYAN, Notary Public in and for said City and County. LELANB STANFORD. 2583 EXHIBIT No. 11. Statement showing from official records the saving to the United Statesin transportation of mails, troops, munitions of war, supplies, -t^t>-r-oooooooc5ro i-lOr-iOOOOOOQOoOOOOtOOCOOOCOOO o o to n O 00 CO t^" t> r-T -^" |>T oT C5* S co ^ IM eo co IH ooocoooococcoocooot~t-t~t> S .'S JQ SJD &C fct feu fcJP, - . -rt-ca ; a ;a ; ^ -a ;H Ssss s S : m " : a := ; g^Hji-3 .i-s . - ' _ . _ _ . . fcJD . tJC ^.^. r- .^.- r _.^.^. F ,- . H . rt .S .'.9 :^ :^r -9 '.S ; l fiP 1 1 1 1 S^s 1 1 1^1 1 | P ^E P i P S l^'' i ' =2 5 LELAND STANFORD. 2593 SAVING IN MAIL TRANSPORTATION, $40,000,000. The table shows that the amount allowed the railroad by the Postmaster- General for carrying the mails from July 1, 1869, to December 31, 1885 a period of sixteen and a half years was $10,606,507.22. This was for carrying the average daily weight at the commencement of the period of about 5,000 pounds, which at the close of the period had increased to about 30,000 pounds. The stage rate, we have seen, was $1,598.17 per mile. This for the 1,895 miles of aided road, and for the sixteen and a half years, would amount to the sum of $49,970,780.47. The diiference representing the amount saved by the Government in the transportation charges on United States mails is $39,364,273.25. IMPROVEMENT IN THE SERVICE. An idea of the improvement in the service and a suggestion as to its value to the Government and to the people may be gained from the following remarks relating to the subject, made by the Postmaster-General at the end of the old regime and the beginning of the new. In his report for 1867 (p. 8) the Postmaster-General says : "No changes have been made in the overland California mail since the last annual report, at which time the Department was having daily service from the ends of the railroad by both the Smoky Hill and Platte routes as far as Denver, where the lines united and formed a single daily route via Salt Lake City and Virginia City to the Central Pacific Railroad connection. During the spring and summer months the com- plaints as to the manner in which the service was being perfotmed, and the great delay in the arrival of mail from the East at Denver and Salt Lake, were more numer- ous and pressing than at any time since the present route has been in operation. It was charged that the Indian troubles complained of by the contractor, and given by his agents as an excuse for non-performance of service, were a pretense, and that there was no reason why the mails should hot be conveyed regularly and within schedule time. The official reports, however, of General Sherman and other officers of the Army, referred by the Secretary of War to this Department, prove conclusively that the most serious troubles did exist on the plains, and that there was no safety for either passengers or mails except under ample military escort, which could not be furnished daily. A special agent of the Department lately sent over the route for the express purpose of reporting as to the manner in which the service had been performed during the summer, and also as to its present condition, has, under date November 4, 1867, made his report, which is accompanied by the affidavits of the postmasters at the principal offices on the route, and also by statements of several officers command- ing military stations on the line. The burden of this proof is summed up as well, perhaps, in the affidavit of the postmaster at Denver as in other papers submitted. He says : ' On that portion of the route from Denver to Omaha City, or terminus of railroad, Indian troubles of a serious nature commenced as early as February 16, and notwithstanding the contractor, supported by the military, put forth every eifort in his power to clear the road and keep it open, no mail was received at this office over that route from February 23 to March 2. During the month of March our registers show eighteen failures. From June 8 to September 1 regular trips were made on al- ternate days, and from that to the present we have had daily service. I am reliably informed that the delay was in many instances caused by loss of stock driven off by hostile Indians at points where it was impossible to replace it without prolonged de- lay. This was more especially the case on the route from Denver to Salt Lake City. Late in the winter the Union Pacific Railroad was blockaded by snow, followed soon by high water, which caused another delay of three weeks and the diversion of the mail from the Platte to the Smoky Hill line. " 'From the best information I can obtain the cause of all the detentions and ir- regularities complained of were unavoidable on the part of the contractor, and of such a character as to have precluded the possibility of any man or set of men making regular trips over the route unless securely guarded by an armed force of considerable magnitude.' "From papers submitted by the contractor to the inspection division it would ap- pear that from April 1 to August 15, 1867, the Indians robbed him of three hundred and fifty head of stage stock, burning twelve of his stage stations with large amounts of grain and hay, destroyed three coaches and express wagons, severely wounded several of his passengers, and killed outright thirteen of his most reliable employe's.." In contrast to this state of affairs, we find the condition of the service the first "year after the Pacific Railroad was opened for through traffic, stated by the Postmaster- General in his report for 1870, as follows (p. 12) : "The through-mail tables herewith submitted make a favorable exhibit as to the average speed and regularity with which the mails have been conveyed over the line, 3,307 miles long, between New York and San Francisco, during the year ending with the month of September, 1870. * * * The average time going west was one hun- 2594 U. S. PACIFIC RAILWAY COMMISSION. dred and seventy-five hours fifty-two minutes, or seven days seven hours and fifty- two minutes; going east, one hundred and seventy-two hours forty-four minutes, or seven days four hours and forty-four minutes. The records from which these tables are compiled show that generally three mails a clay are dispatched from New York for San Francisco, one in the morning and two in the afternoon ; the average schedule time of the afternoon mails being nearly seven days, and of the morning mails nearly seven and a half days, a single train a day being run west of the Missouri River, the departure of which is arranged to connect with the train making the latest afternoon departure from New York. From San Francisco but a single mail a day is dispatched for New York, of which the average schedule time, allowing for the intermission of Sunday service east of the Missouri River, is about seven days three and a half hours, only one hour and fourteen minutes less than the time actually attained." Although the value of this improved condition of affairs is not stated in money in the foregoing comparison of rates and amounts, it should be borne in mind in con- nection therewith. And it strengthens the force of the argument made by the figures that the construction of this line has saved the United States in the transportation of mails during the sixteen and a half years ending December 31, 1885, over $39,000,000. SUMMARY FREIGHT, TROOPS, AND MAILS. A summary of the foregoing shows the following result to January, 1866 . United States trans- portation charges on Central Union Pa- cific. Cost at rates paid prior to railroads. Saving to United States. Freight $5 740 753.00 $61, 161, 307. 00 $55 420 554 00 TrooDS &c 4 616 053.00 49,178 967.00 44 562 914 00 Mail : : 10 606,507.22 49, 970 780. 47 H9 364 273 ^5 Total 20 963 313.22 160 311 054.47 139 347 741 25 A saving in the expense of the Government of nearly one hundred and forty mill- ions up to the end of 1885 in the item of transportation seems enormous to one not accustomed to deal with accounts of Government expenditure. ret it no doubt falls short of expressing the actual saving in this time; for many it e ms (of which some have been noticed) cannot be satisfactory valued in money, and have been entirely omitted from the calculations. A single Indian war has cost more than the whole amount of bonds issued to the Pacific railroads. The Pacific Railroad Committee of the Senate, in a report dated February 19, 1869, make the following statement on this subject: u What is the cost of our Indian wars as compared with the cost of the Pacific rail- ways, which will speedily end the Indian wars? A compilation from the official records of the Government shows that these wars for the last 37 years have cost the nation 20,000 lives and more than $750,000,000. In the years 1864 and 1865 the Quartermaster's Department spent $28, 374, 228 lor military service against the Indians. * * .The chairman of the House Committee on Indian Affairs estimated recently that the present current expenses of our warfare with the Indians was $1,000,000 a week $144,000 a day." (40th Congress, 3d Session, Senate Rep. Com., 219.) VIEWS OF GENERAL SHERMAN. The effect of the Pacific railroads in ending the Indian wars is thus commented upon by General Sherman in his last report as General of the Army : (Report 1883, p. 5. et seq. ) "I now regard the Indians as substantially eliminated from the problem of the Army. There may be spasmodic and temporary alarms, but such Indian wars as have hither- to disturbed the public peace and tranquillity are not probable. The Army has been a large factor in producing this result, but it is not the only one. Immigration and the occupation, by industrious farmers and miners, of lands vacated by the aborigines have been largely instrumental to that end ; but the railroad (the italics are the Gen- eral's), which used to follow in the rear, now goes forward with the picket line in the great battle of civilization with barbarism, and has become the greater cause. I have in former reports for the past fifteen years treated of this matter, and now on the eve of withdrawing from active participation in public affairs, I beg to emphasize much which I have spoken and written heretofore. The recent completion of the last of the four great transcontinental lines of railway has settled forever the Indian question, LELAND STANFORD. 2595 the army question, aud many others which have heretofore troubled the country. * * * I regard the building of these roads as the most important event of modern times, and believe that they account fully for the peace and good order which now prevail throughout onr country. * * * A vast domain, equal to two-thirds of the whole surface of the United States, has thus been made accessible to the immigrant, and, in a military sense, our troops maybe assembled at strategic points and sent promptly to the places of disturbance, checkin bcdisorders in the bud." The saving to the Government in mere money, which directly resulted from the aid granted for the construction of the Central Union Pacific Railroad up to January 1, 1886, may then be fairly stated as $139,347,741, nearly $140,000,000. Such is the re- turn received by the Government in the item of transportation. As an offset to this are the bonds issued by the United States with interest accrued thereon, less the amount of such interest which has been repaid by transportation charges withheld in the Treasury Department and cash paid under the law. Tho statement and balance of this account to December 31, 1885, is shown as follows : To January 1, 1886. Bonds issued by United States : Union Pacific Railroad $27,236,512.00 Central and Western Pacific Railroads 27, 855, 680. 00 Total bonds :... 55,092,192.00 Interest accrued to January 1, 1886 : Union Pacific $29,043,327.21 Central and Western Pacific Railroads 29, 299, 156. 21 58,342,483.42 113,434,675.42 Transportation charges and cash : Union Pacific * Transportation to June 30, 1885 $10, 647, 579. 36 t Cash to June 30, 18c5, 5 per cent 283, 162. 99 t Interest payment, 1885 560,017.05 $ Sinking fund in United States Treasury 6, 006, 033. 73 Total Union Pacific payments on bonded line (not including Kansas Pacific) 17,496,793.13 || Central and Western Pacific transportation charges and cash . . 9, 251, 974. 43 Total transportation charges on aided line and cash paid 26, 748, 767. 56 Balance accrued on debt to date (due in 1898) 86, 685, 907. 86 SAVING BY UNITED STATES THREE TIMES THE CASH VALUE OF THE DEBT AND INTEREST. This balance will not be payable till the maturity of the bonds at the average date of, say, January 1, 1898. The present cash value of this sum, calculated at 6 per cent, interest, payable semi-annually the same rate as borne by the bonds is $42,647,795. The 'saving in money to the Government in transportation charges to the same date amounts to $139,347,741. 25. COMPLETION OF THE RAILROAD IN LESS TIME THAN ALLOWED BY THE LAW. The last spike was driven in the Pacific Railroad at Promontory Point on May 10, 1869. From that date the Union and Central Pacific companies, forming a through line between the Missouri River and the navigable waters of the Sacramento River in California, have been in continuous use and operation for the transportation of passengers, freight, and mails. By section 17 of the act of Congress of July 1, 1862 (12 U. S. Stat., 489), the railroad companies were required to complete the line, ready for use in a reasonable time, and it was provided that if it were not so completed by the 1st day of July, 1876, their properties should be forfeited to the United States, upon which Congress might pass any act to insure their speedy completion. The through line of railroad was thus actually opened for traffic over seven years before the limit of time allowed by the law. *U. S. Com. R. R. Rep., 1885, p. 1. \Ibid. \IUd., Rep., 1886, p. 6. Annual Re. port U. P. Ry., 1885, p. 78. || Rep. C. P. R. R., 1885, p. 4. 2596 U. S. PACIFIC RAILWAY COMMISSION. COST OF ROAD INCREASED BY EARLY COMPLETION. Everything necessary to the construction of a railroad ; capital, labor, and mate- rials, cost the companies much more on account of this early completion of the road, than they would have cost had the companies consumed the full time allowed. But the Government and the people were benefited by all the direct and incidental ad- vantages connected with railroads as compared with the slower and more expensive methods of transportation. To the public the saving in transportation has been many times what it was to the Government ; and it has given to them all the material bene- fits implied by the use of half the continent for seven years. The direct saving in money to the Government is easily abstracted from the forego- ing statements. In addition to this there was a benefit probably to an equal or greater amount by the ending of Indian wars and the abandonment of many military posts which the former frequent hostilities made necessary. The amount saved to the Government by the use of the road for these seven years ending June 30, 1876, is, as shown by the following tables, as follows : Seven years t) June 30, 1876. "' Traffic. United States transporta- tion charges on Central- Union Pacific. Cost to United States at rates paid prior to railroad. Saving to United States to June 30, 1876. Freight - $1, 793, 556 2, 162, 296 3, 689, 343 $15, 509, 977 18, 698, 671 21, 199, 725 $13, 716, 421 16, 536, 375 17, 510, 382 Mails Total 7, 645, 165 55, 408, 373 47, 763, 178 The debt to the same date was as follows : Bonds : Union Pacific $27,236,512 Central and Western Pacific 27,855,680 Interest accrued less credits :* Union Pacific 9,438,810 Central Western Pacific 12,180,838 $55, 092, 19*2 21, 619, 648 Balance of debt, due at maturity of bonds in 1898 76, 781, 840 The cash value of this debt on June 30, 1876, discounted at the same rate of inter- est borne by the bonds, was $21,522,^74. The amount saved by the Government for that period was, as above, $47,763,178. So that in transportation charges alone the Government benefited by the use of the road for seven years for which time it was finished before the limit allowed by the law, the amount of $26,240,904 in excess of the cash value of the debt and interest to that date. DEBT AND INTEREST AT MATURITY COMPARED WITH SAVING IN TRANSPORTATION CHARGES TO SAME DATE. The United States Commissioner of Eailroads, in his report for 1883 (p. 13), esti- mates the balance to become due on the debt of Central Union Pacific line ab matu- rity as $71,000,000. Subsequent experience has shown that the balance will be greater than this sum, as since the commissioner's estimate several competing transconti- nental roads have been completed, thus reducing the net earnings of the original line, and reducing also thereby the amounts of the annual payments to the Govern- ment on account of the debt. In the following estimate the annual payments from 1886 to 1897 are based upon the requirements ascertained under the law since 1883. * Public debt statement, June 30, 1876. LELAND STANFORD. 2597 ESTIMATE OF DEBT AND INTEREST AT MATURITY. Bonds, Central Union Pacific line $55,092,192 Interest, 30 years at 6 per cent 99, 165,945 Total, bonds and interest 154,258,137 PAYMENTS ON DEBT BY COMPANIES. Central Western Pacific : Transportation charges and cash to January 1, 1886* ... $9, 251, 974 Payments 1886 to 1897, estimated on average rate 1883- 1886, $478,000 per annumt 5,736,000 Union Pacific Railroad : Credits to January 1, 1886* 17,496,793 Pavments 1886 to 1897, estimated on average rate of 1883- 1885, $1,448,000$ 17,376,000 14,987,974 34,872,793 Total payments 49,860,767 Balance on debt at maturity 104,397,370 As an offset to this balance the saving in transportation charges may be cited, as that is a direct pecuniary benefit to the Government. The foregoing statements show this saving up to January, 1886, to have been $139,347,741. Assuming this saving to continue to the maturity of the debt at the same annual rate as it has been in the past, the result would be as follows : SAVING TO GOVERNMENT IN TRANSPORTATION CHARGES TO MATURITY OF THE DEBT. Kind of service. amount saved by Govern- ment. Amount saved in 30 years to maturity debt. Freight . $3, 463, 785 $103, 913, 550 2, 785, 182 83, 555, 460 Mails 2, 385, 714 71,571,420 Total . ... 8, 634 ; 681 259 040 430 Balance on debt estimated to be due at maturity as above $104 , 397, 370 Saving to Government in transportation charges to same time 259, 040, 430 Surplus saved 154, 643, 060 The total debt stated above, with interest at maturity, without any deductions for payments by the companies, amounts to Principal of bonds $55,092,192 Interest at 6 per cent 99, 165, 945 Total 154,258,137 Deducting this amount from the sum saved above leaves $104,782,293 as the amount of benefit which would have been realized by the Government in excess of the whole amount of bonds and interest had they been a donation instead of a loan at interest. At the time the granting acts were passed it was frequently stated in Congress that in case the loan could never be directly repaid the saving to the Government in trans- portation charges would more than equal the bonds and interest, and thus directly offset the debt. The foregoing statements show that those predictions have been more than realized. * Annual Report of the Central Pacific Railroad, 1885, p. 4. t Report of the United States Commissioner of Railroads, 1886, p. 35. tSee preceding statement of January 1, 1886. ^Report of the United States Commissioner of Railroads, 1886, p. 35. 2598 U. S. PACIFIC RAILWAY COMMISSION. STATE OF CALIFORNIA, City and County of San Francisco, ss : E. H. Miller, jr., being first duly sworn, saith : That he has read the foregoing statement consisting of the pages next preceding, marked "Exhibit No. 1H," and knows the contents thereof; that the facts therein stated are true, except as to those matters stated on his information or belief, and as to those he believes it to be true. E. H. MILLER, JR. Subscribed and. sworn to before me this 26th day of July, A. D. 1887. [SEAL.] E. B. RYAN, Notary Public in and for tlie City and County of San Francisco, State of California. EXHIBIT No. 12. Relative to competing roads aided by Congress, by J. C. Stubbs, general traffic manager.* There are now eight trans-continental railroad lines in addition to the original Union and Central Pacific line that is to say, there are eight other lines, each of which competes in whole or in part with the original Union and Central Pacific line for the traffic interchanged between the Pacific coast and the territory of the United States and Canadas east of the Rocky Mountains. They are as follows : (1) The original Union and Central Pacific line, opened for through traffic in May, 1889. (2) The thirty-second parallel route, or Atchison, Topeka and Santa F6 and South- ern Pacific line, via Deming, opened in March, 1881. (3) The thirty-second parallel route, or Southern Pacific and Texas and Pacific line, via El Paso, Tex., opened in January, 1882. (4) The thirty-second parallel route, or Galveston, Harrisburg and San Antonio Railway and Southern Pacific, via El Paso, Tex., opened in February, 1883. (5) The Burlington and Missouri River Railroad and Denver and Rio Grande in connection with Central Pacific, opened in May, 1883. (6) The Northern Pacific Railroad, opened in September, 1883. (7) The Atlantic and Pacific in connection with the Southern Pacific, opened in October, 1883. (H) The Oregon Short Line, the date of whose opening for business I am unable to give. (9) The Canadian Pacific, opened for business in July or August, 1886. All of these roads, except the Canadian Pacific, are in United States territory. In the report of the United States Commissioner of Railroads for 1884, pages 226 and 227, will be found a list of grants made by the United States in aid of the con- struction of railroads, which gives the date of the act of Congress making the grants, &c. By reference to the list it will be found that at least a portion of each of the trans-continental lines above described, except the Canadian Pacific (which was heav- ily subsidized in land and money by the Dominion Government), was aided by the United States Government, and, I am informed (not having searched the matter my- self), that in each of said cases there was a larger grant of land made than that to the Union and Central Pacific line; that the grant to the latter line was for 12,800 acres per mile, less mineral lands and lands for which there were prior claims, while the grants to the other lines were usually at the rate of 12,800 acres per mile in the States and 25,6CO acres per mile in the Territories. It is supposed that the lands granted to the Texas and Pacific, Atlantic and Pacific, Atchison, Topeka and Santa F<6, and Northern Pacific Companies caused their construction. Certainly no one will deny that they hastened their completion. Without the land grants the roads would not have been built, and without these roads the traffic which has been carried by them in competition with the Central and Union Pacific line would have gone over the Central and Union Pacific lines, and contributed by so much to the earnings of the Central and Union Pacific Companies. To illustrate the extent to which the earning capacity of the Central and Union Pacific Companies has been impaired by the completion of these roads, I have caused to be prepared and beg to hand you herewith the following exhibits : * See answer to question No. 54. LELAND STANFOKD. 2599 EXHIBIT A. Comparative statement showing freight tonnage and charges on through traffic and percentage of same done by each route for periods as noted. Period. Direction. Via Central Pacific and Union Pacific. Via Central Pacific and Denver & Klo Grande. Via South'n Pac. and Atlantic & Pacific. Pounds. Charges, ds. Charges. Pounds. Charges. Jan. 1, 1874, to Mar. 31 1881 East. West 940, 363, 990 $12, 565, 250. 30 1, 647, 899, 888 29, 991, 892. 90 2, 588, 263, 878 100 42, 557, 143. 20 100 Per cent Apr. 1, to Dec. 31, 1881 East. West 143,303,150 272, 455, 990 1, 928, 977. 40 4, 234, 726. 90 415, 759, 140 94.54 6, 163, 704. 30 94.50 Jan. 1, 1882, to Jan. 31 1883 East. West 127, 141, 720 358, 452, 510 1, 650, 253. 30 5, 285, 101. 90 485, 594, 230 69.23 6, 935, 355. 20 72.37 Per cent Feb. 1, to May 31, 1883 East. West 21,447,710 107, 563, 550 281, 229. 20 1, 473, 145. 00 58, 730 $1, 298. 10 129, Oil, 260 57.77 1, 754, 374. 20 57.45 58, 730 .03 1, 298. 10 .04 Per cent June 1, to Sept. 30, 1883 East. West 56, 751, 140 79, 403, 880 808, 742. 50 1, 150, 336. 70 7, 842, 280 16, 396, 820 112,246.10 214, 107. 00 136, 155, 020 48. 76 1, 965, 079. 20 49. 71 24, 239, 100 8.68 326, 353. 10 8.26 Per cent Oct. 1, 1883, to Sept. 30 1884 East. West 118, 244, 380 204, 365, 320 1,478,543.10 2, 827, 834. 30 25, 158, 880 33,015,840 314, 268. 60 440, 416. 70 22, 695, 450 43, 151, 750 $258, 794. 10 577, 067. 90 322, 609, 700 42. 45 4, 306, 377. 40 43. 23 58, 174, 720 7.05 754, 685. 30 7.57 65, 847, 200 8.66 835, 862. CO 8.39 Per cent . . . Oct. 1, 1884, to Dec. 31 1885 East. West 160, 939, SCO 173,124,650 1,920,418.10 2, 353, 273. 00 34, 340, 150 22, 632, 530 436, 440. 70 284, 530. 70 62, 647, 870 129, 909, 200 699,411.80 1,559,200.40 334, 064, 510 35. 29 4, 273, 691. 10 35.65 56, 972, 680 6.02 720, 971. 40 6.01 192, 557 070 2,258,612.20 18.84 Per cent..... 20. 34 Jan. 1, to Dec. 31, 1886 East- West 175, 783, 490 193, 450, 600 1,492,955.00 1, 338, 468, 60 40, 745, 090 52, 001, 960 331,624.40 319, 472. 80 59, 254, 850 99, 8:20, 590 462, 541. 10 989, 241. 10 369, 234, 090 31.18 2, 831, 423. 60 32.36 92, 747, 050 7.83 651, 097. 20 7.44 159, 075, 440 13.43 1,451,782.20 16.59 Per cent Total 5 yrs. 9 mos 2, 192, 427, 950 48.35 28, 230, 005. 00 52.46 232, 192, 280 5.12 2, 454, 405. 10 4.56 417, 479, 710 9.20 4, 546, 256. 40 8.45 Per cent. Period. Direction. Via South'n Pacific and A. T. & S. F. Via South 'n Pac. and Texas & Pac. Via South'n Pac. and Gr. H. & S. A. Pounds. Charges. Pounds. Charges. Pounds. Charges. Apr. 1, to D%c. 31, 1881 East. West 21,362,350 2, 663, 060 $305, 546. 70 53, 068. 50 24, 025, 410 5.46 358,615.20 5.50 Per cent Jan.l, 1882, to Jan. 31, 1883 East. West 50, 393, 500 54, 278, 820 721,230.00 766, 021. 40 91, 534, 360 13, 223, 860 $921, 285. 60 234, 796. 40 420, 3GO $4, 501. 50 110, 672, 320 15.78 1,487,251.40 15.52 104, 758, 5:20 14. 93 1, 156, 082. 00 12.06 420, 360 .06 4, 501. 50 .05 Percent Feb. 1, to May 31, 1883 East. West 12, 847, 600 49, 494, 060 172, 954. 70 641, 752. 20 8,611,810 7, 055, 760 118, 4fiO. 80 122, 695. 60 5, 147, 610 11,093,7(50 64, 839. 40 177, 622. 20 62, 341, 660 27.92 814, 706. 90 26.67 15, 687, 570 7.01 241,156.40 16,241,370 7. 90 1 7. 27 242, 461. 60 7.94 2600 U. S. PACIFIC KAILWAY COMMISSION. EXHIBIT A. Comparative statement showing freight tonnage, $*c. Continued. Period. | 5 Via South'n Pacific and A.T.&S.E. Via Sonth'n Pac. and Tex. & Pac. Via South'n Pac. and G. H. & S. A. Pounds. Charges. Pounds. Charges. Pounds. Charges. June 1, to Sept. 30, 1883 East. West 13, 792, 950 30, 100, 000 $178, 392. 90 374,613.40 12. 704, 710 8, 113, 3oO $164, 939. 40 120, 022. 10 22, 477, 880 31, 663, 130 $261, 766. 40 561,700.70 43, 892, 950 15.71 553, 006. 30 13.99 20, 818, 090 7.46 284, 961. 50 7.21 54,141,010 19.39 823, 467. 10 20.83 Per cent Oct. 1,1883, to Sept. 30 1884 East. West 17, 916, 560 48, 184, 820 215,477.30 505, 712. 10 35, 29.}, 160 38, 104, 060 410,407.10 459, 110. 80 35, 460, 850 56, 874, 990 454, 253. 40 983, 714. 00 66, 101, 380 8.69 721, 189. 40 7.24 73, 397, 220 9.66 8G9, 577. 90 8.73 92, 335, 840 12.14 1, 437, 967. 40 14.43 Per cent ......... Oct. 1, 1884, to Dec. 31,1885 East. West 7, 396, flOO 254, 730 93, 884. 50 4, 406. 20 36, 437, 990 24, 649, 270 424, 778. 20 287, 921. 10 62, 363, 790 102, 173, 370 712,758.50 1, 610, 103. GO 7, 651, 630 .81 98, 290. 70 .82 61, 087, 260 6.46 712, 699. 30 5.95 164, 537, 160 2, 322, 862. 10 17. 39 19. 38 Jan. 1, to Dec. 31, 1886 East. West 769, 200 41, 310 8, 000. 70 586. 50 34, 625, 300 23, 132, 570 303, 160. 30 184. 238. 00 152, 680, 04o| 895, 459. 20 191,969,4401,288,154.20 810, 510 .07 8, 587. 20 .10 57, 757, 870 4.88 487, 398. 30 5.58 344, 649, 480 29.09 2,183,613.40 24.96 Per cent Total, 5 yrs. 9 mos.. 315, 495, 860 6.95 4, 041, 647. 10 7.51 333, 486, 230 7.36 3,751,875.40 6.97 672, 325, 220 14.83 7, 014, 873. 10 13.03 Per cent Period. Direction. Via North 'n Pacific and O. E. and N. Co. Via Oregon Short Line. Total via all routes. Pounds. Charges. Pounds. Charges. Pounds. Charges. Jan. 1, 1874, to Mar. 31 1881 2, 588, 263, 878 $42, 557, 143. 20 Apr. 1, to Dec. 31, 1881 439, 784, 550 6, 522, 319. 50 Jan. 1,1882, to Jan. 31 1883 = 701, 445, 130 9, 583, 190. 10 Feb. 1, to May 31, 1883 223, 320, 590 3, 053, 997. 20 June 1, to Sept 30, 1883 279, 246, 170 3, 952, 867. 20 Oct. 1, 1883, to Sept. 30 1884 81, 645, 044 10.75 $1, 036, 776. 08 10.41 760, 111, 104 9, 962, 435. 48 Per cent Oct. 1, 1884, to Dec. 31, 1885... . 91, 605, 847 9.62 1, 143, 128. 66 9.53 38, 513, 114 4.07 $458, 160. 71 3.82 946, 449, 271 11,988,416.17 Per cent .... Jan. 1. to Dec. 31. 1886 90, 666, 960 7.66 756, 457. 08 8.65 69,481,740 5.86 378, 222. 80 4.32 1, 184, 41.3, 140 8, 748, 581. 78 Per cent Total, 5 yrs., 9 mos. 263, 377, 851 5.81 2, 936, 361. 82 5.46 107, 994, 854 2.38 836, 383. 51 1.56 4,534,779,9551 53,811,807.43 Percent LELAND STANFOED. 2601 Exhibit A is a showing of the freight tonnage and charges on through traffic by each route from January 1, 1874, to December 31, 1886, divided into periods, these being marked by the dates of the completion of the several opposing lines. For example : From January 1, 1874, to March 31, 1881, there was but one line between the Mis- souri Eiver and California, namely, the Union and Central Pacific. April 1, 1881, the Atchison, Topeka and Santa Fe~ road was connected with the Southern Pacific at Dem- ing, thus opening a new line the first new line to compete with the original Central and Union Pacific line. The date of the opening of this new line for business, namely, April 1, 1881, begins a new period, which ends with the opening of the third line. In January, 1882, the Texas and Pacific and Galveston, Harrisburg and San Antonio roads were connected with the Southern Pacific at El Paso, making, for the period from January 1, 1882, to January 31, 1883, four routes. The Galveston, Harrisburg and San Antonio Railway, in connection with the South- ern Pacific at El Paso, did very little business previous to February 1, 1883, when it opened for business for New York City. Hence, a new period is begun, dating from February 1, 1883, and running to May 31, 1883, during which there were still but four lines, though during the last period the Galveston, Harrisburg and San An- tonio line had been greatly strengthened as compared with the first preceding period. In May, 1883, the Denver and Rio Grande and Burlington and Missouri River line was connected with the Central Pacific at Ogden, making five lines for the period from June 1, 18&3, to September 30, 1883, at which time the Atlantic and Pacific was connected with the Southern Pacific, making six lines. You will notice by Exhibit A that for the period from January 1, 1874, to March 31, 1881, there being but the one line (the Union and Central Pacific), the percentage of trafiic carried by this line is represented by 100 per cent. ; that this percentage is reduced in the second period to 94.54 per cent, in tonnage and 94.50 per cent, in earn- ings; in the third period, to 69.23 per cent, in tonnage and 72.37 per cent, in earn- ings; in the fourth period, to 57.77 per cent, in tonnage and 57.45 per cent, in earn- conclusively that with the opening of each new line there was an additional loss in tonnage and in earnings from through traffic to the Union and Central Pacific line. The conclusion is inevitable that this loss was occasioned by the diversion of traffic to the new lines. The difference between 100 per cent, and the percentages shown for the period succeeding March 31, 1881, represented the loss to the Central and Union Pacific line, the sole cause of which was the opening of new lines. Exhibit B is the same as Exhibit A, with the exception that the entire tonnage via the Central Pacific and Denver and Eio Grande and Burlington and Missouri River line, and the Central Pacific proportion of charges west of Ogden for the same line, are thrown in the first column under the head of Central and Union Pacific line. It was necessary in making these statements to show "line" earnings. It would have been impossible from any records we have to show the earnings of the indi- vidual roads in each line except by going back to the original billing, which would have required so much time and labor, that a report to be based upon information so obtained could not have been reached in time for the next session of Congress. The Denver and Rio Grande and Burlington and Missouri River roads made a line by connection with the Central Pacific, just as the Union Pacific connected with the Central Pacific ; hence the completion of the Denver and Rio Grande and Burlington road only affected the Union Pacific road. In Exhibit B the charges of the Denver and Rio Grande and Burlington and Mis- souri River line east of Ogden are shown separate from the charges of the Central Pacific, and will represent the loss to the Union Pacific by the diversion of traffic caused by the opening of that line. 2602 U. S. PACIFIC KAILWAY COMMISSION. EXHIBIT B. Comparative statement showing freight tonnage and charges on through traf- fic by each route for periods as noted; also percentage of said traffic done by each route- (charges east of Ogden, via Denver and Rio Grande, shown separately). [The tonnage and charges for Central Pacific via Denver and Rio Grande are included in Central and Union Pacific lines.] Periods. Direc- tion. Via Central Pacific and Union Pacific. Via Central Pacific and Denver & Rio Grande. Via Southern Pacific md Atlantic & Pacific Pounds. Charges. Pounds. Charges. Pounds. Charges. Jan. 1,1874, to Mar. 31, 1881. East.. West. 940, 363, 990 , 647, 899, 888 $12, 565, 250. 30 29, 991, 81.2. 90 2, 588, 263, 878 100 42, 557, 143. 20 100 Apr. 1,1881, to Dec. 81, 1881. East.. West. 143, 303, 150 272, 455, 990 $1,928,977.40 4, 234, 726. 90 415, 759, 140 94.54 6, 163, 704. 30 94.50 Jan. 1, 1882, to Jan. 31, 1883. East.. West. 127,141,720 358, 452, 511 M50.253.30 5, 285, 101. 90 485, 594, 230 69.23 6, 935, 355. 20 72.37 Feb. 1,1883, to May 31, 1883. East.. West. = 21,447,710 107, 622, 280 281,229.20 1, 473, 843. 60 $599. 50 129, 069, 990 57.80 1, 755, 072. 80 57.47 599. 50 0.02 June 1, 1883, to Sept. 30, 1883. East.. West. 64, 593, 420 95, 800, 700 866, 827. 30 1, 256, 404. 00 54,161.30 114, 039. 70 160, 394, 120 57.44 2, 123, 231. 30 53.71 168 201.00' 4.26 Oct. 1, 1883, to Sept. 30, 1884. Per cent ... East.. West. 143, 403, 260 237, 381, 160 1,637,052.10 3, 036, 139. 90 155, 759. 60 232, 111. 10 22, 695, 450 43,151,700 $J58,794.10 577, 067. 90 380, 784, 420 50.10 4, 673, 192. 00 46.91 387, 870. 70 3.89 65, 847, 200 8.66 835, 862. 00 8.39 Oct. 1,1884, to Dec. 31, 1885. Per cent East . . West. 195,280,010 195, 757, 180 2, 141,1 62. 6C 2, 487, 504. OC 215.C96.20 62,647,870 150, 299. 70 129, 909, 200 699, 411. FO 1, 559, 200. 40 '.... 391, 037, 190 41 31 4, 628, 660. 6C 38.61 365, 995. 90 3.05 192, 557, 070 20.34 2, 258, 612. 20 18.84 Jan. 1, 1886, to Dec. 31, 1886. Per cent East.. West . 216, 528, 580J 1, 659, 890. 1 C 245, 452, 5GO 1, 489, 614. 3C 164, 689. 30 168, 327. 10 59, 2o4, 850 99, 820, 590 462, 541. 10 989, 241. 10 461, 981, 140 39.01 3, 149, 504. 4C 36. OC 333, 016. 40 3.80 159, 075, 440 13.43 1,451,782.20 16.59 Total, 5 yrs. 9 mos . Percent 2, 424, 620, 230 53.47 29, 428, 726. 6C 54. 6 1, 255, 683. 50 2.34 417, 479, 71C 9.20 4, 546, 256. 40 8.45 . Period. Dire< tion Via Southern Pacific and A. T. & S. P. Via Southern Pacific Via Southern Pacific and Texas & Pacific. and G. H. & S. A. Pounds. Charges. Pounds. Charges. Pounds. Charges. Apr. 1, 1881, to Dec. 31, 1881. East.. 21,632,350 West . 2, 663, 060 $305 546. 70 . 53 OG8.5b . 24 O*>R 11 n 358 615 ''O 5.46 5.50 . LELAND STANFORD. 2603 EXHIBIT B. Comparative statement showing freight tonnage, #c. Continued. Period. Direc- tion. Via Southern Pacific and A. T. & S. P. Pounds. Charges. Via Southern Pacific and Texas & Pacific. Pounds. Charges. Via Southern Pacific and G. H. & S. A. Pounds. Charges. East. West 56, 393, 500 54, 278, 820 $721, 230. 00 766, 021. 04 91, 534, 360 13, 223, 860 $921, 285. 60 234, 796, 40 420, 360 $4, 501. 50 Jan. I, 1882, to Jan. 31, 1883. Percent 110, 672, 320 15. T8 1, 487, 251. 40 104, 758, 220 1 15.52 14.93 East. West Feb. 1, 1883, to May 31, 1883. Percent 12, 847, 600 49, 494, 060 62, 341, 660 27.92 172, 954. 70 641, 752. 20 8, 611, 810 7, 055, 760 814, 706. 90 26.67 15, 667, 570 7.01 ., 156, 082. 00 12.06 ~Il8, 460. 80 122, 695. 60 241, 156. 40 7.90 420, 360 0.06 4, 501. 50 0.05 5, 147, 610 11, 093, 760 16, 241, 370 7.27 64, 839. 40 177, 622. 20 East. West 13, 792, 950 30, 100, 000 178, 392. 901 12, 704, 710 374, 613. 40 8, 113, 380 164, 939. 40 120,022.10 22, 477, 880 31, 663, 130 June 1, 1883, to Sept. 30, 1883. Per cent 43, 892, 950 15.71 553, 006. 30 13.99 East . West 17, 916, 560 48, 184, 820 215, 477. 30 505, 712. 10 Oct. 1, 1883, to Sept. 30, 1884. Per cent 66, 101, 380 8.69 721, 189. 40 7.24 East. West 7, 396, 900 254, 730 93, 884. 50 4, 406. 20 Oct. 1, 1884, to Dec. 31, 1885. Per cent 7, 651, 630 0.81 98, 290. 70 0.82 East. West 769, 200 41, 310 8, 000. 70 586. 50 Jan. 1, 1886, to Dec. 31, 1886. Per cent . . 810, 510 0.07 8, 587. 20 0.10 Total, 5 yrs. 9 mos . Per cent .. 315, 495, 860 4, 041, 647 6.95 7.51 20, 818, 090 7.46 284, 961. 50 7.21 54, 141, 010 19.39 35, 293, 160 38, 104, 060 410, 467. 101 459, 110. 80 35, 460, 850 56, 874, 990 261, 766. 40 561, 700. 70 823, 467. 10 20.83 454, 253740 983, 714. 00 73,397,220 869,577.90 9.66 36, 437, 990 24, 649, 270 8.73 424, 778. 20 1 287, 921. 10 92, 335, 840 12.14 62, 363. 790 102, 173, 370 712, 758. 58 1, 610, 103. 60 61,087,260 712,699.30 6. 46 5. 95 34,625,300! 303,160.30 23, 132, 570 184, 238. 00 57, 757, 870 487, 398. 30 4. 88 5. 58 10 333, 486, 230 3, 751, 875. 40 7. 36, 6. 97 164, 537, 160 17.39 152, 680, 040 191, 969, 440 2, 322, 862. 10 19.38 895, 459. 20 1, 288, 154. 20 344, 649, 480 29.09 672, 325, 220J 14. 83 2, 183, 613. 40 24.96 7, 014, 873. 10 13.03 Period. Direc- tion. Via Northern Pacific and O. R. & N. Co. Pounds. Charges. Via Oregon Short Line. Pounds. Charges Total via all routes. Pounds. Charges. Jan. 1,1874, to Mar. 31, 1881. Apl. 1,1 881, to Dec. 31, 1881. Jan. 1, 1882, to Jan. 31, 1883. Feb. 1,1883, to May 31, 1883. June 1, 1883, to Sept. 30, 1883. Oct. 1, 1883, to Sept. 30, 1884. Per cent Oct. 1,1884, to Dec. 31,1885. Per cent Jan. 1, 1886, to Dec. 31, 1886. Per cent ... 81,645,044 10.75 91, 065, 847 9.62 90, 666, 960 7.6G $1, 036, 776. 08 10.41 1, 143, 128. 66 9.53 756, 457. 08 8.65 2, 588, 263, 878 $42, 557, 143. 20 439, 784, 550 6, 522, 319. 50 701, 445, 130 9, 533, 190. 10 223, 320, 590 3, 053, 997. 20 279, 246, 170 3, 952, 867. 20 760, 111, 104 9, 962, 435. 48 38, 513, 114 4.07 69, 481. 740 5.86 458,160.71 3.82 378, 222. 80 4.32 946, 449, 271 11,988,416.17 184, 423, 140 8, 748, 581. 78 Total, 5 yrs. 9raos. Percent ... 263, 377, 851 2, 936, 361. 82 107. 994, 854 5.81 5.46 2.38 836, 383. 51 4, 534, 779, 955 1.56 53, 811, 807. 43 P R VOL IV- -18 2604 U. S. PACIFIC RAILWAY COMMISSION. EXHIBIT C. Statement allowing tonnage and charges lost to Central and Union Pacific lines (including Central Pacific tonnage and charges via Denver and Rio Grande) on through freight traffic for periods noted, on account of the opening of new lines. Period. Tons. Charges. Total tonnage and charges via all lines. January 1 1874 to March 31 1881 1 294 131 939 $4 9 557 143 20 April 1 to December 31 1881 219 892 275 6 522 319 50 January 1 1882 to January 31 1883 . . 350 722 565 9 583 190 10 February 1 to May 31 3883 111 660 295 3 053 997 9 June 1 to September 30 1883 139 6 9 3 085 3 95 867 October 1 1883 to September 30 1884 380 055 552 9Ofi9 40;: 40 October l' 1884 to December 31 1885 473 224 635 11 988 416 17 January 1 to December 31, 1 886 592 211 570 8 748 581 78 Total 5 years 9 months 2 267 389 977 53 811 807 43 Tonnage and charges via Central and Union Pacific. January 1 1874 to March 31 1881 1 294 131 939 42 557 143 20 April 1 to December 31 1881 ' 207* 879 570 6 163 704 '30 January 1 1882 to January 31 1883 242* 797 J15 6 935 355 20 February 1 to May 31 1883 . ... 64 534 995 1 755 072 80 June 1 to September 30 1883 . . . 80 197 060 2 1 9 3 231 30 October 1 1883 to September 30 1884 190 399 210 4 673 19 9 00 October 1 1884 to December 31 1885 .... 195 518 595 4 6 9 8 666 60 January 1 to December 31 1886 ........ 230* 990 570 3 149 504 40 Total 5 years 9 months ............... ... ....... 1 212 310 115 29 4 9 8 726 60 Loss of tonnage and charges to Central and Union Pacific. January 1, 1874, to March 31, 1881 April l*to December 31, 1881 12 012 705 35H 615 9 January 1 1882 to January 31 1883 . 107 9 9 5 450 2 647 834 90 February 1 to May 31 1883 47 125 300 1 298 9 9 4 40 June 1 to September 30, 1883 59 420 9 5 1 829 635 90 October 1, 1883, to September 30, 1884 189 663 342 5 289 243 48 October 1, 1884 to December 31, 1885 277 706 040 7 359 749 57 January 1 to December 31, 1886 .. 361 221 000 5 599 077 38 Total, 5 years 9 months 1 055 079 862 24 383 080 83 REDUCED TO ANNUAL RATES. Period. Annual tons. Annual av- erage rate. Annual charges. Total via all lines. January 1 1874 to March 31 1881 178 500 948 $3 288 50 $5 869 950 84 April 1'to December 31, 1881* 293 189.705 2 966 00 8 694 426 04 January 1, 1882, to January 31, 1883 323, 743. 908 2 732 40 8 846 021 64 February 1 to May 31, 1883 334, 980. 888 2 735 00 9 161 991 60 June 1 to September 30 1883 418 809 255 2 83] 10 11 858 601 60 October 1, 1883 to September 30 1884 380 055 552 2 6 9 1 30 9 96 > 435 48 October 1, 1884, to December 31 'l885 378 579 708 2 53 9 50 9 590 73 9 88 January 1 to December 31 1886 592 211 570 1 477 30 8 748 581 78 Total, 5 years 9 months ... 394 328 688 2 373 30 9 358 575 9 4 Via Central and Union Pacific. January 1, 1874, to March 31, 1881 178, 500. 948 3 2-88 50 5 869 950 84 April 1 to December 31, 1881 . 277, 172. 765 2 965 00 8 218 272 36 January 1, 1882, to January 31, 1883 224, 120. 402 2, 856. 40 6 401 866 32 February 1 to May 31, 1883 193, 604. 982 2,716 50 5 259 248 40 June 1 to September 30, 1883 240, 591. 180 2, 647. 50 6 369 693 84 October 1, 1883, to September 30 1884 190 392 210 2 454 50 4 673 19 9 00 October 1, 1884, to December 31 1885 156 414. 876 2 367 30 3 702 933 i;) 4 January 1 to December 31, 1886 230 990. 570 1 363 3 149 504 40 Total, 5 years 9 months 210 836.544 2 4 9 7 00 5 118 039 36 Loss annually to Central and Union Pacific. January 1, 1874, to March 31, 1881... April 1 to December 31, 1881 , 16, 016. 940 478 J 53. 68 LELAND STANFORD. 2605 EXHIBIT C. Statement shoiving tonnage and charges, fc. Continued. Period. Annual tons. Annual av- erage rate. Annual charges. Loss annually to Central and Union Pacific Continued. January 1, 1882, to January 31, 1883 99 623 496 $2 444 155 32 February 1 to May 31, 1883 141 375 906 3 902 773 20 June 1 to September 30 1883 178 278 075 5 488 907 76 October 1, 1883, to September 30 1884 189 663 342 5 289 243 48 October 1, 1884, to December 31, 1885 222 164 832 5 887 799 64 January 1 to December 31, 1886 311 064 9 9 4 204 757 49 Total, 5 years 9 months 183 492 144 4 240 535 88 The total loss (5 years 9 months) to Central and Union Pacific line = $24,383,080.83, or an annual loss Of $4,240,535.88. Of which the Central Pacific proportion is 46 per cent. = $11,216,217.18, or an annual loss of $1,950,646.50. Of which the Union Pacific proportion is 54 per cent. = $13,166,863.65, or an annual loss of $2, 289,889.38. Exhibit C shows the tonnage and charges of all the lines compared with the ton- nage and charges as given on Exhibit B for the Central and Union Pacific line, and the difference in tons and dollars ; that is to say, according to Exhibit C the loss in tonnage to the Central and Union Pacific line, by the diversion to other lines, from April 1, 1881, to December 31, 1886, was 1,055,079 tons and $24, 383, 080. Exhibit C also shows the charges and tonnage of each of the several periods re- duced to an annual basis ; that is, if for each of the several periods the tons carried and charges made had been at the same rate for twelve months, it shows what the annual tonnage, charges, and loss would have been. For example : take the second period, from April 1, to December 31, 1881, being nine months. The tons carried during that nine mouths via all lines were 219,892 tons, which at the same rate for twelve months would be 293,189 tons. The charges or earnings for the nine months by all lines were $6, 522, 319, and for twelve months at the same rate would have been $9,696,426. The tonnage and charges of the Central and Union Pacific line for the nine months, at the same rate, would have been 277,172 tons and $8,218,272. The actual loss for the period to the Central and Union Pacific line is represented by 12,012 tons, on which the charges were $358,615. For twelve months, at the same rate, the loss would have been 16,016 and $478,153. Exhibit C also totals the several periods beginning April 1, 1881, and ending De- cember 31, 1886 (five years nine months), with the following result : Total tonnage and charges via all lines 2,267,389 tons and $53,811,807. The tonnage and charges via the Central and Union Pacific for the same period were 1,212,310 tons and $29,428,726. The loss in tonnage and charges to the Central and Union Pacific line, being the difference between the tonnage and charges via all lines and the tonnage and charges via the Central and Union Pacific line, as shown above, were 1,055,079 tons and charges $24,383,060, which,rsduced to an annual basis, shows the loss for this period at the annual rate of 183,492 tons and $4,240,535. Exhibit C also shows the average annual rate per ton charged for freight. Dur ing the first period, when there was but one line (Union and Central Pacific line), from January 1, 1874, to March 31, 1881, you will note that the average annual rate per ton was $32.88. By following down through, the several subsequent periods you will notice a gradual reduction in the annual rate per ton until in 1886 the rate was reduced to $14.77 per ton. Some of this difference in rate was chargeable to the opening of competing lines ; in other words, take, for example, the year 1886 ; while it is not reasonable to suppose that at the annual average rate which obtained in 1885 ($25.32 per ton) the same tonnage would have been moved as was moved in 1886 at a lower average rate ($14.77 per ton), yet it is true that the tonnage would have been moved at a higher rate than the average earning during 1886. It is impossible to say what would be the maximum rate at which the same tonnage would have moved. It is a matter of public knowledge that during a portion of that year (1886) rates were unnecessarily low. I should estimate that an average rate of $20 per ton, being a reduction of a little more than twenty per cent, from the average rate prevailing from October 1, 1884, to December 31, 1885, would have given all needed stimulus to the movement of traffic, and the difference between $14.77 and $20 $5.23 per ton- would be a reasonable estimate oftUe effect of unreasonable competition between 2606 U. S. PACIFIC RAILWAY COMMISSION. the railroads, which would fall below rather than above the real measure of the in- fluence of that competition. Accordingly 311,064 tons extended at a rate of $5.23 per ton would represent a further loss to the Central and Union Pacific line by reason of the diversion of traffic to other lines and the competition inaugurated by said other lines of $1,626,864. For all the competitive periods shown on Exhibit C the charges are extended at the annual average rate. The effect of the competition of the other lines was something more in each period than the mere diversion of traffic. It reduced rates ; that is to say, had the other lines not been built, not only the entire traffic would have been carried by the Union and Central Pacific lines, but it would have been carried at higher rates. Hence the earnings upon the total traffic, if carried by the Union and Central Pacific line without the competition of the other lines, would have been greater than the earnings made by all the lines from the same traffic, so that the real loss in freight earnings resulting from the building of other lines, if the exact facts could be ascertained, would prove to be much more than $24, 383, 080, as shown on Exhibit C. Exhibits A, B, and C relate only to freight traffic ; I also inclose herewith Exhibits D and E. Exhibit D shows the number of through passengers carried by each route, and the earnings accruing therefrom west of Ogden, Mojave, Deming, and El Paso, the termini of the Southern Pacific system. Ogden is the terminus of the Central Pacific road. Mojave is the point of junction of the Atlantic and Pacific with the Southern Pacific. Deming is the junction of the Atchison, Topeka and Santa F6 Railroad with the Southern Pacific. El Paso is the junction point of the Southern Pacific, Texas and Pacific, and Gal- veston, Harrisburg and San Antonio Railroads, respectively. Exhibit D and the other passenger statements shovr the earnings west of these re- spective termini. In the case of passengers, our records do not show the earnings of the connecting lines as in the case of freight. EXHIBIT D. Comparative statement allowing number of passengers carried by each route on through traffic, and the earnings accruing west of Ogden, Mojave, Deming, and El Paso , for periods as noted, also percentage of earnings by each route. [The earnings via Northern Pacific, 0. E. & N. Co. and Oregon Short Line as shown are 46 per cent of the through via those routes.] Period. ft Via Ogden and Union Pa- cific. Via Ogden and Denver and Rio Grande. No. Earnings. Per cent. No. Earnings. 2 January 1, 1874 to March 31 1881 East.. West. 207, 717 359, 116 $5,948,323.94 9, 688, 287. 38 566, 833 15, 636, 611. 32 100 April 1 to December 31 1881 East.. West. 20, 574 32, 854 53, 428 573, 384. 51 856, 946. 57 1, 430, 331. 08 77.25 January 1, 1882, to January 31,1883. February 1 to May 31, 1883 East.. West. == 24, 321 41,170 683, 809. 28 1, 059, 765. 89 65, 491 1, 743, 575. 17 63.32 East.. West. 6,781 16,445 190, 925. 36 384, 796. 17 436 352 $14, 837. 22 7, 318. 18 23, 226 575, 721. 53 53.78 . 788 22, 155. 40 2.07 June 1 to September 30, 1883 East.. West. 9,445 17, 183 228,731.93 419, 683. 73 3,464 2,676 9-2, 478. 71 61, 957. 72 26, 628 648, 415. 66 61.10 6,140 154, 436. 43 14.55 Octoberl, 1883, to September 30, 1884. East.. West. 19, 271 29, 033 484, 051. 58 708, 192. 05 5,886 4,839 165, 289. 34 128, 064. 45 48, 304 1, 192, 243. 63 42.43 10, 725 293, 353. 79 10.44 LELAND STANFORD. 2607 EXHIBIT D. Comparative statement showing the number of passengers, $-c. Continued. Period. Direction. Via Ogden and Union Pa- cific. Via Ogden and Denver and Bio Grande. tfo. Earnings. Per cent "Ho. Earnings. Per cent October 1, 1884,|to December 31, 1885. January 1 to December 31, 1886 East.. West. 21, 013 33, 304 $519, 642. 79 745, 564. 18 9,574 5,546 $251, 742. 18 143, 394. 40 41.25 54,318 1, 265, 206. 97 15, 120 395, 136. 58 12.88 East.. "West. 30, 157 38, 768 375, 253. 90 510, 028. 26 18, 804 15, 213 250, 893. 45 189, 547. 59 68, 925 885, 282. 16 38.51 34, 017 440, 441. 04 19.16 Total, 5 years 9 months 340, 320 7, 740, 776. 20 51.91 66, 790 1, 305, 533. 24 8.75 Period. | fi Via Mojave and Atlantic Pacific. Via Deming and A. T. and S.F. Ko. Earnings. 1 No. Earnings. Per cent. April 1 to December 31, 1881 East.. 5,354 8,652 $169, 114. 89 252, 201. 40 West. 14, 006 421, 316. 29 22. 75 January 1, 1882, to January 31, 1883 February 1 to May 31, 1883 East.. 9,640 17, 967 296, 874. 80 518, 021. 11 West . 27, 607 814, 895. 91 29.60 East .. 3,105 8,918 94, 837. 93 238, 434. 46 West. 12, 023 333, 272. 39 31.14 June 1 to September 30, 1883 East 2,088 4,187 61, 171. 33 108, 174. 12 West. 6,275 169, 345. 45 15.96 Octoberl, 1883, to30, September 1884. October 1, 1884, to December 31, 1885. January 1 to December 31, 1886 East.. West. 2,463 4,789 $42, 580. 18 2, 246. 20 4,126 11,989 120, 244. 54 314, 364. 28 15.49 7,252 124, 826. 38 4.44 16, 115 434, 608. 82 East . . West. 6,796 16, 849 60, 945. 85 130, 807. 15 3, 763 9,900 107, 969. 87 254, 417. 34 23,645 191, 753. 00 6.25 13, 663 362, 387. 21 11.81 East.. West . 8,262 22, 210 42, 462. 35 123, 839. 29 1,136 3,160 21,214.25 57, 134. 49 ...... 30, 472 166, 301. 64 7.23 4,296 78, 348. 74 3.41 Total, 5 years 9 months 61, 369 482, 881. 02 3.31 93, 985 2, 614, 174. 81 17.46 2608 U. S. PACIFIC RAILWAY COMMISSION. EXHIBIT D. Comparative statement showing number of passengers, $c. Continued. Period. Direction. Via El Paso and Texas and Pacific. Via El Paso and Ox. H. and S.A. No. Earnings. Per cent. No. Earnings. Per cent. January 1, 1882, to January 31, 1883 February 1 to May 31 1883 East.. West. 2,495 2,348 $80, 462. 02 114, 440. 48 6,843 194, 902. 50 7.08 East.. West. 1,318 2,266 32, 438. 10 55, 581. 23 455 952 $18, 610. 46 32, 652. 78 3,584 88, 019. 33 8.22 1,407 51, 263, 24 4.79 June 1 to September 30 1883 East . . West. 813 1, 427 22, 765. 33 34. 428. 58 287 761 10, 503. 58 21, 382. 76 2,240 57, 193. 91 5.39 1,048 31, 886. 34 3.00 October 1, 1883, to September 30, 1884 October 1, 1884, to December 31, 1885 January 1 to December 31 1886 East.. West. 3,161 4,630 87, 853. 67 139,139.45 1,270 3,773 46, 677. 52 113, 703. 96 7,791 226,993.12 8.08 5,043 160, 381. 48 5.71 East.. West. 4,433 6,093 152, 573. 07 145, 072. 83 2,434 4,473 84, 329. 71 134, 399. 42 10, 526 267,645.90 8.72 6,907 218, 729. 13 7.13 East.. West. 7,011 7,342 93, 668. 30 132, 617. 72 1,675 5,781 30, 179. 49 106, 565. 27 14, 353 226, 286. 02 9-85 7,456 136, 744. 76 5.94 Total 5 years 9 months 45, 337 1, 061, 040. 78 7.13 21, 861 599, 004 95 4.02 Period. Direction, Via Northern Pacific and O. R. and N. Co. Via Union Pacific and Northern Pacific. No. Earnings. Per cent. No. Earnings. Per cent. October 1, 1883, to September 30, 1884 October 1, 1884, to December 31, 1885 January 1 to December 31 1886 12, 955 10,871 13, 896 $294, 796. 23 221, 150. 98 257, 474. 42 10.49 7.26 11.23 3,692 1,155 $82, 054. 90 24, 696. 82 2.92 0.80 Total 5 years 9 months 37, 722 773, 421. 63 5.18 4,847 106, 751. 72 1.52 Period. Direction. Via Oregon Short Line. Total via all routes. No. Earnings. Per cent. No. Earnings. January 1, 1874, to March. 31, 1881 566, 833 67, 434 99, 941 41,028 42, 331 111, 877 141, 918 180, 210 $15, 636, 611. 32 1, 851, 647. 37 2, 753, 373. 58 1, 070, 431. 89 1, 061, 277. 79 2, 809, 258. 35 3, 066, 579. 02 2, 298, 395. 73 April 1 to December 31, 1881 Jannarv 1, 1882, to January 31, 1883 February 1 to May 31, 1883 June 1 to September 30 1883 October 1 1883, to September 30 1884 October 1 1884, to December 31 1885 5,713 6,795 $119, 872. 43 107, 516. 95 3.90 4.67 0.71 January 1 to December 31 1886 Total, 5 years 9 months 12, 508 227, 389. 38 684, 739 14, 910, 963. 73 LELAND STANFORD. 2609 EXHIBIT E. Statement showing number of passengers (through) and revenue lost to Cen- tral Pacific road on account of opening of new lines ; also showing average rate per passenger earned and loss annually for the periods as noted. Period. Total via all routes west of C. P. and S. P. terminals. Total C. P. via Ogden, including via JD.fl.Gr. Loss to Central Pacific via Ogden. No. Earnings. No. Earnings. No. Earnings. Per cent. Jan. 1, '74, to March 31, '81.. . Average rate per passenger. April 1, '81, to Dec. 31, '81 Average rate per passenger. Jan. 1, '82, to Jan. 31, '83 .... Average rate per passenger. Feb. 1, '83, to May 31, '83 .... Average rate per passenser. June 1, '83, to Sept. 30, '83 ... Average rate per passenger. Oct. 1, '83, to Sept. 30, '84. ... Average rate per passenger. Oct. 1, '84, to Dec. 31, '85 Average rate per passenger. Jan. 1, '86, to Dec. 31, '86 .... Average rate per passenger. Total five years nine months. 566, 833 $15,636,611.32 27.59 566, 833 $15,636,611.33 27.59 67, 434 1, 851, 647. 37 27.46 2, 753, 373. 58 27.55 1, 070, 431. 89 26.09 1, 061, 277. 79 25. 07 2, 809, 258. 35 25.11 3, 066, 579. 02 21.60 2, 298, 395. 73 12.75 53, 428 1, 430, 331. 08 26.77 1, 743, 575. 17 26. 62 597, 876. 93 24. 89 802, 852. 09 24.50 1, 485, 597. 42 25.17 1, 660, 343. 55 23. 77 1,325,723.20 12. 88 14, 006 $421, 316. 29 30.08 1, 009, 798. 41 29.02 472, 554. 96 27. 77 258, 425. 70 27.02 1, 323, 660. 93 25.05 1, 406, 235. 47 19.40 972, 672. 53 12.60 22.75 99, 941 65, 491 "24," Oli" 34, 450 36.65 41, 028 17, 014 44 14 42, 331 32, 768 9,563 '52,"848' "72," 480 " "77," 268' 24.35 111, 877 59, 029 47.12 iii, 9is 69, 438 45.85 180, 210 102, 942 42.32 684, 739 14, 910, 963. 73 407, 110 9, 146, 299. 44 277, 629 5, 864, 664. 29 39.33 Period. Reduced to an annual basis. Total via all routes. Total via Ogden. Annual loss to Central Pacific. No. Earnings. No. Earnings. No. Earnings. Per cent. Jan. 1, '74, to March 31, '81 .. April 1, '81, to Dec. 31, '81 Jan. 1, '82, to Jan. 31, '83.. Feb. 1, '83, to May 31, '83 . June 1, '83, to Sept. 30, '83 Oct. 1, '83, to Sept, 30, '84. Oct.l, ? 84, to Dec. 31, '85|.. Jan. 1, '86, to Dec. 31, '86. . Total five years nine months. 78, 180 89, 912 92, 256 i23, 084 126, 993 111, 877 121, 644 180, 210 $2, 156, 773. 92 78, 180 71, 237 60, 456 72, 048 98, 304 59, 029 59. 508 102, 942 $2, 156, 773. 92 2,468,863.36 2, 541, 575. 52 3,211,295.64 3, 183, 833. 37 2, 809, 258. 35 2, 628, 496. 32 2, 298, 395. 73 1, 907, 108. 11 1, 609, 453. 92 1, 793, 630. 76 2, 408, 556. 27 1, 485, 597. 42 1, 423, 151. 64 '1, 325, 723. 20 18, 675 31, 800 51, 036 28, 689 52, 848 62, 13fi 77, 268 $561,755.05 932, 121. 60 1, 417, 664. 88 775, 277. 10 1, 323, 660, 93 1, 205, 314. 68 972, 672. 53 22.75 36.68 44.14 24.35 47.12 45.S5 42.32 119, 076 2,593,211.40 70, 800 1, 573, 269. 36 48, 276 1, 019, 942. 04 39.33 NOTE. From April 1, 1881, to December 31, 1886 (five years nine months), during which time other lines competed with the Central and Union Pacific line, the Central Pacific road suffered a total loss of revenue amounting to $5,864,664.29, or 39.33 per cent, of the total through passenger traffic. Assum- ing this loss based on 46 per cent, of total through, the Union Pacific has sustained a proportionate loss of $6,884,605.90, making total loss for Central Pacific and Union Pacific line of $12,749,270.19. Re- ducing this to an annual basis, the loss annually to the Central Pacific is $1,019,942.04, and to the Union Pacific $1,197,323.26, or a total for the through line of $2,217,265.30. Exhibit E is the same for passengers as Exhibit C for freight. Both of the exhibits relating to the passenger traffic in the matter of division into periods are the same as the exhibits for freight. Exhibit D will show the number of through passengers forwarded by the original Union and Central Pacific line from January 1, 1874, to March 31, 1881, amounting to 556,833, from which the Central Pacific earned $15,630,611, which represented 100 per cent. For the period (from April 1, 1881, to December 31, 1881) this percentage was re- duced to 77.25 per cent. For the third period (January 1, 1882, to January 31, 1883) it was reduced to 63.32 per cent. For the fourth period (February 1, 1883, to May 31, 1883) it was reduced to 53.78 per cent. For the fifth period (June 1, 1883, to September 30, 1883) the reduction was only to 61,10 per cent, j that is to say, the opening of the Denver and Rio Grande and Bur- 2610 U. S. PACIFIC RAILWAY COMMISSION. lington and Missouri River line contributed temporarily something to the earning power of the Central Pacific, probably owing to the scenic attractions which the new route would offer. But in the sixth period (October 1, 1883, to September, 1884) the percentage fell off to 42.43 per cent. For the seventh period (October 1, 1884, to December 31, 1885) it was reduced to 41.25 per cent. For the last period (January 1, 1886, to December 31, 1886) it was reduced to 38.51 per cent. As in the case of freight, it will be observed with respect to passengers that the opening of each new line, with the single exception of the short period immediately succeeding the opening of the Denver and Rio Grande road, the Central Pacific line suffered a loss ; and that loss resulted from no other cause than the opening of these new lines. Exhibit E shows the number of passengers carried by all routes and the Central Pacific charges therein, with the loss in charges to the Central Pacific by diversion to other routes for each period reduced to an annual basis.. The total loss to the Central Pacific by diversion for the period from April 1, 1881, to December 31, 1886 (five years nine months), is shown to be 277,629 passengers and $5,864,664, or an average annual rate of 48,276 passengers and $1,019,942. It will be observed also that the average rate on passengers for each period shows a less percentage of reduction than in the case of freight, though in the year 1886 the average rate fell to $12.75, against an average rate of $27.59 during the first period, from January 1. 1874, to March 31, 1881. From October 1, 1884, to December 31, 1885, the average annual rate by all routes was $21.60, and the number of passengers carried was at the rate of 121,644 per an- num, as against a rate of $12.75 for the year 1886 and 180,210 passengers. The large reduction in rate was incident to the war in rates which followed the dissolution of the transcontinental pool. It was not compensated by increased traf- fic, as all the rail lines earned less from the increased traffic than they earned the year previous on a less amount of traffic. The conclusion necessarily follows that while Exhibit E shows a loss for the year 1886 to the Central Pacific by diversion of 77,268 passengers and $972,672, it does not show the entire loss resulting to the Cen- tral Pacific by reason of the competition of the other lines. The same number of passengers could have been moved by the Central Pacific at a higher average rata than was earned by all lines. As has been explained, the passenger exhibits show only the earnings west of the eastern termini of the Southern Pacific and Central Pacific Railroads, and show for the entire period from April 1, 1861, to December 31, 1886, a total loss in revenue to the Central Pacific road of $5,864,664, or 39.33 per cent, of the total through passen- ger traffic. In my judgment, it is fair to assume that the loss of the Central Pacific represents 46 per cent, of the loss to the Central and Union Pacific line, that being not only the Central Pacific road's proportion of mileage, but also its percentage of the Central and Union Pacific " line " rates. This is a very close approximation of what an in- quiry for the purpose of ascertaining the exact loss would show. It is rather under than over tjie loss. If we assume that the loss to the Central Pacific road is 46 per cent, of the loss of the Central and Union Pacific line, we have a loss in revenue to the Union Pacific and Central Pacific line of $12,749,270.19. Reducing this list to an annual basis, the loss of revenue annually for the line would be $2,217,265. This es- timate will govern Exhibit F, which combines the showings made by Exhibit C and Exhibit E for freight and passengers respectively. EXHIBIT F. Recapitulation of Exhibits E and C, showing combination of passenger and freight traffic lost to the Central and Onion Pacific line for the period April 1, 1881, to December 31, 18rf6 ; assuming that the results shown in Exhibit E (passenger) repre- sent 46 per cent, of the through line earnings, the remaining 54 per cent, is added, show- ing total loss to Central and Union Pacific line, as below. Total earnings via all routes. Earnings via Central and Union Pacific. Loss to Central and Union Pacific. Per cent, earnings lost. Passenger ...... ................. .. $32 415 138.54 $19, 665. 868. 35 $12, 749, 270. 19 39 53 811 807.43 29, 428, 726. 60 24,383,080.83 45 86, 226, 945. 97 49,094,594.95 37, 132, 351. 02 43 LELAND STANFORD. 2611 EXHIBIT F. Recapitulation of Exhibits E and C Continued. Reduced to an annual basis. Annual earnings all routes. Annual earn- ings Cent'l and Union Pac. Annual loss of earnings to C. P. & U. P. Percent, lost annually. $5, 637, 416. 10 9, 358, 575. 24 $3, 420, 150. 80 5, 118, 039. 36 $2, 217, 265. 30 4, 240, 535. 88 39 45 14, 995, 991. 34 8, 538, 190. 16 6, 457, 801. 18 43 The total loss on passengers and freight (five years nine months) to Central and Union Pacific line, $37,132,351.02, or an annual loss of $6,457,801.18. Of which the Central Pacific's proportion is 46 per cent. = $17,080,881.47, or an annual loss of $2,970,588.54. Of which the Union Pacific's proportion is 54 per cent. = $20,051,469.55, or an annual loss of $3,487,212.64. Exhibit F is a recapitulation of Exhibit E and Exhibit C, and shows that the total earnings for the entire period from April 1, 1831, to December 31, 1886 (five years, 9 months), of all routes from through freight and passengers were $86,226,945.97 ; that the earnings of the Central and Union Pacific line, ascertained as above explained, for the same period were $49,094,594.95. The loss resulting to the Central and Union Pacific line by diversion of traffic to other lines being the difference between the above amounts was 137,132,351.02, or 43 per cent, of the total business. This reduced to an annual basis shows an annual loss to the Central and Union Pacific line (since April 1, 1881, the date of the opening of the first competing line), $6,457,801.18, 46 per cent, of which, or $2,970,588.54, represents the loss of the Central Pacific Company. There can be no question that the traffic carried by all routes during this period could have been carried by the Union and Central Pacific lines. I do not think there can be any doubt that had there been but one line, and that line had offered the same rates (and these comparisons are based upon the rates actually charged), the same amount of traffic would have been carried, and the earnings from it would have been covered into the treasuries of the Central and Union Pacific Companies. Not only is this true, but the same amount of traffic could have been carried, and doubtless would have been carried, at an average rate of charge something higher than was actually obtained, so that while the average annual loss to the Central and Union Pacific line is shown by these statements to have been less than $6,500,000, I believe that the actual damage to the Union and Central Pacific line, caused by the building of the other lines, is not less than $7,000,000 per annum, or a total loss of over $40,000,000 for the period between April 1, 1881, and December 31, 1886, 46 per cent, of which represents the loss to the Central Pacific Railroad Company. The facts and figures set forth in the inclosed exhibits are derived from our own records ; first, being abstracts made from impression copies of the original way bills covering the freight carried, and from the original tickets collected from the passen- gers ; and, second, for the Oregon Short Line and Northern Pacific roads, which are not connections of either the Central or Southern Pacific, from the records of the Transcontinental Association for the period from October 1, 1883, to January 1, 1886, and for the year 1886, from the records of the Northern Pacific and Uuion Pacific Companies respectively. In giving the dates of the opening of the several lines, I have not been governed by the historical dates, but by the dates of the first billing or ticketing of through business done by those lines. Respectfully submitted. J. C. STUBBS. STATE OF CALIFORNIA, City and County of San Francisco, ss : J. C. Stubbs, being first duly sworn, saith : That he has read the foregoing state inent consisting of the pages next preceding marked " Exhibit No. 12," and knows the contents thereof; that the facts therein stated are true except as to those matters stated on his information or belief, and as to those he believes it to be true. J. C. STUBBS. Subscribed and sworn to before me this 26th day of July, A. D. 1887. [SEAL.] E.B.RYAN, Notary Public in and for said City and County. 2612 tr. S.PACIFIC RAILWAY COMMISSION. EXHIBIT No. 13. Statement of E. H. Miller, jr., secretary, relative to amounts due from the United States for transportation on non-aided roads.* The Central Pacific Railroad Company controlled by lease a number of branch lines prior to April 1, 1885, from which date the lines were leased to the Southern Pacific Company. Mails were carried by these lines for the United States under the rules and orders of the Post-Office Department. No payments have been made for such serv- ice since 1883, at which time but partial payments were made. The payments were withheld prior-to April I, 1885, because the Central Pacific Railroad Company leased the lines, and they have been withheld since that date because the Central Pacific Railroad Company had formerly leased the lines. The United States Supreme Court decidedjin U. S. vs. C. P. R. R. Co., October term, 1885, that compensation for transportation on non-aided and leased lines was due the company in cash. (See U. S. Com. R. Rs., 1886, p. 27. ) To show the amount of this service for which payments have been withheld, state- ments are submitted herewith as follows : (A.) Mail transportation from January 1, 1882, to March 31, 1885, showing amounts as allowed by Post-Office Department, $1,814,384.96, of which non-aided and leased lines' proportion is $806,923.27 ; cash paid is $300,623.46 ; balance due and unpaid, $501,299.81. AMOUNT DUE FOR MAIL SERVICE IN CASH. (B.) Mail transportation from April 1, 1885, to December 31, 1886, showing amounts as allowed by Post-Office Department, $989,037.54, of which non-aided and leased lines' proportion is $459,244.97, all of which latter sum remains due and unpaid. The total amount thus remaining due and unpaid for transportation of mails to December 31, 1886, on such non-aided and leased roads, is $960,544.78. The transportation charges on non-aided lines were applied in settlement of the an- nual requirements of the company under the provisions of the Thurman act. After such applications there remained a balance due the Government on December 31, 1881, of $79,149.91. This balance was paid by the company in cash October 23, 1882, thus settling the accounts to the end of 1881. Of this the U. S. Commissioner of Railroads, in his report for 1882 (p. 26), says: " Under the act of May 7, 1878, the book-keeper of this office checked the books and accounts of the company in San Francisco, with a view to the ascertainment of 25 per cmt. of the net earnings' for the year ending December 31, 1881. Twenty-five per cent, of the net earnings of the subsidized portion of the road was found to amount to 81,038,935.24. The transportation for the Government during the year amounts to $359,785.33, leaving a balance due the United States of $79,149.91. Statement was rendered and payment demanded October 20, 1882. A check for the amount was sent to the Treasurer of the United States by the vice-president of the company, October 23, 1882. The company has therefore paid to the Government all of its accrued in- debtedness to date.'"' CASH DUE FOR ALL TRANSPORTATION SERVICE. From and including the year 1882 to the present time there has been annually a balance due the non-aided lines for transportation services performed. The amount thus due from the Government in cash, in excess of all requirements of the law, 1o December 31, 1886, is $1,853.323.15. This appears from statement C herewith, the further details of which appear in the annual reports of U. S. Commissioner of Rail- roads for the several years named. The United States, by failing to pay for such mail service and other transportation, has caused an expenditure to the Central Pacific Railroad Company of amounts equal to interest on the sums retained at the rate of 6 per cent, per annum, that being the rate of interest paid during the period on floating debt of the company, which debt would have been decreased by the payment of the sums due from the United States. The annual interest on this balance due the roads in cash to December 31, -1886, of $1,853.323.15, at 6 per cent., is $111,199.39. This is the present annual injury to the roads by the Government on account of the item of transportation charges unpaid. Tbe current charges also, in excess of the requirements, amount, as shown by the foregoing statement, to about $450,000 a year. This amount with the interest on the balance make the accruing annual sum of $560,000 due for transportation on non- aided lines and remaining unpaid. * See answer to question No. 55. LELAND STANFORD. 2613 t~t-c}iO"*oc5coaocot^ocooin:"3i-i>- O OO O ^ r-t t- lO *H Ci CO t-t CO CO i-l S8SSSSS8SS3SggSSSgSSSS ilJlJJ; *i 2614 U. S. PACIFIC RAILWAY COMMISSION. 2,1 ! 1*1 ,8 ?3 1 fit 85 5 S> ! 9 II a s s*3s IMS- * a-s-3 s^slea * SF SSffl^lgliiiSi.l^a^J, LELAND STANFORD. 2615 STATEMENT C. Statement showing amounts due from United Slates Government in cash to December 31, 1886, for transportation on non-aided and leased lines. Year. Requirement under Thur- man act. United States transportation. Balance due and unpaid. Aided lines. Non-aided lines. Cash paid. Total trans- portation less cash. 1882 $792, 920. 24 661,530.69 538, 851. 52 386, 118. 83 418,271.56 $403f| 754. 26 403,241.26 478, 225. 20 342, 941. 39 344, 694. 45 $648, 108. 20 515, 237. 00 481, 395. 51 514, 242. 16 504, 343. 41 $122, 754. 64 183, 564. 93 $929, 107. 82 734, 913. 33 959, 620. 71 857, 183. 55 849, 037. 86 $136, 187. 58 73, 382. 64 420, 769. 19 471,064.72 430, 766. 30 1883 1004 1883 -ICCfj 2, 797, 692. 84 1, 972, 856. 56 2, 663, 326. 28 306, 319. 57 4, 329, 863. 27 1, 532, 170. 43 The requirements from July 1, 1878, to December 31, 1884, were originally stated and settled as above, but they have since been restated in conformity with the decision of the Court of Claims (see U. S. Com. of R. R., 1885. p. 7), that new construction and equipment on the aided line are proper deductions in ascertaining the net earnings. These deductions, since made, make the annual requirements less than the amounts on which settlements were currently effected, by the sum of $321, 152.72. This amount is therefore due the compauy in addition to the sum stated above Making balance of cash due and unpaid for transportation on non-aided roads to De- cember 31, 1886 321, 152. 72 1, 853, 323. 15 STATE OP CALIFORNIA, City and County of San Francisco, ss : E. H. Miller, jr., being duly sworn, sayske has read the foregoing statement ; that the matters and things therein stated are true of his own knowledge, except as to mat- ters stated on his information and belief, and as to those he believes it to be true. E. H. MILLER, JR. Subscribed and sworn to before me this 20th day of July, 1887. [SEAL.] E. B. RYAN, Notary Public in and for said City and County. By the CHAIRMAN: Q. Have you any further statements to submit to the Commission ? A. No, sir. Q. Do you desire to say anything further in connection with the state- ments already submitted ? A. No, except to explain them, if the Com- mission desires. WILLINGNESS TO GIVE INFORMATION. Q. Are you ready to have your oral examination proceeded with ? A. Yes, sir ; now or at any time. I would suggest, however, that it might be better to postpone it for a day or two. I suppose that there are a great many witnesses whom you wisb to examine, and if I am left to the last there are some things which may develop in the course of these examinations which I may be able to explain. Commissioner ANDERSON. We will call you again. We shall be here thirty days yet, and I have no doubt that we will nearly bother the life out of you before we get through. The WITNESS. It may ; but this thing is not new to us by any means. Commissioner ANDERSON. I believe that. The Union Pacific people say the same thing. The WITNESS. We have had investigating committees after us all the time since we began crawling up the mountains. We used to have 2616 U. S. PACIFIC KAIL WAY -COMMISSION. annual sessions of the legislature, and there was scarcely one of them but what we had to appear and defend ourselves against attack. We used to appear before these legislative investigating committees regu- larly and stand a general investigation of our affairs. By Commissioner ANDERSON : Q. Shall we proceed with you this morning ? A. Unless it is your order of business I should like to be excused. I have some consider- able work to do, and I am not feeling very well to-day. Commissioner ANDERSON. We have no other witnesses. We excused Mr. Brown because we expected that your examination would require several days. If you can do so just as well as not we would prefer to ask you a few questions now. When you get fatigued, if you will let us know, we can stop. EARLY BUSINESS CONNECTIONS. Q. When did you first come to California ? A. In 1852. Q. At that time San Francisco was just beginning to be a city of any importance, was it not? A. It was a pretty small place at that time. I think that when we commenced to build this road it had a population not exceeding 60,000. Q. What business did you follow here from 1852 to 1860 ? A. Mer- chandising. Q. Were you alone, or did you have a partner ? A. A portion of the time I had a partner and a portion of the time I was alone. Q. Who were your early partners? A. First, I had a partner by the name of Smith, and my brothers had an interest with me. They had a certain interest with me as a firm. I afterwards did business alone, and used that firm name. Then I had a gentleman by the name of Meeker in partnership with me. PUBLIC LIFE. Q. When did you enter public life? A. I can hardly say. I took part in the formation of the Eepublican party. Q. Please state what public offices you have held. A. I held office once as justice of the peace. I was elected to that office up in the mountains. The only other office that I have held is that of governor of this State. From all that I can learn, I believe that I made a pretty good justice of the peace. Q. When were you elected governor of the State? A. In 1861. Q. Did you serve more than one term ? A. I served one term only. Q. How many years is the term? A. It was then two years. Q. What other public offices have you ever filled? A. None other. Q. Are you not a Senator of the United States? A. Oh, yes; I did not think of that. Q. When were you elected Senator of the United States ? A. Two years ago last winter. Q. When did you enter upon the discharge of your duties? A. I en- tered upon the discharge of my duties at Washington at the time that Mr. Cleveland was inaugurated President. FIRST ACQUAINTANCE WITH CROCKER, HUNTINGDON, AND HOPKINS. Q. When did you first form the acquaintance of Mr. Charles Crocker ? A. I am not certain, but I think that I formed liis acquaintance about 1854, LELAND STANFORD. 2617 Q. Here in San Francisco ? A. No, sir ; in Sacramento. Q. What business was he in at that time? A. He was merchandis- ing. Q. Was he engaged in the same line of business that you were en- gaged in ? A. No, sir. Q. Was he alone or had he a partner ? I believe that the firm name was Charles Crocker & Co. A. I think that he had a partner, but I am not certain. Q. Do you know who his partners were at any time between 1854 and 18C2 ? A. No, sir ; I do not know. If he had a partner I think that it was a gentleman who lived in New York. I think that there was some one in New York who had an interest with him in the firm. Q. When did you become acquainted with Mr. Huntington ? A. In 1852. Q. What was his business ? A. He was in the hardware business in Sacramento. Q. When did you become acquainted with Mark Hopkins? A. About the same time. Q. Also at Sacramento ? A. Yes, sir. Q. What was Mr. Hopkius's business ? A. He had a general grocery and provision store. INCEPTION OF CENTRAL PACIFIC RAILROAD ENTERPRISE. Q. Do you recall the circumstances under which the scheme of the Central Pacific Railroad was first developed ? I mean when the bill first passed the legislature of California, and the time when the first idea of the road was developed. A. I will tell you the whole history, if I can take time to refresh my memory, because I was a part of it at the beginning. If you desire, however, I will now give you a brief sketch. ORIGINAL SURVEY MADE BY T. D. JUDAH. Q. I wish that you would give us a brief sketch now, and at some future time you can give us the complete history. A. In 1860 there was a gentleman by the name of T. D. Judah, who was afterwards chief engineer of the company, who had made surveys over the mountains with reference to the building of a line of railroad connecting the Atlantic and the Pacific. At first I had no personal acquaintance with him. The first time that my attention was called to the question of the construction of a railroad was by a gentleman by the name of James Bailey, who was afterwards the secretary of the company. Mr. Bailey came down to see me, told me of his acquaintance with Mr. Judah, and informed me that Mr. Judah had discovered in the mountains a pass over which a railroad could be built, and gave me such further infor- mation on the subject as he possessed, and desired that I should see Mr. Judah. I told him that I should be glad to see Mr. Judah, but did not know that we would care to do anything in the matter. I told him, however, that I would talk with Mr. Huntington and others about it. We fell into conversation upon the subject, and the result was that we agreed to have a meeting, and did have it the same evening at my house. We then fully considered the subject, and discussed the matter one way and another. We afterwards met again, when Mr. Hopkins joined us, and the result of that was that we concluded that we would make the acquaintance of Mr. Judah. Neither of us was acquainted with him, and we invited him to meet us and make our acquaintance, 2618 U. S. PACIFIC RAILWAY COMMISSION. He then came down with Mr. Bailey and we had a conversation. We discussed the question thoroughly in all its bearings, and the more we talked of it the better we liked it. Mr. Crocker then came in, together with some other citizens, and between Crocker, Huntington, Hopkins, Judah, Bailey, and myself we raised some money towards making ex- plorations which we thought necessary before forming a company. We awaited the result of those explorations and the reports made by Mr. Judah before we concluded to form a company, which we did in 1861. COMPANY FORMED AND ROUTE SELECTED. We had routes surveyed over the mountains according to my recol- lection there were five of them and finally determined which was the best one as to the passes and grades. We took the one which had the shortest snow line. At that point the ascent is very irregular. We had 7,000 feet of ascent almost in 83 miles. After reaching the sum- mit the descent was at the rate of 90 feet to the mile. Outside of this, down the Truckee, there were a number of short grades and low sum- mits, and a number of plateaus to cross. Altogether the route which we selected was the most practicable, according to our ideas. Although the snow falls as deep and even deeper on this line than it would have fallen on other lines that could have been selected, yet this deep snow line extends but a very short distance. We finished our explorations and then looked over the country to see what business there would be for a railroad line. At that time the business of Nevada was very promising, and we had an idea, like everybody else on this side, that most of the mountains in Nevada were filled with mineral wealth. PROSPECTIVE BUSINESS FROM SILVER MINES. Q. The Comstock lode was then being developed, was it not? A. Yes, sir ; they were all making developments at that time and most of them were very rich. The mines, however, did not have the depth which the Comstock lode had. I speak now of the mines outside of those upon the Comstock lode proper. I remember that while we were making our explorations, we came to the summit, and at Donner Pass we looked down on Donner Lake, 1,200 feet below us, and then looked up at the drifts above us 2,000 feet, and I must confess that it looked very formidable. We there and then discussed the question of the pay- ing qualities of the enterprise, and we came to this conclusion : That if there was a way by which a vessel could start from San Francisco or from New York, and sail around Cape Horn, in behind those mountains, we could not afford to compete ; or if a vessel could start from any of the Atlantic ports and come there around Cape Horn, we could not com- pete. If this could not be done, however, and if we had only the ox and mule teams to compete with, we saw that we could obtain such a rate for carrying freight and passengers that we could afford to build the road with the prospect of further developments in Nevada. GOVERNMENT AID. Q. Was not your attention almost immediately turned to the subject of obtaining aid from the Government f A. I do not think it was at that time, but it was very soon afterwards. We drafted the bill in our office which, I think, became the foundation of the act of Congress. Mr. Judah and Mr. Bailey went to Washington to look after it. Mr. Judah went before the railroad commission and the committees of Congress, LELAND STANFORD. 2619 and bad his maps with him to explain everything. He did a great deal towards the passage of that bill, because he understood the subject better than any other man at that time. He understood the country and the routes, and what was needed generally. METHODS EMPLOYED IN OBTAINING IT. Q. It appears from your minutes with reference to this visit of Mr. Judah to Washington, that a resolution was passed authorizing the is- sue of not to exceed $100,000 in full paid stock to be used by Mr. Judah as agent for the company, in such manner as he might deem advisable, in compensating agents and assistants who might perform service in promoting the interests of the company, and. in furtherance of the ob- jects of his mission. Do you remember that circumstance ? A. Yes, sir ; I know that we gave him stock to be used to pay his expenses there, and to secure such aids as he might need. He used but little of that stock, however not very much of it. I do not remember how much he did use, but it may be that the reports will show. I think, however, that he brought back most of it. Q. He was by profession an engineer, was he not ? A. Yes, sir. Q. Who else accompanied him to Washington on behalf of the com- pany ? A. Mr. James Bailey. He was the first secretary of the com- pany. Q. Had you at this time any acquaintance with J. 0. Stone, of Leaven- worth, who was then present in Washington ? A. No, sir $ I did not go on to Washington myself. PASSAGE OF BILL BY CONGRESS. Q. Proceed with your narrative. You were stating the inception of the enterprise, and the ideas that you had about getting over the mountains, and the object of Mr. Judah's trip to Washington ? A. Mr. Judah remained in Washington some little time, and I do not know but what Mr. Huntington was there with him, but I think not, however, at that session. The bill was finally passed. After the passage of the bill Mr. Judah came back here and went to San Francisco in the hope that stock might be placed with the capitalists here in order to get money to build the road. Except a subscription for one lot of ten shares, we were not able to interest anybody in this city. The only thing we were able to obtain was that one ten-share subscription. There was some local feeling at Sacramento and some little stock was taken up there. This failure compelled us to ask aid from the counties, particu- larly the county of Placer, through which the road was to be construc- ted, and it gave a subscription of $200,000 towards the stock, giving the company its bonds for the same. STOCK SUBSCRIPTIONS. By the CHAIRMAN : Q. Did you open books for the subscription of stock here f A. Yes, sir. Q. And also at Sacramento ? A. Yes, sir. And we went around soliciting subscriptions but found it impossible to get them. At that times everything here was high, and money was readily worth from 2 to 2 per cent, per mouth. All the objections to taking stock might be crystallized into this one, that money was bringing from 2 to 2 J per cent, P R VOL iv 19 2620 U. S. PACIFIC RAILWAY COMMISSION. I per month, arid capitalists could not afford to put it into an enterprise which they considered at best as of doubtful character, where the return would be only after the completion of the road. We were therefore compelled to rely upon our own resources. We obtained $200,000 sub- scriptions to stock from Placer County; $300,000, I think, from Sacra- mento County, and $000,000 were to have been subscribed by San Fran cisco, but the influential men and other influences here were such that we could not obtain this last subscription, and after considerable litiga- tion the city gave us $400,000 of their bonds and did not take any oi our stock. It was the best that we could do, but it hurt the enterprise very much. One of the principal things which operated against our securing stock subscriptions was the fact of the existence of a personal liability which attached to stock under the laws of this State. We were forced to use our own individual credit to its fullest extent for the purchase of supplies, at one time to the extent of $600,000. We went on, however, and built the first 31 miles of road entirely from our own means. We had not then obtained any county or State, aid. The State paid the interest on a million and a half of our own bonds, we paying the principal. We built 31 miles of the road, but we were not able un- til we got this county aid to go further. LOCAL CONTRACTORS. By Commissioner ANDERSON : Q. What 31 miles was this f A. The first 31 miles east of Sacra- mento. Q. The first 31 sections'? A. Yes, sir. Q. By what company was that built? A. By the Central .Pacific liailroad Company, without any outside aid. Q. Was it built by 4ocal contractors who took certain small subdi visions ? A. Yes, sir. We thought that was the most practicable way of building the road at that time. OBSTACLES TO BE OVERCOME. By the CHAIRMAN : Q. During what year was this? A. I think that it was in 1863. We kept on building and doing what we were able to do until our means were substantially exhausted. The principal drain at that time was in the purchase of iron. We wanted to have on hand sufficient iron to build fifty miles of road. We had considerable litigation to procure right of way. In fact, we obtained hardly any without litigation. Par- ties opposed to the construction of the road interfered with us, and we had a great deal of trouble and considerable litigation. Finally the courts decided in our favor, the counties gave us their bonds, and the State paid the interest on a million and a half of our own bonds. That was all that we had until we got aid from the Government. CONTRACT WITH CHARLES CROCKER AND COMPANY. By Commissioner ANDERSON : Q. Please go back to the construction of the road. After several contractors had proceeded with portions of the work, and you concluded t hat it was best to make a change, what change did you make in the form of construction ? A. We then made a contract with Charles Crocker, in the name of Charles Crocker & Company, He had no part- LELAND STANFORD. 2621 ner, but the contract was made out in the name of Crocker & Company for the reason that we had hopes that he would be able to get capital- ists interested with him. This was found to be impossible, however, as every one regarded the enterprise as of too doubtful a character to risk money in it. It was the general impression that it would be a doubtful struggle at best, with the chances all against us. Q. For how long was this matter discussed between all of you as to the advisability of changing the method which you had pursued, and instead of letting the work to smaller contractors giving it out in large contracts ? A. It came up almost immediately. OBJECTIONS TO SMALL CONTRACTS. By Commissioner LITTLER : Q. Immediately after the small contractors began 1 A. Yes, sir. Labor was very scarce, and we pushed them very hard. We wanted the work done as nearly as possible in consecutive order. We wanted it done first at the point nearest the starting point, so that as each sec- tion was completed we could utilize our capital to the greatest extent possible. We often found, however, that the contractor the farthest off would finish his work first. The others would be slow, and there was constant trouble from this source. Considerable trouble also re- sulted from the fact that labor, especially white labor, was very scarce. Most of the men working on the road were merely working for a stake, and when they got that they would go off to the mines, and we could not hold them, except in rare instances, more than a very little while. We could not get the necessary white men, and then we had to take Chinaman. By Commissioner ANDERSON : Q. Had Mr. Crocker done any work of this character before that time? A. I think not. ADVANTAGES OF CONTRACT WITH CROCKER. Q. What were the advantages known to you of selecting him as con- tractor to do that work ? A. He joined us in the enterprise. He was a man of a great deal of energy and force of character, and nobody else hardly would touch the enterprise at all. We were left substan- tially alone. Six or seven men who started with us left us to get through the best that we could. After that it became practically an individual enterprise. Then we made this contract, in the hope that we would be able to get others in with us. I think that we made the con- tract for a certain number of miles, which Mr. Crocker finished, and that he then continued on working without any regular contract. CROCKER'S RESIGNATION AS DIRECTOR. Q. I would like to know something about the contract first. Do you remember the fact that Charles Crocker resigned his office as director of your company on the 24th day of December, 1862 ? A. I remember the fact that he resigned, but I do not remember the date. Q. Do you not connect that resignation with the fact that this con- tract was about to be awarded to him f A. I do not remember that fact, but very likely that was so. This contract, as I say, was awarded to Mr. Crocker in order that he might get capital interested with him in the matter. It had got to be a sort of individual enterprise, because 2622 U. S. PACIFIC RAILWAY COMMISSION. nobody else would take hold, and it became a question with us how to get on. We saw that we must control things, control the men and control the work, if we were to succeed at all. I made great efforts, and so did all of us, to get capitalists to take an interest in this con- tract with Mr. Crocker, but we were unable to do so. This personal lia- bility clause in our law had a great deal to do with it. We not only tried to get capitalists interested with iis, but we were very anxious that they should come in, even if we had to give them all the assets of the company. Our failure in this matter led us to form the Contract and Finance Company. Q. That was formed some time later, some three years later, was it not? A. Yes, sir. REASON FOR HIS RESIGNATION. Q. Mr. Crocker's proposal for construction under his contract appears from your minutes to have been considered and awarded by your board on the 26th of December, 1862, two days after his resignation. With- out intending to criticise that resignation, is it not perfectly apparent and well known to all of you that he resigned because the voting for that contract or the awarding of that contract while he was a director might raise questions as to its legality ? A. That may have been so. Q. Was it not so, according to your best judgment ? A. I do not know but that it was. Q. Mr. Crocker resigned on the 24th and his proposal was acted on on the 26th. Would that not seem to indicate that the reason that I have suggested for his resignation is the correct one I A. That may have been the case. I have stated the objections to the making of small contracts, and in making a contract with Mr. Crocker it was done with the idea that we knew that he would work with us, that he was deeply interested with us, and that he would be at all times under our control. We wanted his whole time devoted to the construction of the road. We thought that he could do better service as a contractor than as a director, and there may have been some question as to his oc- cupying both positions. How far those influences went at that time, however, I do not now remember, but it was a part of our general scheme to build the road, and we knew that we had to rely upon our- selves. Mr. Crocker went on with the contract, and kept on struggling with the rest of us until our means were pretty well exhausted. TERMS OF HIS CONTRACT. Q. Now pass to his contract : Can you tell us what the terms of his con- tract were f A. No, sir : not without examination. I know, however, that we gave him so much a yard for material I think in cash, and so much in stock. The stock at this time was not considered as of much, if any, value. We did not attach much importance tt it. Long before we got over the mountains it was not a financial problem. It was a question of whether it was possible to construct the road. Q. What I want to get at is, what is your recollection as to the terms of the Crocker contract ; was payment to be made on the engineer's statements of the quantity of work to be done, and not at so much per mile? A. That is my recollection. We made estimates of prices for the different classes of work, but those prices I do not remember. I think that our books, if you have them, will show just what those con- tracts were, LELAND STANFORD. 2623 THE STOCK OF LITTLE VALUE. Q. The minutes do not show the terms of the contract. Your books show only large payments to Mr. Crocker during the years 1863> 1864, and 1865, and the estimates produced yesterday by Mr. Miller show, as preliminary to making the payments to Mr. Crocker, that schedules of estimates of quantity and estimates of amounts were made out, stating so many yards of excavation, so many feet of grading, so many ties delivered, so much wrought iron, so much cast iron, the whole being com- puted by the month, and then payments were made to Charles Crocker & Co. at the rate of five-eights of the amount due in money and three- eighths of the amount due in stock. Does that statement refresh your recollection as to the nature of the (Crocker contract ? A. Iknow that the contract was for specific prices, to be paid by the yard, and so much was to be paid in cash, and so much was to be paid in stock. The stock was not considered as amounting to very much value, but still we had an idea that the stock of the company might be an inducement to cap- italists to come in with Mr. Crocker, and if the enterprise was success- ful they would have the benefit of it. None came iri, however ; but we still continued on in the hope that at some time or another either this stock or some other inducements could be given by which we could ob- tain the necessary financial assistance to complete the road. As I have said before, this became substantially an individual enterprise. The whole weight rested upon us. We could not get anybody with us, and it seemed, long before we got over the mountains, that something had to be done or we would not be able to make it a success. The best thing that we could do was, first, the making of this contract with Crocker & Co., hoping for the best, and then the contract with the Contract and Finance Company. CHRONOLOGICAL HISTORY OF CONSTRUCTION. Q. When did you make the contract with the Contract and Finance Company ? A. That was made after the contracts with Crocker & Co. Q. Before I ask any further questions in that respect I would like to get an intelligent and chronological history of the construction of the road from year to year. I would like the history of the building of of the road, section by section. How many miles did the Crocker con- tracts embrace before the contract was made with the Contract and Fi- nance Company ? A. I think that this contract took us up to a place called Dutch Flat, 60 miles from Sacramento, about 30 miles from New Castle. Mr. Crocker then continued on building the road. I do not know now whether there was any regular contract for this additional con- struction or not, but I do not think that there was. I do not think that we ever gave him a contract beyond Dutch Flat, because, as I say, we were all oping to get some Eastern contractors and capitalists to come out and take an interest in the work. We did not succeed in this, so Mr. Crocker kept on doing the work. I do not know about the prices, whether they were changed or not. I do not think that we cared, so long as we got the work done. We kept building all the time, so far as we could obtain money to go on with the work. We pushed it as fast as our means would permit, and in order to do this it was necessary that we should keep substantially the control of the whole thing in our hands. I do not know whether there was ever any new contract, either verbal or written. I do not think that there was. I think that it was merely a general understanding. 2624 D. S. PACIFIC RAILWAY COMMISSION. EXTENT OF WORK DONE BY CROCKER. Q. Assuming that there was not, or that they were mere modifica- tions of this original contract, up to what point did the Crocker work extend, and where did the Contract and Finance Company begin f A. The Crocker work continued merely to the State line, I think, before the work of the Contract and Finance Company began. By this time, I will say further, our means were very limited. Under the act of Congress we had mortgaged the road and issued bonds 100 miles in advance of construction, and they were all consumed, together with the county aid and all the aid that we received, and it was doubtful if we could possibly go on. Then I thought, and talked it over with the rest of my associates, that if we made a contract and put in a sufficient amount of the stock so that the con tractors could have substantially what there was in it, we might induce Eastern men to come in, and pos- sibly some of our own people. I tried to get some of the largest capi- talists in this State to come in with us at that time, but it was the same old story. THE CONTRACT AND FINANCE COMPANY A FINANCIAL NECESSITY. They were afraid to take any chances in what they considered a doubtful enterprise, when they could lend their money out on good security at high rates of interest. All the way through it was a ques- tion of capital whether we would succeed or not. And we determined to let contracts in the way in which they were let, thinking that in that way we might get rid of this scare of the individual liability of stock- holders under the California law. We thought that by forming the Contract and Finance Company, and agreeing to give it the stock of the company, that company might be able to interest capital. Of course this was practically giving the contractors all the assets of the company, but it was better for us to do that than to fail. FAILURE TO INTEREST CAPITALISTS. Mr. Huntington in Kew York tried to get capital interested, and I tried here. At one time I had a good deal of hope that I might succeed here by forming a syndicate of our wealthiest men and offering them these inducements. We failed in all these endeavors, as we had failed in all the previous ones. We finally managed to get through, but when we did finish the work to Ogden our entire means were exhausted. The Government bonds were all gone. I never saw one of these Government bonds. Our first-mortgage bonds were exhausted. The aid received from the counties had been used up. The money raised from the bonds on which the State had guaranteed the interest had gone into the road, and, to cap all, the company was considerably in debt. ROAD COMPLETED TO STATE LINE. Q. To come back to Mr. Crocker's work, I understand you to say, then, that the construction actually effected, paid under those contracts, extended from Sacramento City to the State line. Is that correct ? A. Not by virtue of the contract, but because we continued the work for the reason that there was no one else to do it. Q. flow many miles was this east of Sacramento 141 ? A. About that ; I think, though, that it was about 137. LELAND STANFORD. 2625 Q. Can you give ine the exact location where your State line is, with reference to Donner Lake Pass or the town of Truckee ? A. It is some ways down from Truckee. Q. After you pass the village ? A. Yes, sir. Q. Was it not known as " Camp No. 24 " at that time f A. I cannot say as to that. Q. At what period was it that you reached this point on the State line? A. I do not remember exactly. Q. Take it this way. How long was it before the contract was made with the Contract and Finance Company *? A. I think that it was in the winter of 1866 and 1867. I know that in 1868 we were at the Sum- mit. We built over the desert during the season of 1868 the winter of 18C8->69. COST OF CONSTRUCTION. Q. What is your recollection as to the cost of the first portion of the road ? What is your recollection as to the total amount paid under the Crocker contracts for the work done by him from the thirty-first section to the one hundred and forty first section f A. I cannot remember now. I cannot tell you in dollars and cents 5 but I know that he had all the money that we could put our hands on at that time, as well as the pro- ceeds realized from the sale of our own bonds for one hundred miles in advance of our construction, part of it at the rate of $40,000 a mile, and the rest at the rate of $32,000 a mile. The Government, I think, gave us bonds on the basis of two-thirds of the completed amount of work, at the rate of $48,000 a mile. All that was gone, and every- thing that we had from the county and State had gone in at that time. The bonds given us by the city and county of San Francisco bore interest at the rate of 7 per cent, per annum. Money here at that time was very high, and I think that all we realized from the sale of those bonds was at the rate of 73 cents on the dollar. The million and a half of our own bonds, upon which the State had guaranteed the interest, produced us but about $1,000,000 in cash. From the Sacra- mento County bonds we realized but 65 cents on the dollar, and from the Placer County bonds but 70 cents. Q. Your statement is that all that the company had received, all of its assets, except what had been paid to the small contractors for the construction of the first thirty-one sections of the road, were used up in paying for work done under the Crocker contract and the extension of the Crocker contract? A. I think so. I may be in error a little, but that is substantially the case. At that time I know that I was look- ing after the finances here, and what I have given you is my recollection. NECESSITY FOR COMPANY TO CONTROL CONTRACTORS. Q. Do you remember the fact that Mr. Crocker first proposed, among a number of other contractors, for a comparatively small section of work between Sacramento and the California Central, and that it was sub- sequently to that date that he made his larger contract ? A. Yes, sir; subsequent to that. When we first commenced, we thought of letting contracts to bidders before much work was done, but it soon became apparent to us that we could not handle them and be success- ful in building the road in that way. We saw that we must have them under our own control, or practically so. We saw that we must have contractors whom we could control, who could do the work when we had the money to pay, and who would push it and be willing to make any 2626 U. S. PACIFIC EAILWAY COMMISSION. kind of sacrifice that we might call upon them to make. We looked at the work ourselves, and whenever there was a chance to push it by any sacrifice, we did not hesitate. We used our money with the greatest economy in every respect, except in the matter of speed, and theft we never hesitated to make a sacrifice. The road could not have been built under any other circumstances, and we could not have done anything in the matter, except by pushing it as rapidly as possible, still exercis- ing in everything the closest economy. Q. Our object is to ascertain approximately, without disputing your proposition, the terms upon which it was constructed. A. There is no reason for concealing anything about this, or about anything else in connection with the company. 1 take it that this committee is here to see what is fair and right between the Government and the company, and what is right all around. I am glad to give you all the information in my power. We had great difficulties to overcome, and the only wonder is that we ever did overcome them. AMOUNT PAID TO CROCKER & CO. Q. We find from the books of the company that the payments to Crocker & Co. in 1865 amounted to $3,236,710.35; in 1866, $8,290,790.11; and in 1867, $9,930,282.19. The payments that I have enumerated all appear to have been made for the construction of the road from section 31 to section 141, both inclusive, one hundred and ten sections in all. It would therefore appear that between $21,000,000 and $22,000,000 were paid in the form in which the payments were made, five-eighths in cash and three-eighths in stock, to Mr. Crocker for his work to the State line. If this is correct It would seem that for the construction of the road between sections 31 and 141 Mr. Crocker received at the rate of over $200,000 a mile. Is that the way you understand the work to have been done and the payments to have been made, assuming these figures to be correct ? A. I do not know about the figures. We did not give him money any faster than he needed it, because we had great difficulty in obtaining money at that time. Q. Who can give an idea about this I A. I am coming to it. MAGNITUDE OF THE WORK. Q. Please describe the start at section 31 and extending to section 141, each of the sections being substantially equivalent to 1 mile, and give us the character of the country over which this line passes. Give the names of the towns, the names of the rivers, and tell us all you can about the general character of the country. Give us a description of the plain first, and then you can tell us about the mountains. A. I was going to give you an idea about that work. We worked on that mountain from ten to fifteen thousand men most of the time, and then were oftentimes aided by five hundred kegs of powder a day. After we passed the mountains we worked about half that number of men. We were four years crawling up the mountains, and three of those years we drew upon all the forces that we could get. After we passed the mountains we built 500 miles of road in five days less than ten months. Q. That is not under the Crocker contract. What I want to know is all about the Crocker contract and the work done under it. We can take up this other work afterwards. A. What I wanted to give yon was an idea of the magnitude of the work. LELAND STANFORD. 2627 Q. What I want to know first of all is the history of these first one hun- dred and forty-one sections. A. If you will let me go on I will give you something by which you can judge of the magnitude of that work. GEOGRAPHY OF THE COUNTRY. Commissioner ANDERSON. If you will describe the geography of the country, and give the names of the towns, rivers, &c., as you go on, it would be much more intelligent to me. If you say, for instance, sec- tion 31 commenced east of such and such a place and passed over such and such a river, going such and such a way, I could follow you more intelligently. The WITNESS. The maps of our engineers will show all of these de- tails; although they will give you the names of a great many places well known at the time the road was constructed, but which have since disappeared. Q. The rivers are there, are they not? A. The rivers are there ; yes, sir. The contract with Crocker, I think, commenced at New Castle, 31 miles east of Sacramento. It was for a limited number of miles. My impression was that it was for 20 miles. It may have been only to Col- fax, 51 or 52 miles. I am not positive about that. After terminating this contract, however, Mr. Crocker continued on with the work. I do not think that we put the terms in writing, but still we may have done so. At any rate I am not certain about it, and I do not see that it is of any great importance. We were doing whatever we thought neces- sary to complete that road, and we" went on and did the work, and pushed it on as fast as possible with the means at our command. We never had any surplus money. Commissioner ANDERSON. Mr. Crocker seems to have had some sur- plus money at some time or other in the course of his life. DIFFICULTIES IN CROSSING THE SIERRA NEVADAS. The WITNESS. I will give you something which will give you an idea of the extent of the work and of its magnitude if you will let me. We worked from ten to fifteen thousand men on that mountain, and after we passed the mountain, with less than half the force, we built 500 miles in five days less than ten months and met the Union Pacific Bail- road line at Promontory. The work on the Sierra Nevada Mountains was exceedingly difficult, and was far more than the average of the work from there to Chicago. The same rate of speed which we were able to exhibit after we left the mountains with only half the men would, if we had been able to have carried it out during all the time that we were building, have carried us to Chicago. There never was any por- tion of the work on either road so difficult as that which we had in climb- ing the Sierra Nevada Mountains. Q. Which side of Truckee? A. Partly beyond Truckee, say, for the first 150 miles beyond the summit, carrying us beyond the State line. It took more work upon our part to get us across these mountains than would have sufficed to build a single track road from the other side of the Sierra Nevadas to Chicago. PREVIOUS INVESTIGATIONS. By Commissioner LITTLER : Q. Is not this work well described and well stated on your side of the case in the report of >our superintendent of construction, which is 2628 TJ, S. PACIFIC RAILWAY* COMMISSION. made an exhibit to your affidavit ? A. Yes, sir. This is twenty-six years ago, during which time I have led a very busy life. From time to time the papers have discussed all these questions, and they have been all through these things. Legislative committees and the courts have fully investigated all these matters, and numerous reports have been made from time to time. I suppose that in one place and another an immense quantity of matter can be found that would throw light on this subject, but I cannot place my hand on it. BASIS OF RAISING MONEY TO PAY CONTRACTOR. By Commissioner ANDERSON: Q. It appears from these figures, which I have read, that there was paid to Mr. Crocker for the work done by him, part of which was in money and part in stock, at the rate of $210,000 for each mile of road constructed, and our inquiry is directed to the question whether the is- sues of stock and the sales of bonds made for the purpose of raising that money were not upon such a basis as to have contributed, in the ultimate result, very largely to the present crippled condition of the Central Pacific Eailroad Company? A. No, sir; it has not. Commissioner ANDERSON. And on that point we would like any in- formation that you can give us. The WITNESS. The stock was not considered as valuable at the time, and it did not turn out to be of any valuable assistance in the building of tiie road. If it had any value at all it was wholly prospective. We could not sell it and we could not hypothecate it. All the money that we could get from any and every source went into the road. Q. You mean it went into the Crocker contract? A. It went into the construction of the road. Mr. Crocker did not have any profits from it. WHO CONTROLLED THE ENTERPRISE. Commissioner ANDERSON. Excuse me ; but you are passing over the whole question that we are so anxious to get light upon. If that ex- pression, "Crocker did not get any profit out of it," is based upon fact we will pass to the next section. The WITNESS. We substantially controlled the whole of that work. We knew all the work that we could do and all the money that we had to push it through. Q. Whom do you mean by "we," yourself and Crocker? A. I mean the five men who devoted themselves to it from the beginning to the end. We all worked on the best that we could, and did all we could to accomplish the result. Q. There were yourself, Mr. Crocker, Mr. Mark Hopkins, Mr. Hunt- ington, and who else? A. E. B. Crocker. Q. A brother of Charles Crocker ? A. Yes, sir. Mr. Judah died early and Mr. Bailey retired. Q. And E. B. Crocker is dead now? A. Yes, sir. Q. Was his interest substantially the same as that of Charles Crocker ; did they work together? A. No, sir. Charles Crocker was contractor; but we all felt that we should fill our parts the best that we knew how towards securing the construction of that road, and we did so. Q. You say that you were all working together. Do I understand you that you all contributed your time, attention, and credit, and gave your best energies to the successful completion of these Crocker con- tracts? -A, Yes, sir j that is substantially it. LELAND STANFORD. 2629 WHO WOULD HAVE GOT THE PROFITS. Q. Do I also understand that you were equally interested in any of the profits, or were to share any of the losses that might arise under that contract 1 A. No, sir ; not at that time. Q. If there had been profits would they have gone to Mr. Crocker f A. If there had been profits we would have let them go to him, as is ordinarily the case in contracts, and Mr. Crocker would have enjoyed them. We had to make great sacrifices, however, in order to make time, and this cut off whatever profits he might otherwise have made. Sometimes it was a question how far we could get money to keep things going, and how to regulate expenses so as to be able to pay them. RELATIONS OF CONTRACTORS WITH RAILROAD COMPANY. Q. State on what you based your belief or conviction that you appear to have that when Mr. Crocker had finished the one hundred and forty- first section there was nothing left of the $22,000,000 in money and stock which he had received ? A. Because the money passed through our own hands, and the relations of Mr. Crocker and the Contract and Finance Company with the railroad company was such that we knew all the time about their expenses and their wants. We met their wants, but did not go any further. The contract, at the time it was let to Mr. Crocker, would not have been taken by anybody else. If there had been a regular contract let to a regular contractor whom we could not have absolutely controlled, we would have had more or less trouble. We could not have afforded to have let him go on as contractors ordi- narily go on with work, because of the difficulty which we experienced in getting money. If we could have let him go on in this way, as other contractors do work, he would have had a right to enjoy all the profits that he could make; but we had to have control over him in order to be able to do anything at all; and as he was interested with us in the construction of the road, and as we were all working together for the common end, we could of course do as we pleased with him. INDIVIDUAL KNOWLEDGE OF EXPENSES. Q. Did that control which you exercised over Mr. Crocker give you such a knowledge of his doings as to enable you to tell when he ought to have money, or did you take his word for it every time *? A. We knew what he wanted and what he needed. We had reports of the work that was being done, and we knew the work that was to be done. We knew what it was costing, and we knew every dollar that was re- quired to carry it on. Q. Those reports made to you must have, been entered somewhere upon your books, and ought to show the amounts paid to the different contractors who did the work, ought they not ? A. I suppose so. Q. You would not be liable to take his word for it whenever he needed money, would you ? He would not come to you and say, " I want more money to do more work," or " I want $5,000,000 to go on, as I have spent all I had " ? A. Each one of us on the spot had his individual knowledge as to the other's department, and we kept trace of it all the time. We hardly slept, but did the best we could to get along, and I may say now that I sometimes wonder that we ever did get through at all. 2630 U. S. PACIFIC RAILWAY COMMISSION. DISAPPEARANCE OF CONTRACTOR'S BOOKS. Q. Who kept Charles Crocker's books? A. I think William E Brown. Perhaps not at the beginning, but very soon afterwards, be- fore the enterprise became of very great magnitude, William E. Brown was in charge. Q. Have you ever seen those books since this contract was finished in 1867 ? A. 1 dp not know. I never have been over his books, but I have seen books in his office lying open on his desk. Q. Do you know whether they have been exhibited in any of the various litigations in which these matters have been discussed! A. Not to my knowledge. Q. Do you know whether they are available to this Commission now? A. I do not think that they are. I do not know where they are, nor what became of them, but they have disappeared. Q. They have disappeared ? A. Yes, sir. Q. Do you know whether this has been the subject of litigation and investigation, as have been the books of the Contract and Finance Com- pany, which have been described as missing ? A. Yes, sir. Q. And they have not been produced ? A. No, sir. INTEREST OF COMMUNITY AS TO CAUSE OF CENTRAL PACIFIC'S WEAKNESS. Commissioner ANDERSON. I may as well say here that the subject, as we understand it, assumes about this shape : The community is largely interested in this matter, and it seems to be the general belief that the present weak condition of the Central Pacific Railroad Company is due to the fact that the contract with Crocker & Co., and the contract with the Contract and Finance Company, and the contracts with the Western Development Company, and the contracts with the Pacific Improvement Company have drained the company of its resources ; that certain in- dividuals have procured to be issued to themselves enormous quanti- ties of stock and bonds of this company, and have paid dividends on the stock, and have made the interest charge on the bonds exceedingly heavy, and that the origin of its difficulties lies there entirely, and no- where else. The Commission desires to afford a full opportunity to have answers made in reference to that matter. To those subjects to which you have been so fully devoting your time (and in the report you handled them with great dexterity and ability), the community has had its attention called so often that it is familiar with them 5 but the subject of this issue of stock and bonds has always remained concealed, and all proceedings brought to throw light upon it have been met with the as- sertion that the books and the contracts have disappeared. THE STOCK VALUELESS WHEN ISSUED. The WITNESS. I thank you for your frankness. This opportunity is what we want, and what we have desired for some time. We have nothing in our transactions to conceal, and we are ready and willing that the whole history shall be fully understood. The stock was sub- stantially valueless. It had no value at the time it was issued, and it had no value when the road was completed. Of course it afterwards became valuable. Of the very few people who subscribed for stock at the beginning, most all got out, and this included most of those who had taken a little stock to help us along. Afterwards it went down, and 1 myself bought, as an accommodation to a stockholder, 2,300 LELAND STANFORD. 263! shares of it at 10 cents on the dollar, full paid stock. Finally, it was not sold at all, as nobody would have it. In making these contracts we did not count the stock even among ourselves as of any special value, but we put it in in the hope that somebody or other, some capi- talists, would be willing to take an interest with us, and there would be the property as security. MEANS EXHAUSTED UPON COMPLETION OF ROAD. When the road was completed to Ogden, all of our money and all of our means were exhausted. You will understand that our road was mortgaged for 100 miles in advance of construction, and we had used up all of this money crossing the mountains. We had graded the road to Promontory, some 63 miles, I think, and there met the Union Pacific. In the settlement, the Union Pacific took the entire aid from the Gov- ernment for these G3 miles, which made a considerable inroad in the amount received from the Government by the Central Pacific. Every- thing was used up. The Contract and Finance Company itself was somewhat in debt, and I think our books will show by this I mean the Western Development Company books that when the Contract and Finance Company went out of existence there was a great deal of prop- erty which it was supposed by the general public to have, which really had no existence. About that time there was a great deal of talk about the Credit Mobilier matter of the Union Paific. DISSOLUTION OF CONTRACT AND FINANCE COMPANY. The people began to talk about the Contract and Finance Company; and when we, after a while, got through, we concluded to let that com- pany go. Its affairs were wound up, and under our laws here it was dissolved. The indebtedness of the Contract and Finance Company was assumed by Mr. Huntington, Mr. Crocker, Mr. Hopkins, and my- self, according to my recollection, and its affairs were wound up. DIVIDENDS. Commissioner ANDERSON. I will say here that the assertion is made that the Contract and Finance Company was in the condition which you mentioned because, before presenting its petition to the court, it had divided up enormous dividends of stock and bonds to the four gen- tlemen you named. The WITNESS. My impression is that the only dividends made were of stock ; but Mr. Brown, when you come to him, will be able to tell you specifically about that. MONEY PAID TO CROCKER. By the CHAIRMAN : Q. Of what department did you have charge during the Crocker con tract? A. I was president of the company, and had the general manage- ment of its affairs on this side. I looked particularly after the financial department until we were able to obtain aid from the Government. I had to look after a great deal of the financial business of the company, especially that which was transacted here. Q. Was the sum of $22,000,000, or the different amounts named to you as having been paid to him from 1864 to 1867, paid to Mr. Crocker on his individual contract f A, As to the amount I cannot say, but 2632 U. S. PACIFIC KAILWAY COMMISSION. of course Mr. Crocker received the money, whatever was paid for that work from the end of the 31 miles until the Contract and Finance Com- pany took hold of the construction. But as to the amounts I cannot say anything. I only know this, that I was helping to raise money all the time, and it was hard work to get it. STOCK SUBSCRIPTIONS. I will say further about this stock: The stock subscriptions by in- dividuals were very small. At last we had some trouble about this Contract and Finance Company, and got into the courts. We finally bought up the stock, so that there was none of the stock owned by the original shareholders in the market that we know of, and they have not any interest in the railroad because of that stock. The present stock- holders in the concern have no interest or concern at all in any business or contracts prior to that date. ACCOUNT BOOKS OF CHARLES CROCKER & CO. By Commissioner ANDERSON : Q. Before leaving the Crocker contracts can you refer us to any one else besides William E. Brown and Charles Crocker who would "have knowledge of the contents of the books of account of that firm, and who can lay before us the figures showing what profits, if any, were made out of that construction, so that we can reach an intelligent judg- ment on that subject ? A. No ; I do not think that I can. I think that Mr. Brown had a clerk or two with him ; but he kept the books, and he would know. Mr. Crocker did not pay much more attention to the books and to the accounts than the rest of us. He was supervising construction, and spent most of the time at the front. He was a very active man, and personally supervised the work of construction. Q. Did he have any assistant ? A. Yes, sir ; his first assistant was Mr. Strobridge. Q. Is he living ? A. Yes, sir. Q. Please give us his name in full. A. J. H. Strobridge. Q. Please give us his address. Is he living in San Francisco ? A. He lives across the bay, in Oakland. Q. How can he be reached ? A. He may be reached at almost any time upon a .day's notice. Q. Did he make the subcontracts that Mr. Crocker made ? A. No, sir. Q. Was he employed by Mr. Crocker ? A. Yes, sir. Q. Did he have the employment of any men ? A. Yes, sir ; under Mr. Crocker he had the entire supervision of the work of construction. Q. Did the Crocker contract include rails ? Did he furnish the rails f A. 1 think that the contract included everything. MATERIALS PURCHASED IN NAME OF CENTRAL PACIFIC. Q. Where goods, materials, rails, &c., were purchased in the East to be used in" these Crocker contracts, were they purchased in his name or in the name of the Central Pacific ? A. I think they were purchased in the name of the Central Pacific and charged by the Central Pacific to Crocker & Co, LELAND STANFORD. 2633 Q. The Central Pacific bought the rails aud charged them to the Crocker contract? A. Yes, sir; I think that was the way. PRICE OF BAILS AND ENGINES. Q. Do you remember the price of rails at that time? A. They varied, I think, from $70 to $80 a ton, and I believe at one time we paid as high as $136 per ton. Q. Does that mean iron or steel rails'? A. Iron; that was before the days of steel. Everything was high. I think that we paid $65,000 or $67,000 for two engines. Commissioner LITTLER. Your engineer says that you paid $143.67 at one time per ton for rails delivered at Sacramento. The WITNESS. Yes, sir; that was for a portion. Q. Was it at that time very difficult to get rails ? A. Yes, sir. Does that statement give the amount of rails that we bought at that time 1 ? COST OF TRANSPORTATION VIA PANAMA. Commissioner LITTLER. Eb, sir ; he says that shipments by way of the Isthmus of Panama were made as late as 1868, and that the rails alone cost $51.98 per ton ; and that with freight added the rails cost, delivered at Sacramento, $143.67, not including the charges for transfer from the ships at San Francisco to the schooners, or for transportation up the Sacramento Eiver to the city of Sacramento. The WITNESS. I remember that we had 10,000 tons of rails come by way of the Isthmus, and I think that my impression is that they charged us about $60 a ton for the freight. I know that we had quite a number of engines come by way of the Isthmus, and it cost us something like $3,000 an engine for freight by way of the Pacific Mail. By Commissioner ANDERSON. I show you one of your estimates to make up the amount coining due under this contract. Please explain it. [Hands witness the document referred to.] EXPLANATION OF ESTIMATES. Q. Does the first column show the quality of work done for which payment was to be made, the second column the price, and the third column the figures ? A. I only know by what I see here ; but 1 presume that it is correct. I have no reason to think otherwise. Commissioner ANDERSON. I call your attention to the fact that the items for work do not seem to include the rails. The WITNESS. This seems not to include them. Q. Does your memory serve you as to whether they were included in the contract or not? A. I think that they were included in the contract, but that would be a different charge. These are estimates made by the engineers at the beginning of that contract. It was very carefully con- sidered, and received as much attention as any other matter which came before the company, because when Mr. Crocker made the contract he, of course, hoped that he would make some money out of it ; and if we had been able to push matters, he would have gone on in that way, and would have made some money; but circumstances required us to make all kinds of sacrifices for speed. At one time we had to pick out and dig out snow to the depth of 75 feet to make an embankment. At times the snow was very deep all along the mountains, and it was difficult to get provisions aud materials to the front. At times the stage could not run, owing to the depth of the mud. The horses would mire in the mud, and 2634 U. S. PACIFIC RAILWAY COMMISSION. then we had to pack the goods to the front at great expense and with a great deal of trouble. The snow fell during the winters that we were on the mountain to an average depth of from 37 to 38 feet. Heavier falls have taken place since, but we have been better prepared to meet them. In the spring that snow would pack down to about from 14 to 16 feet, and would be very hard. We worked through this snow at enormous expense and trouble, and no contractor would have been able to stand on his contract. WHY THE COMPANY CONTROLLED SUPERVISION OF WORK. 9 Q. Are you speaking of the Crocker contract ? A. Yes, sir. We therefore practically took control of the supervision of affairs, and did all that we could to take care of the interests of the company ; but we forced the road along at any sacrifice, without any reference to the irf- terests of the contractor. By Commissioner LITTLER: Q. And without any reference to the obligations of the contract? A. Yes, sir. We wanted the work done, and as Mr. Crocker was jointly interested with us in the success of the enterprise, his interests as a con- tractor were considered by us as secondary to the completion of the road. Q. Do you mean to say that by your conduct you practically annulled the Crocker contract and ran the work yourselves ? A. Pretty largely, though not entirely; perhaps legally not. But we had to have that work done, and we insisted upon it that every sacrifice should be made. For instance, we wasted a great deal of dirt, which the contractor or- dinarily would put in the fills ; but to do this would have delayed the progress of the work. By Commissioner ANDERSON : Q. Did you have any trouble with Mr. Crocker about this ? A. No, sir. Q. Did he make any objections ? A. No, sir. Q. Did Mr. Crocker furnish any part of the equipment or the rolling- stock under his contract ? A. I think that everything went in under that contract. Q. You notice that by your reports you did business as fast as your road was completed, do you not 1 A. Yes, sir. GROSS EARNINGS FROM COMPLETED PORTION. Commissioner ANDERSON. So that your gross earning reported for the years 1864, 1865, 1866, 1867, and 1868 reached up to quite large figures, the gross earnings of 1868 being over $2,000,000, those for 18(59 being over $5,000,000, those of 1870 being $7,000,000, and those of 1871 being $9,000,000. I merely refer to the fact that from 1862 to 1867, un- der the Crocker contract, your gross earnings amounted to quite a con- siderable sum. The rate at which the road was operated appears to have been under 35 per cent., and the credit to the income account, that is, the actual surplus after deducting all expenses chargeable to the in- come, appears to have amounted to over $1,000,000. The WITNESS. About the book-keeping part I do not know. I do not know that I ever looked over a page of the books since the history of the road commenced. LELAND STAlfFORD. 2635 FINANCIAL RESULTS FROM CROCKER'S CONTRACT. Q. Have you ever been over any statement showing the result of this contract with Mr. Crocker, so as to see whether he did or did not make any money out of it ? A. No, sir ; I never did. All the money that he received on that contract went into construction. Of course the stock was net. I never went over the matter myself, but still I had sufficient knowledge of things, and I knew that at that time every dollar of in- come from every source went into the construction of the road. In the first place, I had largely to do with negotiating the money for him, and our relations were such that I knew what his wants were. He talked it over with Mr. Hopkins, who was treasurer of the company, and my- self, and we furnished what was needed, but we did not furnish any more. It was hard enough to get that. THE STOCK A NET PROFIT. Q. You used the expression a few moments ago that the stock was net ; was it your understanding that the money which he received was sufficient to pay the expense to which he was put, and that when he finished the Crocker contract and completed the road up to that one hundred and forty-first section he had all the stock remaining substan- tially net ? A. I think so. Q. Was there ever anything done whatsoever between Mr. Crocker, Mr. Huntington, Mr. Hopkins, and yourself as to the money received by Mr. Crocker under the Crocker contracts $ A. No further than what our books show. Q. I mean, was there anything done looking to an accounting among yourselves as partners'? A. Not at that time; no, sir. Q. You say that you were not partners at all as to those sections ? A. No, sir ; we were not partners in those contracts. Q. You had no interest in his profits ? A. No interest at all at that time. Q. You were not to be held for any portion of his losses, if he made any? A. No, sir. Q. At any time have you had any right to inquire from Mr. Crocker whether he made any money or not out of his contract, or to ask him to account for the moneys received by him for the construction of sections 31 to 141 ? A.. We had no right to do it, other than that we were all engaged in the enterprise, and if money was taken out and wasted, or anything of that kind done, we would have stopped it. This work was in such shape that we could have stepped in at any time, if we were not satisfied, and could have taken it out of Mr. Crocker's hands. NO EXPECTATION OF PROFITS. At that time, in our own minds, we had given up all hope of real- izing anything from the stock of the company. The profit to us as investors in the railroad had passed away. We had given up all hopes of that. It was then simply a question whether we could overcome the difficulties which beset us, and succeed in building the railroad. How to build it was the thing that engaged our attention, and we were willing to give our best efforts towards building the road with the greatest expedition possible ; and if we had found that Mr. Crocker was making a great deal of money out of it we would have said to him, ^ No ; it cannot be 5 we cannot afford to give you a large profit in money, ? R VOL IY 20 2636 U. S. PACIFIC RAILWAY COMMISSION. because we cannot spare it;' ? and whatever bis contract might have been, we would have stopped it. I had enough knowledge of his affairs to know just how much money he needed and what he was doing with it. I was perfectly familiar with the whole thing, as also were the others. We were all in the enterprise together. We all started in at the same time, and at the beginning we started with the idea of tak- ing what stock we could afford to take, and if others desired to come in and subscribe for the balance they could do so, even to the taking of the control of the road. Q. As far as Mr. Crocker's individual profits out of the construction of that portion of the road to which I have referred, from section 31 to section 141, are concerned, neither you nor Mr. Huntington, nor Mr. Hopkins, ever received from Mr. Crocker an accounting or a division of the profits 9 A. No, sir. Q. Is that your positive statement ? A. Yes, sir 5 I do not think that we left him with any money over. Q. I am asking about an accounting. A. We never had any account- ing. NOT ENTITLED TO SHARE IN PROFITS OF CROCKER CONTRACT. Q. I will ask you if you were entitled to receive any of the profits from the Crocker contracts or liable to pay any proportion of the losses? A. No, sir; if he had made a large profit, there was nothing to prevent his legally appropriating it to his own use, and if he had made large losses, there was no obligation upon our part to assist him, except the general fellowship which comes from association in large enterprises like that. If he had made losses he might have appealed to us to assist him, and he might have done so with good grace, as we had practically assumed control of the work. We demanded that the work be crowded, without any reference whatever to whether it was advantageous to the contractor or not. Q*. To confine myself to your connection with the Crocker contract, I understand you to state positively that you have riot participated in any of the profits, if any were made out of the Crocker contracts, for the work that was done between sections 31 and 141 of this road ? A. Yes, sir ; that is my positive statement. PRICE AT WHICH STOCK SHOULD BE TAKEN. Q. Do you remember that the stock originally was to be taken at 50 cents on the dollar in the settlement with Mr. Crocker? A. I remem- ber that we made an estimate of this stock at that time, but whether that is the exact figure or not I do not remember now. Q. Do you not remember that from time to time there were modifica- tions made which reduced this figure to 30 cents on the dollar 9 It would be counted as 30 cents on the dollar in your settlement. It is on your minutes, if you have forgotten it. A. I know that there was an estimate made on the stock under the C. Crocker & Co. contracts when they were made ; but I do not think there was afterwards. INCEPTION OF CONTRACT AND FINANCE COMPANY. Q. We will now come down to the Contract and Finance Company. By whom was that invented or engineered ? A. I think that that origi- nated with me. Commissioner ANDERSON. Mr, Huntington claims it, LELAND STANFORD. 2637 The WITNESS. He was not here when it originated. When it was made I think that he was at the East; but of this fact I have not a positive recollection. At any rate I have no doubt that we must have talked it over some time when we were together, and I know that when we made it we did it with the approval of all the principal men inter- ested. ORIGINAL STOCKHOLDERS. <^. Who were the stockholders in that company at its inception ? A. At first we made that contract in the hope of inducing capitalists to eome in and take a part. Our finances were very low, and we or- ganized th