John Tilson Ganoe

“ We have now followed the history of the company for more than a half century. We have watched it grow from the amoebaic state of the preliminary survey through all its stages, until its union with the more complete systems, becoming an indispensable part of their lines. But what next? Now has come the motor bus and the motor truck to compete for the carrying trade of this region. Pavement now extends over an extensive portion of the territory traversed by the railroad. So effective has been the competition of the busses that the railroads have been forced to curtail the number of trains run. ”

“ The Oregonian The Oregon Sentinel The Oregon Statesman The State Journal Law Suits—In the study of any railroad, lawsuits must needs be a great source of information. The courts are full of litigation by the company. The most important cases to be noted, however, are: Holladay vs. Elliott Newby vs. The Oregon Central. Oregon and California Railroad vs. the U. S . Just a word should be added as to the use of lawsuits. Decisions usually give the main points in the history of the case, but to stop with this would be to stop before the most prolific source has been reached. ”

“ Capitalists could not be induced to finance a $30,000,000 road with only a loan of $40,000 a year as a maximum guarantee for such a short period. Yet Barry and Gaston were themselves largely to blame. It is probable that the State could not have done much more but the ease with which the money could be raised as indicated by Barry's facile pen did not show that the company needed a great deal of aid. Barry estimated that the annual earnings of the road would be $5,600,000. ”

“ Every other road has been troubled with the same objections. The real source of opposition he said was from the citizens of Portland who were afraid some of the trade would be diverted to San Francisco. This he showed to be erroneous. All that was needed in his opinion was a grant from the government in order to interest capitalists in the project and since the road was of such great military importance and since Congress had not aided Oregon by any grants for railroads it was only just that it should do this. ”

“ No man was more considerate or generous in his praise and assistance to those who worked with or under him or whose work he had made use of. In the days of his prosperity his purse was open wide to all works of charity and benevolence, of which in Oregon was $50,000 to the State University for an irreducible fund, at least $400 of the interest from which to be used annually in the purchase of books for the University library. ”

“ From the first Gaston's plan had been to appeal to the people for aid. When the company was first organized it had been his desire to open the stock books to the people and gain an interest in the construction of railroads generally, so after the company received the recognition of their application for the government grant from the Department of the Interior "a canvas for subscriptions to the capital stock of the company, and donations of land and other property in aid of the enterprise wag commenced in Washington and Yamhill counties, which subsequently extended to the city of Portland. ”

“ The truth of the business is no Company was in existence and consequently no com- pany could be designated in my judgment, and now the question before the Legislature should be:—Which of these two corporations are the most meritorious? Which one is pursuing the route indicated in the Act of Congress, making its grant? namely from Portland "Southeasterly through the Willamette, Umpqua, and Rogue River Val- leys" which is the most central road, and most nearly in accordance with the intentions of the Congress of the United States? Which is the most likely to go and build the road? ”

“ The total cost of constructing the road to Roseburg was $5,463,805, or $27,478 per mile. This would leave about two million dollars received from the bonds which was not put into construction. Yet before we make a wholesale accusation of fraud against Holladay, we should at least attempt to see what became of the money. If the company was only paying one-third the interest charge, funds could not be expected from that source. This deficiency would have to be met from some source. The interest payments on ten and a half million dollars would amount to about $800,000 a year. ”

“ Estimated Traffic and Earnings: To ascertain what he thought would be the traffic and earnings of the road Barry started with the statement that for every acre of good agricultural land one ton of freight could be expected by the railroad. But he says, "In order that no one can quarrel with our figures or esti- mates, I will, in the present instance, estimate it at only one-fourth of a ton per acre per annum." The railroad, he said, would control not less than six million acres of good land and probably nearer sixteen million than six. This would make 1,500,000 tons per annum. ”

“ The truth of the matter seems to be that Elliott did not misrepresent the stocks and bonds for he had been able to dispose of about $38,000 worth of bonds at par for locomotives. Neither he nor Holladay knew that the bonds would be- come practically worthless, so Holladay on these pros- pects entered the partnership. The reason for the decease in the value of the bonds is very evident. Immediately when the East Side Company issued their bonds, Gaston started a systematic campaign against them, stating that this company was not the Oregon Central Company, but a fraud. ”

“ Thus it is in 1863 we find Elliott engaged in the first survey. He went along the general line of the route gathering what subscriptions he could, but with little success, except in Southern Oregon. Southern Oregon had been brought into prominence by the discovery of gold in California and was at this time no insignificant factor in the State. The Southern Oregon cities were the trading centers between California and Oregon. It was to their advantage to have railroad connections for thus they could ship direct to San Francisco or to Portland. ”

“ At the average rate of $300,000 per year for earnings, the company would only be paying about fifty per cent of the interest on the eleven millions dollars funded debt. It is true there was some income from land sales at this time, but on the whole this was almost a negligible item, although for one year the sale of land did bring in over $100,000. ”

“ It will be the only internal mountain-defended military road, safe from the raids of our enemy, on which the nation and the American communities on the Pacific could rely for the speedy transportation of troops and munitions of war, in case of an invasion by foreign nations. ”

“ The people of the Willamette Valley have troubled themselves about getting cheap transportation on freight shipped to San Francisco. Many hoped that when the railroad was completed to the head of the valley, the charge would be more reasonable. But they have been deceived since Mr. Holladay has advanced rates on wheat and flour five cents per ew^., and ten cents per barrel. The question arises, 'What are the people of Oregon to do? Will they rise in their might and strike down this monster monopolist?' The crisis will come in the Legisla- ture. ”

“ With a fall in the traffic and consequent fall in earnings the company thought to gain traffic by building on through to California. But they did not have the capital, so it was decided to reorganize and force Holladay out altogether, and then issue bonds and complete the road to the state line.
The reorganization was made in May, 1881. By this reorganization all of the old Holladay stock was wiped out and the bonds converted into stocks. Common stock was issued to the amount of seven million dollars and preferred stock (7%) to twelve million. ”

“ Bonds of new company, bearing three per cent for first two years and five per cent thereafter, in exchange of Oregon and California first mortgage bonds, in the proportion of $1000 of former for each $1000 of latter (new first mortgage bonds at rate of $30,000 per mile being issued in exchange for old firsts at $20,000 per mile and old seconds at $10,000 per mile) ; one share Central Pacific stock for each two shares Oregon and California preferred, of an assessment of $4.00 per share ”

“ He came to the United States in 1853, tarried with relatives near Belleville, Ill., for a year, then drifted into journalism, became a war correspondent in the Civil War, made friends with influential people, attracted attention by his ability and genial manners, made some money in speculations, went back to Germany on a visit and made financial friends at Frankfort, who afterwards employed him to look after their interests in investments in America, and put him on the highway to his great success. ”

“ The company, as we have shown, had been practicaly instigated by Elliott and it was to him the construction was entrusted. Elliott presented to the company an offer by A. J . Cook to construct the road. A . J . Cook was supposed to be an eastern capitalist. Elliott had been given the power of attorney by A. J. Cook. Accordingly on April 23, 1867, the day following the organization of the company, a contract was made between the Oregon Central Com- pany of Salem and A. J. Cook. ”

“ These were the conditions that Holladay faced during 1871 and 1872. When he negotiated the loan for ten and a half million dollars money was easy to obtain, especially from Germany. The realization that conditions were un- stable and that men had invested beyond their ability to pay back brought on the panic of 1873, resulting in a depression of industry for several years. This meant the earnings of the railroads would be lessened. A rail- road built during the period of inflation was forced to try to pay out during a period when earnings were low. ”

“ Elliott is not a speculative adventurer. His statements we believe to be entitled to credence and the candid consideration of our people." Then follows in brief the estimates of the cost of construction as given in Elliott's report. On Jan. 30, 1864, in an editorial entitled "Jackson- ville and the Telegraph," in the Oregon Intelligencer we find the following: "A railroad line from Marysville to Portland has been surveyed and located through our town." Barry did not complete his survey until October, 1864, so this could not have been the Barry survey. ”

“ To equalize the traffic on the whole road he divided by three which made 500,000 tons per annum. At ten dollars a ton, and he showed this was considerably less than was being paid or would be paid, the road would have an income of $5,000,000 per annum. In the same way he estimated the freight from the mines, from lumber, fast freight, how many through passengers, how many local passeng- ers and how much mail and express. ”

“ If the oper- ating ratio was not too high, the earnings as figured by him, would take care of the interest so the only aid needed from the legislature would be a small aid the first few years. The company had tried to gain the proceeds of 500,000 acres of land granted to Oregon for internal improve- ments, but this bill had been indefinitely postponed. 10 1. Route: 11 The route of the Barry survey caused no little dis- cussion. Places in the Willamette Valley cried against it because, as they said, it did not go through the Willamette Valley. ”

“ This bill passed the House and was sent to the Senate which passed it, and the bill became a law July 25, 1866. The grant provided 17 that the California and Oregon Railroad Company and such other company as the legis- lature of Oregon should designate should receive "every alternate section of public land, not mineral, designated by odd numbers to the amount of twenty alternate sec- tions per mile (ten on each side) of said railroad line." If the sections were already taken they could take others in lieu of them within ten miles of the limits of the grant. ”

“ The original endorsed articles were filed in Multnomah County, November 23, 1866. 24 In April, 1867, Elliott and T. R. Brooks came from California claiming to represent capitalists in California, and the East. They presented a proposition to I. R. Moores and others to aid the Oregon Company in finan- cing the road. The company of November 17, 1866, was not organized for the purpose of building a railroad, but to beat out Gaston since the capital stock was only placed at $500,000. ”

“ R. No. 14 be indefinitely postponed. Senator Cornelius moved to amend the motion by postponing the whole subject mat- ter of the resolution. Although Senator Ford accepted the amendment, the amendment was lost, whereupon Senator Bayley asked permission to withdraw his resolution, which was carried. ”

“ Division 1 2 3 4 5 6 7 Miles 26 38 38 12 31 50 130 325 Cost per Mile $ 80,000.00 40,000 .00 60,000 .00 80,000.00 40,000.00 40,000.00 35,000.00 Total Cost $ 2,080,000.00 1,520,000 .00 2,280 ,000 .00 960,000.00 1,240,000 .00 2,000 ,000 .00 4,550 ,000 .00 $14,630 ,000 .00 The estimate made by Barry of the cost of the road in Oregon is more than two and a half million dollars less than the estimate made by Elliott. ”