THE CANAL FUND AND ENLARGEMENTS
No more important question was proposed to the commissioners in 1816 than the one which asked them to ascertain where the money that was to build the Erie Canal was coming from. Of course a loan must be made and the commissioners at once began casting about for information. William Bayard inquired for loans in Europe, but no answer was now at hand. “The Committee entertain no doubt,” was the tentative reply in 1817, “but that as much money can be obtained in this country, as may be required for the canal, on the credit of the state, at an interest of 6 per cent by the creation of a funded debt, and that ample funds may be appropriated for the payment of the interest, and the gradual extinguishment of the debt without the imposition of taxes.” The commissioners applied to those states which, it seemed, would be most benefited by the canal, Vermont on one side and Ohio and Kentucky (!) on the other, and to the United States. “But if no extraneous aid should be afforded,” the commissioners concluded with threatening menace, “it will at all times be in the power of this state to levy high transit on the articles transported to and from those states and the territory of the United States, and thereby secure eventually, a greater fund than can possibly arise from any present contribution from those quarters.” In order to facilitate gifts in lands or money, the commissioners scattered blank forms of cession and bequest throughout the country; “one form relates to gratuitous grants of land for the ground through which the canal is to pass, and the other is a contribution to the fund for making it. Agents have also been appointed in Vermont and Ohio for the same purpose.” It was reported that nearly all the land necessary for the canal throughout its entire length would be ceded by the owners to the state for the purpose. In concluding their report for the year ending February 15, 1817, the commissioners affirmed that “their investigations have shown the physical facility of this great internal communication, and a little attention to the resources of the state will demonstrate its financial practicability. And they may be permitted to remark, that unless it is established the greater part of the trade which does not descend the Mississippi, from all those vast and fertile regions west of the Seneca lake, will be lost to the United States.” This report is signed by De Witt Clinton, S. Van Rensselaer, Samuel Young, and Myron Holley.
The needs of the canal were of course outlined in the estimates of expense of building; the estimated cost of the Western Section, according to James Geddes, was $1,801,862; that of the Middle Section, by Benjamin Wright’s figures, was $853,186, and that of the Eastern Section, Charles C. Broadhead estimated at $2,271,690. The total amounted to $4,926,538 or five millions in round numbers. The committee of the legislature advised the organization of the Board of Commissioners of a Canal Fund, to borrow $1,500,000 at six per cent interest. The annual revenue of the canal was estimated at $924,000 and the expenditure $547,000.
William Ford, chairman of the joint committee of the legislature, addressed De Witt Clinton on March 8, 1817, asking him to outline a financial system for a canal fund. Clinton’s scheme, which became the basis of all New York’s canal building, is thus sketched by Mr. Sweet:[55]
“1. Borrow $1,500,000 on the credit of the State, by the creation of a funded debt, with interest at six per cent, principal reimbursable in twenty years.
“2. The said Committee shall keep an account of all moneys received for the said fund, (which moneys shall be kept in the treasury), and shall pay over, from time to time, such moneys as shall be required for the execution of the powers committed to them.
“3. The said Committee of the fund shall, as soon as the whole or a part of the said works be completed, have power to establish and receive reasonable tolls.
“4. The annual application of $60,000 of the moneys arising which the State may derive from the sale of unappropriated lands, shall be pledged for the payment of said debt and the interest thereof. And they shall have power to apply any unappropriated money in the treasury to make good any deficiency or suspension in the payment of said funds.
“5. The said Committee shall, at the opening of the next session of the Legislature, report a plan of finances for the execution of the whole of said canals, and also of a sinking fund for the extinguishment of the debt.
“In this same communication it was stated that 400,000 tons of freight were carried annually on the Hudson River.