The History of Minnesota and Tales of the Frontier

by Charles E. Flandrau

On the twenty-third of February, 1857, an act had passed the congress of the United States authorizing the people of Minnesota to form a constitution preparatory to becoming a state in the Union. Gen. Willis A. Gorman, who was then governor of the territory, called a special session of the legislature to take into consideration measures to carry out the land grant and enabling acts. The extra session convened on April 27th. In the meantime Governor Gorman's term of office had expired, and Samuel Medary of Ohio had been appointed as his successor, and had assumed the duties of his office. He opened the extra session with an appropriate message. The extra session adjourned on the 23d of May, and in accordance with the provisions of the enabling act of congress, an election was held on the first Monday in June for delegates to a constitutional convention, which was to assemble at the capitol on the second Monday in July. The constitutional convention is an event in the history of Minnesota sufficiently important and unique to entitle it to special treatment, which will be given hereafter.

An act was passed at the extra session, on the 19th day of May, 1857, by which the grant of lands made to the territory was formally accepted, "upon the terms, conditions and restrictions" contained in the granting act.

On the twenty-second day of May, at the extra session, an act was passed to execute the trust created by the land grant act, by which a number of railroad companies were incorporated to construct roads on the lines indicated by the act of congress, and to aid in the building of these roads, and the lands applicable to each were granted to it. The companies were to receive title to the lands as the construction progressed, as provided in the granting act. They also had conferred upon them powers to issue bonds, in the discretion of the directors, and to mortgage their roads and franchise to secure them.

These railroad companies were organized upon the hope that the aid extended to them by the grants of land would enable them to raise money sufficient to build their several roads. They had nothing of their own, and no security but the roads and lands upon which to negotiate loans. The times, and the novel idea of building railroads in unpeopled countries, were all against them, and, of course, nothing could be done.

The constitutional convention met and framed an instrument for the fundamental law of the new state which was very conservative, and, among other things, contained the following clause, which was enacted in section 5 of article IX.:

"For the purpose of defraying extraordinary expenses the state may contract debts, but such debts shall never in the aggregate exceed two hundred and fifty thousand dollars." And another clause found in section 10, which is as follows: "The credit of the state shall never be given or loaned in aid of any individual, association or corporation."

It was the intention of the framers of the constitution to prevent the legislature from ever using the credit or funds of the state in aid of any private enterprise, and these provisions effectually accomplished that end.

The people were deeply disappointed when they became convinced that the roads could not be built with the aid that congress had extended, and as this work was also looked upon as the only hope of financial relief, the case became a desperate one, which could only be remedied by the most extreme measures. The promoters of the railroads soon discovered one, in an amendment of the section of the constitution which prohibited the credit of the state being given or loaned to anyone, and at the first session of the first legislature, which convened on Dec. 3, 1857, an act was passed proposing such amendment, to be submitted to the people for ratification. The importance of this amendment, and its effect and consequences upon the future of the state, demands that I give it nearly in full. It changed section 10 as it was originally passed, and made it read as follows:

"Section 10. The credit of that state shall never be given or loaned in aid of any individual association or corporation, except that, for the purpose of expediting the construction of the lines of railroads, in aid of which the congress of the United States has granted lands to the Territory of Minnesota, the governor shall cause to be issued and delivered to each of the companies in which said grants are vested by the legislative assembly of Minnesota the special bonds of the state, bearing an interest of seven per cent per annum, payable semi-annually in the city of New York, as a loan of public credit, to an amount not exceeding twelve hundred and fifty thousand dollars, or an aggregate amount to all of said companies not exceeding five millions of dollars, in manner following, to-wit:"

The amendment then prescribes that, whenever ten miles of railroad was graded so as to be ready for the superstructure, it should receive $100,000 of the bonds, and when ten miles should be completed with the cars running, the company so completing should receive another $100,000 of the bonds until each company had received its quota. The bonds were to be denominated "State Railroad Bonds," for the payment of which the faith and credit of the state was to be pledged. The railroad companies were to pay the principal and interest of the bonds, and to secure such payment they were to pledge the net profits of their respective roads, and to convey to the state the first two hundred and forty sections of land they received, and to deliver to the state treasurer an amount of their first mortgage bonds equal to the amount of bonds received by them from the state, and mortgage to the state their roads and franchises. This was all the security the companies could give, but the underlying difficulty was that it had no value whatever. There were no roads, no net or other profits. The lands had no value whatever except such as lay in the future, which was dependent on the construction of the roads and the settlement of the country. The bonds of the companies, of course, possessed only such value as the property they represented, which was nothing, and the mortgages were of the same character. The whole scheme was based upon hopes, which the slightest application of sober reasoning would have pronounced impossible of fulfillment. But the country was hungry, and willing to seize upon anything that offered a semblance or shadow of relief.