During the administration of Governor James Pollock the Main Line of public works had been sold by virtue of the act of Assembly of May 16, 1857. Governor Pollock had very strongly urged the sale of the public works, as they had become a running sore of corruption, including political debauchery and the systematic plunder of the treasury.
On June 25 following the Governor closed the transaction by which the Pennsylvania Railroad Company, July 31, assumed ownership of the whole line of public works between Philadelphia and Pittsburgh, the consideration being $7,500,000.
Following that sale measures were taken for the disposal of the remainder of the public improvement. They had failed to be a source of revenue to the State, and the application of the proceeds to the payment of the debt of the Commonwealth soon led to the removal of taxation by the State.
With the disposal of the Main Line of public works, there were left not a few local canals, such as the North Branch, West Branch and others, to be managed by the Board of Canal Commissioners. This was a sore point, and there was a very general desire that these should also be disposed of and the State entirely divested of its interests in transportation lines.
The Sunbury and Erie Railroad Company was chartered April 3, 1837. The road was opened between Williamsport and Milton, December 18, 1854, and between Milton and Northumberland, September 24, 1855.
The railroad bridges over the North Branch at Northumberland were completed for traffic January 7, 1856, which opened the road from Williamsport to Sunbury. From this time it became a long struggle to complete the line from Williamsport to Erie, which was to be the western terminus.
Borough councils and prominent citizens subscribed for stock, and various attempts were made to construct the road, but each new organization only repeated the story of failure.
A number of very able and experienced railway men and the directors conceived the idea of virtually borrowing the credit of the State, without imposing any liability upon the Commonwealth, to aid in the construction of this road.
Their proposition was that the various canals remaining in the ownership of the State should be sold to the Sunbury and Erie Railway Company for $3,000,000, giving the railway company the right to sell or mortgage the several canals as might be deemed best, the proceeds to be applied to the construction of the Erie line, and the State to accept a mortgage upon the line for the $3,000,000 to be paid for the canals. It was believed this would provide sufficient funds to complete the line, and when this was accomplished the mortgage held by the State would be abundant security against loss to the Commonwealth.