On the 20th of February, 1857, Mayor Whittam in a report to the city council made a statement that he, as representative of the city, had attended the meeting of the stockholders of the Chicago, Iowa & Nebraska, held on the 25th day of January, 1857, at Clinton and at that time had passed over to the railroad company the fifteen bonds of one thousand dollars each, to which they were entitled, they giving the required stock certificates for same as per agreement. The railroad company also entered into a contract with the city in which they agreed to pay interest on said bonds and all others to be issued to the railroad until such time as the road should be finished and the cars running into the city of Cedar Rapids.
The mayor also complimented the men in charge of the affairs of the road as men of means, honor, and energy, and finished his report by predicting that when the road was completed it would be of great benefit and advantage to our young but growing city. But notwithstanding the financial aid and the general encouragement given by the people the road advanced westward slowly and while the grading had been nearly completed there were many other things necessary to build a railroad and which could only be had by having the ready money with which to buy such supplies. In June, 1857, another petition was presented to the city council asking that the mayor call an election of the legal voters of the city to vote on the question, shall the city issue its bonds to the amount of forty thousand dollars to aid in purchasing the iron rails to complete the road to Cedar Rapids, the city to be a subscriber to the capital stock of the road to that amount. On July 10, 1857, the mayor called the election to vote on the proposition, shall the city in its corporate capacity issue its bonds for forty thousand dollars, the money to be used to procure iron rails and for no other purpose. The election was held on July 20, 1857, and resulted as follows: For the proposition, 104 votes; against 25 votes.
These bonds were to be issued in series and were to be paid one-quarter in 13 years, one-quarter in 14 years, one-quarter in 15 years, and the balance in 16 years from date.
Some time after these bonds were issued and turned over to the railroad company some legal point was raised touching their validity, and this together with the fact that the financial standing of the railroad company in the east among the iron manufacturers was not first class, made it necessary that some other plan should be adopted to procure the iron rails to build the road to Cedar Rapids. Heretofore they had found it practicable to survey and locate and grade a road and pay for the same in farm products, dry goods and groceries, etc. But when it came to buying iron from the manufacturers it required the cash or a suitable collateral. But our people were ready to meet this unforeseen emergency. Six of our early and more wealthy citizens made notes of $8,000.00 each, each note being signed by each of the other gentlemen, making a joint note of each one and together amounting to the $48,000.00. These notes were to be used as collateral and to strengthen up their credit, so that the iron rails could be bought and the road completed to this city. This was purely accommodation paper and the road contracted that the interest and principal of these notes should be paid by the railroad company from the first net earnings of the company, but in the early years of the road there were no net earnings. It was only by the most economical management that the operating expenses could be met, and several years elapsed before these notes given to aid the railroad were fully paid. The gentlemen aiding in the early construction of the first railroad to Cedar Rapids were Gabriel Carpenter, George Greene, Sampson C. Bever, J. J. Snouffer, and two others whose names are not remembered.
After the railroad was completed and in operation to this place little was said in regard to these city bonds. In the proceedings of the city council June 13, 1860, a resolution was passed authorizing E. H. Steadman, the mayor of the city, to represent the city at the annual meeting of the stockholders of the C., I. & N. Ry., which was to be held in Clinton at a later date.
On January 25, 1861, a committee was appointed consisting of the mayor, I. N. Whittam, and Alderman G. Livensbarger who were to examine into the legal condition of the city in relation to the $100,000.00 worth of city bonds already issued for railroad purposes. What this investigating committee did, and what their conclusions were, are not matters of record. Nothing more is said in any of the proceedings of the city council in regard to this matter until May 8, 1863, when it appears from the preamble of a resolution introduced that the railroad company was calling upon the city authorities to comply with the terms of the contract entered into when the bonds were issued, which was that the city should pay the interest on such bonds after the completion of the road to this place.
The road had been finished and in operation some two years and still no interest had been paid and the city made no efforts to collect any sum for such purpose. At the meeting of the council May 8, 1863, a resolution was introduced asking that a committee be appointed to investigate and report on the recorded facts bearing upon this matter of railroad bonds from its inception to this date. Aldermen McClelland, Denlinger and Slonaker were desirous of having light on the subject and voted for an investigation, but Aldermen Bever, Carroll and Stibbs voted in the negative, and this being a tie vote it was decided by the mayor, who also voted in the negative.
At the council meeting held June 11, 1864, another committee to investigate was appointed who was authorized to procure legal advice in regard to the liability of the city and also meet and confer with the officers of the railroad company, and this committee consisting of Aldermen McClelland and E. H. Steadman reported back to the council that they had procured legal advice in the matter and from all data and facts collected their attorney was of the opinion that the railroad company had no legal claims against the city and that the bonds were illegal and void.
In October of 1864 the same subject came up in the city council and a committee of three consisting of S. C. Bever, H. C. Angle and John Weare were appointed to confer with the railroad company and get the best terms of settlement they could, either by taking reissued stock in payment or a certain amount of money yearly in full settlement. This committee were prompt in their investigations and reported back to the council November 4, 1864. Their report was that they had a conference with the railroad company and the best compromise they could obtain was this:
First. That the city surrender to the company all its claims to stock in said road.