Chapters on the History of the Southern Pacific

by Stuart Daggett

Playing Towns Against Each Other

There is evidence that the promoters of the Central Pacific were perfectly aware of the possibilities of securing local subsidies by playing one California town against another. Huntington wrote David D. Colton in 1871 that the company ought to get a large amount of land and other good things from parties having interests along the line between Spadra and San Gregorio Pass, if it would build them a railroad on which to get out.[36] T. G. Phelps, president of the Southern Pacific, speaking in the same vein, told Colonel Baker, of Tulare, that it was his private opinion that if that county would donate $100,000 to the company, it would run its road through the town of Visalia. We also know that pressure was brought to bear upon the city of Stockton, to induce that city to grant a right-of-way, as well as other privileges, to the Western Pacific,[37] and it is notorious that the fears of San Francisco were played upon in order to obtain terminal facilities on San Francisco Bay.

How this policy appeared from the point of view of the opponents of the Central Pacific, may be gathered from a description offered by a member of the Constitutional Convention of 1878:

They start out their railway track and survey their line near a thriving village. They go to the most prominent citizens of that village and say, “If you will give us so many thousand dollars we will run through here; if you do not we will run by,” and in every instance where the subsidy was not granted, that course was taken, and the effect was just as they said, to kill off the little town. Here was the town of Paradise, in Stanislaus County; because they did not get what they wanted, they established another town 4 miles from there. In every instance where they were refused a subsidy, in money, unless their terms were acceded to, they have established a depot near to the place, and always have frozen them out. As stated by the gentleman from Los Angeles, General Howard, they have blackmailed Los Angeles County $230,000 as a condition of doing that which the law compelled them to do.

County Stock Subscriptions

Perhaps the earliest California statute in aid of railway construction was the act approved May 1, 1852, granting to the United States a right-of-way through the state for the purpose of constructing a railway from the Atlantic to the Pacific oceans.[38] In 1857 the supervisors of Yuba County were authorized to submit to the electors of that county a proposal to subscribe $200,000 to a railroad between Marysville and Benicia.[39] And during the following two years the San Francisco and Marysville Railroad not only received a land grant,[40] but secured an enactment, making it the duty of the Board of Supervisors of Sutter County to submit to popular vote the question of a $50,000 subscription to its capital stock,[41] and the duty of the supervisors of Solano and Yolo counties to call elections in those counties with similar intent.[42] No subscriptions were made under these acts.

It seems to have been the intention of the legislature to treat the Central Pacific and the Western Pacific railroads after the same general fashion as other railroads had been treated—that is to say, to allow counties and cities interested to subscribe freely to their stock. By virtue of an act dated April 16, 1859, any county could so subscribe up to 5 per cent of its assessment roll when popular approval had been secured.[43] This was not, however, enough. Between March 21, 1863, and April 4, 1864, the legislature passed eight acts granting special concessions to the Central Pacific and to the Western Pacific. Mr. Stanford had become governor of the state in January, 1862, and this legislation had of course his cordial approval.

In March, 1863, the supervisors of San Joaquin County were authorized to hold a popular election on the question of subscribing $250,000 to the capital stock of the Western Pacific.[44] In April, Placer County was authorized to consider a subscription of equal amount to the stock of the Central Pacific.[45] Next, Santa Clara County was authorized to hold an election and to subscribe $150,000 to the Western Pacific, if it so desired.[46] Sacramento received the same privilege in April, to the extent of being permitted to take 3,000 shares of the Central Pacific,[47] and was in addition allowed to give away rights-of-way and certain rights of construction of considerable though indefinite value;[48] while San Francisco was permitted to subscribe $400,000 to the stock of the Western Pacific and $600,000 to that of the Central Pacific, making $1,000,000 in all.[49]

Invariably subscriptions contemplated in the acts were to be made in bonds running twenty or thirty years, and bearing 7 or 8 per cent interest. Counties were to enjoy the usual privileges of stockholders, but were protected by special clauses against the proportional liability for debts of the corporation resting upon the ordinary stockholder by virtue of state law. The proceeds of county bonds issued in subscriptions were to be used for construction of the road, and it was provided that at least an equal amount of other funds obtained from stockholders was to be so used. It was thus the intention of the legislature that funds for construction should not be entirely derived from county subsidies.